What is a Traditional IRA (Individual Retirement Account)?
A traditional IRA is an IRA that is not a Roth IRA or an IRA SIMPLE.
You can build and contribute to a traditional IRA if you (or, if you file jointly, your spouse) received taxable compensation during the year, and you were not under age 70 ½ the end of the year.
Time for Making Contributions in 2013
You can set up a traditional IRA at any time, but time to make contributions for one year is limited.
Contributions may be made to your traditional IRA for each year that you receive compensation and have not attained the age of 70 ½. For every year you do not work, contributions can not be made to your IRA unless you receive alimony, fight against non-taxable payment, military pay differential, or to produce a joint statement with a spouse who compensation. See Who can create a traditional IRA, earlier. Even if contributions can not be made for the current year, amounts paid for the years during which you are entitled can not remain in your IRA. Contributions can resume for the years you are eligible.
Contributions should be made by due date. Contributions may be made to your traditional IRA for a year at any time during the year or the due date for filing your return for that year, not including extensions. For most people, this means that contributions for 2012 must be made before April 15, 2013, and contributions for 2013 must be made before April 15, 2014.
70 ½ rule. Contributions may be made to your traditional IRA for the year you reach age 70 ½ or any later year.
You reach age 70 ½ on the date falling six calendar months after the 70th anniversary of your birth. If you were born on or before June 30, 1939, you can not contribute for 2009 or one year later.
Designated year for which contributions are paid. If an amount is paid to your traditional IRA between January 1 and April 15, you must inform the sponsor which year (current year or previous year) the contribution is intended. If you do not tell the sponsor which year it is for the sponsor may take, and to report to the IRS that the contribution is for the current year (the year the sponsor received it).
Filing before a contribution is made. You can file your return claiming a traditional IRA contribution before the contribution is made. In general, the contribution must be made by the due date of your return, excluding extensions.
Contributions not required. You do not contribute to your traditional IRA for each tax year, even if you can.
How to Configure Traditional IRA?
You can configure different types of IRAs with a variety of organizations. You can set up an IRA in a bank or other financial institution or a mutual fund company or life insurance. To set up a traditional IRA, you can try the following businesses and organizations:
Requirements for Individual Retirement Account (IRA)
An individual retirement account is a trust or custodial account established in the United States for the exclusive benefit of you or your beneficiaries. The account is created by a written document. The document must indicate that the account meets all the following conditions.
The trustee or custodian must be a bank, a federally insured credit union, an association of savings and loan, or an entity approved by the IRS to act as trustee or custodian.
The trustee or custodian generally can not accept contributions more than the amount deductible for the year. However, rollover contributions and employer contributions to a simplified employee pension (SEP) may be more than this amount.
Types of traditional IRA. Your traditional IRA can be an individual retirement account or annuity. It can either be part of a simplified employee pension (SEP) or an employer or a trust account for employees association.