BillHumphrey
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Hello all, I am a CPA working an IRA provider that has been dealing with a lot of these questions. Most of the inquiries we have had came from Delta pilots but now I see there are many more pilots with the same questions. We have a post our website about the topic: see www. newdirectionira.com/united-delta-retirement-settlement-roth-ira/
The general idea with the form 8935 is that in the past you received as income in a check from the airline, money that was in exchange for the termination of your pilot retirement plan due to the bankruptcy. You paid tax on that amount with that years return (or will if it is in 2009 or later).
A new law was passed late in 2008 which give you the special option to deposit the money from that payout (the amount on your form 8935) into a Roth IRA. The Roth IRA allows for tax free growth into the future and is a great deal. (not compared to giving up the plan in the first place of course, but it is a great opportuinty to build a retirement plan that has no future income tax on it). The special law allows you make the contribution disregarding the normal income limits and amounts.
The down side is that you have to get the money into the Roth IRA by June 22 and you might not have the money to do it. Some clients have borrowed, sold other assets, gotten second mortgages to be able to fund the IRA. Contributions can not come out of other plans such as IRAs to make the contribution as they are funds that have not been taxed yet and will need to be.
I hope this helps. We would be happy to answer any other questions you have on the form and to help you get a Self Directed Roth IRA set up.
The general idea with the form 8935 is that in the past you received as income in a check from the airline, money that was in exchange for the termination of your pilot retirement plan due to the bankruptcy. You paid tax on that amount with that years return (or will if it is in 2009 or later).
A new law was passed late in 2008 which give you the special option to deposit the money from that payout (the amount on your form 8935) into a Roth IRA. The Roth IRA allows for tax free growth into the future and is a great deal. (not compared to giving up the plan in the first place of course, but it is a great opportuinty to build a retirement plan that has no future income tax on it). The special law allows you make the contribution disregarding the normal income limits and amounts.
The down side is that you have to get the money into the Roth IRA by June 22 and you might not have the money to do it. Some clients have borrowed, sold other assets, gotten second mortgages to be able to fund the IRA. Contributions can not come out of other plans such as IRAs to make the contribution as they are funds that have not been taxed yet and will need to be.
I hope this helps. We would be happy to answer any other questions you have on the form and to help you get a Self Directed Roth IRA set up.
