Taxes just started to suck
Let me preface this story by saying, yes, I probably should hire an accountant to do my taxes. But I'm stubborn, and take pride in doing my home and business taxes myself.
I was working through my 2007 taxes tonight, thinking that figuring out cost bases was the worst problem I'd have. Then I hit a major roadblock. Last year, I put $1000 into my Roth IRA. As it turns out, my adjusted gross income is too high for Roth contributions. So, that $1000 has to come out, and I'll pay a 6% fine on it until it does.
So now, I have to "recharacterize" the $1000 into one of my regular IRAs. This involves paperwork, waiting, and numerous additional IRS forms. I filled out the paperwork, so now the waiting game begins.
I wouldn't have even guessed that you could be "too rich" to contribute to a retirement account, but clearly I was wrong!
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This is why, sadly, I never contribute to my IRAs until I've already done my taxes. I put aside money during the year into a savings account. Then after I do my taxes and figure out which of the three IRAs I qualify for (deductible, Roth, non-deductible), I make my contribution.
You have until April of the next calendar year to make a contribution to the year before. Just be careful with sending your deposit in that you mark it's for the previous tax year.
Yet one more reason 401ks are easier for most (non-self-employed) folks. No income limitations.