Together Dawn and Joseph Cook earn more than the $183,000 maximum income for a married couple to fund a Roth IRA in 2012 (the cap is $188,000 in 2013).
"We already have workplace retirement accounts," says Dawn, "but we want to spread out our nest egg so that when we retire we'll have the option to draw from multiple baskets."
You can't deduct what you invest in a Roth, but withdrawals are tax-free in retirement.
Do a "backdoor" Roth. You can fund a nondeductible IRA and convert an IRA to a Roth regardless of your income.
So the Cooks can put $5,000 in a nondeductible IRA for 2012 until April 15 and then immediately convert, says Charlotte CPA Ann Gugle.
A drawback to this move is that you could owe hefty conversion taxes if you have other regular IRAs (the Cooks don't). Your tax bill is based on all your IRAs, not just those you convert.
How to avoid catching the attention of the IRS.