<mystic02removethisple...[at]verizon.net> wrote:

- quote -

First, look at Tax Topic 412 on Lump-Sum Distributions on
the IRS Website, then continue to Tax Topic 413.

I would also look at preparing and paying an estimated tax.

As previously mentioned, a qualified CPA or Tax Advisor
would be able to look at the specifics of the specific
situation and provide pertinent advice specific to that
situation or determine where to go. As good as online advice
is, this is a situation where a qualified individual can
help and save money.

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"Michael B." <mystic02removethisplease[at]verizon.net> wrote:

- quote -

An individual is generally a cash basis taxpayer. That means
you report income in the year that you actually recieve it.

You might want to see if the pension plan allows a direct
rollover to an ira. However, you will have to make annual
withdrawls from the ira as you are older than 70 1/2.

You really should consult your own CPA/tax advisor on what
is the best way to handle this.

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] > > -----> real address on hobokeni or hobokenx <-----

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I hope that some of you can give me some opinions/help with
the following situation, which I will describe in brief:

My father, who is a union worker is currently 77 years old
and continues to work full-time. He has been receiving
full social security pension after he turned 70 1/2 (which
is like $15K a year) and his yearly work income is about
$65K a year. His wife is alive but is retired and has no
income. So the total income is about $80K per year for
both of them together. They file jointly.

It turns out that earlier this year (2007), his local union
and the national one for his industry realized that he
should had started receiving his 2 union pensions also after
he turned 70 1/2. They have calculated that he is owed
$31K and $60K in pension back pay from the period of
2002-2007. They want to send him the two checks so he is all
"caught-up" and he will now receive the proper pay monthly.

Here are my questions:

1) If he is to earn the usual $80K and then add these $91K
in "back-pay", his total income for the year is going to be
$171K. A huge chunk of that will go back to the
government for taxes. Correct?

2) If he was being paid those two pensions as he was
supposed to, he would have been only adding about $15K per
year in additional income per year for the period of
2002-2006. This would of course mean a smaller refund for
those years but at least he would not be hit with this huge
tax for the year 2007 on this "extra $91K" one-time income.

3) From what I understand, there is no way to go back to
re-file 2002-2006 taxes with the $30K and $60K properly
divided between each of those years. This would be the best
way, I assume?

4) He has NOT been issues or sent those 2 back-pay checks.
Is there any way he can instead of cashing them ,have them
go to some tax-deffered fund so that he avoids declaring
these $91K as income just for the year 2007? It would be the
best that he would just withdraw from the $91K like $10K per
year onwards and limit his tax exposure.

Any help is appreciated in this complicated sitation. It's
just I think it's unfair that although he is getting all the
money that is due to him that due to the union's mistake he
is going to be taking a huge tax hit for the year 2007.

Thank you!

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