My client received the following information in email, is there anything to this?
As a reminder, in 2006 pilots received money from the airline due to its bankruptcy filing. For some pilots, it was a significant amount of money. These funds pushed pilots into higher tax brackets than they ordinarily would have been in, which means that the upper percentages of their income might have been taxed a higher rate. Further, some pilots were pushed into Alternative Minimum Tax, or AMT. This increased their tax bill even more in 2006.
Section 1106 of the Act allows you to potentially reduce your tax bill. It does that by allowing you to retroactively contribute to a traditional IRA in 2006 and exclude that contribution from 2006 income. When one contributes to this traditional IRA, it reduces their taxable income and defers the payment of taxes to a later date when the money contributed is ultimately withdrawn from the IRA- normally at retirement. As I mentioned previously, in 2006, some pilots had an abnormally high tax bill due to the bankruptcy distributions. However, under this Act, the pilot can retroactively take 90% of the money that was distributed and put these funds into a traditional IRA, effectively lowering your taxable income for that year. Lowering your taxable income will likely lower your tax bill for that year. If the contribution lowers your tax bill, you may receive a refund from the IRS. That is how you would end up with money in your pocket if you choose to take advantage of this Act.
The above naturally leads to a few more questions. How much can I put in this traditional IRA under the Act? You need to find your Form 8935(s) that was/were given to you several years ago. If you don't know where they are, then send an e-mail to esc@united.com using the subject line "IRS FORM 8935" and include your name, file number, complete mailing address, and telephone number. They will give you new forms. You'll then know the maximum amount you will be able to contribute to this traditional IRA by taking 90% of the figures shown on Form 8935.
If you think that you might be interested in taking advantage of this Act, then you have a deadline of August 13, 2012 to make the contribution to the traditional IRA.
As a reminder, in 2006 pilots received money from the airline due to its bankruptcy filing. For some pilots, it was a significant amount of money. These funds pushed pilots into higher tax brackets than they ordinarily would have been in, which means that the upper percentages of their income might have been taxed a higher rate. Further, some pilots were pushed into Alternative Minimum Tax, or AMT. This increased their tax bill even more in 2006.
Section 1106 of the Act allows you to potentially reduce your tax bill. It does that by allowing you to retroactively contribute to a traditional IRA in 2006 and exclude that contribution from 2006 income. When one contributes to this traditional IRA, it reduces their taxable income and defers the payment of taxes to a later date when the money contributed is ultimately withdrawn from the IRA- normally at retirement. As I mentioned previously, in 2006, some pilots had an abnormally high tax bill due to the bankruptcy distributions. However, under this Act, the pilot can retroactively take 90% of the money that was distributed and put these funds into a traditional IRA, effectively lowering your taxable income for that year. Lowering your taxable income will likely lower your tax bill for that year. If the contribution lowers your tax bill, you may receive a refund from the IRS. That is how you would end up with money in your pocket if you choose to take advantage of this Act.
The above naturally leads to a few more questions. How much can I put in this traditional IRA under the Act? You need to find your Form 8935(s) that was/were given to you several years ago. If you don't know where they are, then send an e-mail to esc@united.com using the subject line "IRS FORM 8935" and include your name, file number, complete mailing address, and telephone number. They will give you new forms. You'll then know the maximum amount you will be able to contribute to this traditional IRA by taking 90% of the figures shown on Form 8935.
If you think that you might be interested in taking advantage of this Act, then you have a deadline of August 13, 2012 to make the contribution to the traditional IRA.