J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

8.1 Starting a Traditional IRA

If you have earnings, you may contribute to a traditional IRA up to an annual limit (8.2). The contribution may be deductible (8.4) or nondeductible (8.6). Earnings within the IRA accumulate tax free until withdrawals are made (8.8).

You also may set up a traditional IRA by rolling over a distribution received from a qualified employer plan. For example, if you receive a lump-sum payment from a qualified employer plan upon retirement, changing jobs, or becoming totally disabled, you may make a tax-free rollover to a traditional IRA (7.8). If you have a traditional IRA, you can roll it over or make a direct transfer to a different traditional IRA (8.10).

Your employer can set up a “deemed IRA” as a separate account under a qualified retirement plan. As long as the separate account otherwise meets IRA requirements, you can make voluntary employee contributions that will be treated as IRA contributions subject to the regular IRA rules. The separate account can be treated as a traditional IRA or Roth IRA (8.19).

Roth IRAs.

Annual contributions to a Roth IRA and conversions of traditional IRAs to Roth IRAs are discussed at 8.19–8.21.

Restrictions on traditional IRAs.

You may not freely withdraw IRA funds until the date you reach age 59½ or become disabled. If you take money out before that time, you are subject to a penalty (8.12). Pledging the account as collateral is treated as a taxable distribution from the account (8.8). In the year you reach age ...