I think you are getting two similar traditional IRA components mixed up. You are confusing “income limits pertaining to the right to contribute to an IRA account at all” to “income limits pertaining to the right to take an IRA deduction”.

There is no income restriction or cap limit to the ability to contribute to an IRA retirement account. However, there is indeed income limitations to one’s ability to take an IRA tax deduction. Higher incomes precludes one from enjoying an IRA deduction on one’s income tax return.

I made a slight change to the article wording to make it a bit more clear…thanks for your commentary!

In Item #2 above, you state “While the traditional IRA is available to all with no income restrictions or contribution phaseouts, only the Roth reduces and limits your contribution if your income goes above certain levels.”

This is not true.

It is clear from the IRS website at (link) that there is certainly is an upper income limit for Trad. IRAs…

From the IRS:
Modified AGI limit for traditional IRA contributions increased. For 2008, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified adjusted gross income (AGI) is:

* More than $85,000 but less than $105,000 for a married couple filing a joint return or a qualifying widow(er),
* More than $53,000 but less than $63,000 for a single individual or head of household, or
* Less than $10,000 for a married individual filing a separate return.
For 2008, if you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your AGI is more than $159,000 but less than $169,000. If your AGI is $169,000 or more, you cannot take a deduction for contributions to a traditional IRA.

What gives?

Once it’s past April 15, you can’t submit an IRA or Roth contribution for the previous tax year. The extension only applies to IRS late filing penalties.

I haven’t looked into this in great detail, but I presume brokers and banks that operate Roth accounts do report contributions to the IRS.

Keep in mind that there is a 6% IRS penalty that is imposed on all excess unqualified Roth contributions until the excess is withdrawn and removed. If you had no earned income for the year, you would not be entitled to contribute and the entire amount would be regarded as excess. Thus, I would presume the IRS would keep adding up the 6% penalty charges each year until a time that the sum is large enough for them to come after you to enforce penalty payment.

Say a person had earned income in previous years, and contributed to a Roth IRA… but this year had no earned income, for whatever reason. What’s to prevent the person from going ahead and contributing to a Roth this year anyway? It’s not declared on the 1040 (which would show the earned income problem); who would step in and say “no”? Someone at the time when the Roth is tapped decades later???

I’m sure there’s a good argument against the above, but I’m wondering what it is!

Much of this information can be obtained through the IRS’ website, but they don’t always compile them into easy to locate tables.

As for my own IRA, although most of my money’s been locked up in other investments, I managed to scrounge up $4000 to contribute towards my 2007 Roth before the deadline. Use it or lose it!