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Need cash for IRA deposits? Bail yourself out

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Are you having trouble scraping up the cash for an IRA contribution this year? The solution may be right under your nose.

Strategy: Use your tax refund to fund your IRA contribution. Simply file your '08 return early, claiming the amount you intend to contribute. When you receive the refund, deposit the stated amount in your IRA.

Is it legal? Absolutely. The IRS approved this technique years ago so long as you make the IRA deposit by the April 15 deadline. (IRS Revenue Ruling 84-18

The IRA contribution limit for 2008 is $5,000 ($6,000 if age 50 or over). If you actively participate in an employer retirement plan, the deduction phases out if your AGI is between $53,000 and $63,000 for single filers; $85,000 and $105,000 for joint filers. If your spouse is the active participant, the phaseout range is between $159,000 and $169,000 of AGI.

Tip: The IRS recently indicated the contribution limit for 2009 will remain at $5,000 ($6,000 if age 50 or over).


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