5th Circuit Affirms Sanctions against CtC Filer

[Gregg]

FOOTNOTE

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

END OF FOOTNOTE

Which means they cheated and don't want to publish it and expose their skullduggery/

Victory!!! Stand Tall Warriors!

[Judge Roy Bean]

Gosh, CtC lost yet again?

Imagine that. Spend $24.95 on a "book" that will "free" you from federal taxation and wind up with only an extra $8,000 of sanctions on top of what you already owe. The $5K frivolous penalty for filing your next CtC return is nothing compared to that.

Clearly, the next step is to consult with Skankbeat.

Texas is an at-will state; any bets on whether Dell keeps him as an employee?

[Nikki]

Montero has been a busy little man.

Just from Tax Court:

23166-07L CDP case Bench Opinion 10/15/08 Friv Pen for 2003, 2004 sustained + $20,000 sanction -- AFFD 5th 1/22/2010

Petitioner informed Respondent that he is a follower of the book entitled Cracking the Code : The Fascinating Truth About Taxation in America, by Peter Eric Hendrikson, in which the author takes the position that "income" is not defined in the Code and that wages earned by non-federal employees are not subject to ederal income tax .

13141-09L CDP case Dismissed 9/4/09 Lack of Jurisdiction -- Attempting to relitigate '07 case, but nothing actionable by the court

24355-10 Outstanding order for Montero to show why case should not be dismissed for lack of jurisdiction. (He missed the filing deadline)

Based on Internal Revenue Code Section 6702, Frivolous Tax Submissions, we have determined that the information you filed as a return of tax, or purported return of tax, on July 14, 2010, is frivolous and there is no basis in the law for your position.

[Nikki]

Filed with 24355-10 regarding his 2008 tax return

2) Copy of Form 4852 correcting information return from "Renesas Technology"
3) Copy of Form 4852 correcting information return from "UBS Financial Services"
4) Copy of Form 1099-B correcting information return from "UBS FinancialServices"
5) Copy of Form 1099-B correcting information return from "Pershing LLC"
6) Copy of Form 1099-B correcting information return from "National Financial Services LLC"

Dell seems to be missing

[Quixote]

Gosh, CtC lost yet again?

Imagine that. Spend $24.95 on a "book" that will "free" you from federal taxation and wind up with only an extra $8,000 of sanctions on top of what you already owe. The $5K frivolous penalty for filing your next CtC return is nothing compared to that.

Clearly, the next step is to consult with Skankbeat.

CTC is now free on Losthorizons, but could turn out to be the most expensive book the Lost Boys will ever buy.

[grixit]

Gosh, CtC lost yet again?

Imagine that. Spend $24.95 on a "book" that will "free" you from federal taxation and wind up with only an extra $8,000 of sanctions on top of what you already owe. The $5K frivolous penalty for filing your next CtC return is nothing compared to that.

Clearly, the next step is to consult with Skankbeat.

Texas is an at-will state; any bets on whether Dell keeps him as an employee?

Even if he were with the Teamsters, i don't think he'dd get more than token backup on this.

[LPC]

No Rule 11 sanctions, but the refund action was dismissed, and Santero was hit with $8,000 in sanctions when he appealed the dismissal.

Adolfo Sandor Montero v. United States, No. 10-50480 (5th Cir. 1/27/2011)

Cert. denied, Supreme Court docket no. No. 11-310 (Oct. 31, 2011).

[AndyK]

Undaunted, Montero filed ANOTHER Tax Court petition on 4/11/11 (8509-11) restating exactly the same claims he made on each of his earlier cases.

BANG WALL WARRIOR

[Gregg]

Filed with 24355-10 regarding his 2008 tax return

2) Copy of Form 4852 correcting information return from "Renesas Technology"
3) Copy of Form 4852 correcting information return from "UBS Financial Services"
4) Copy of Form 1099-B correcting information return from "UBS FinancialServices"
5) Copy of Form 1099-B correcting information return from "Pershing LLC"
6) Copy of Form 1099-B correcting information return from "National Financial Services LLC"

Dell seems to be missing

The last three look like genius boy cashed out his 401K programs, so on top of everything else, he's gonna take a 10% penalty on those. Depending on how long he was contributing, and what percentage, he might be taking a haircut of $100,000 in total. real smart.

[Pottapaug1938]

Filed with 24355-10 regarding his 2008 tax return

2) Copy of Form 4852 correcting information return from "Renesas Technology"
3) Copy of Form 4852 correcting information return from "UBS Financial Services"
4) Copy of Form 1099-B correcting information return from "UBS FinancialServices"
5) Copy of Form 1099-B correcting information return from "Pershing LLC"
6) Copy of Form 1099-B correcting information return from "National Financial Services LLC"

Dell seems to be missing

The last three look like genius boy cashed out his 401K programs, so on top of everything else, he's gonna take a 10% penalty on those. Depending on how long he was contributing, and what percentage, he might be taking a haircut of $100,000 in total. real smart.

I see people cashing out of 401k accounts all the time, in my line of work. The "street wisdom" is that, once you set up your 401k, you can borrow from it and "pay yourself interest". Then, when you leave your job, you get to cash it in and spend the money on things like that trip to Vegas you always wanted to take. Or, you can put it into something "safe" like a bank savings account.

Of course, these geniuses don't realize that with #1, they are repaying pretax dollars with post-tax dollars and destroying the tax advantages of a 401k. With #2, they act as if, since they don't have to write out a check to pay the penalty, it doesn't really exist. With #3, they overlook the fact that most of the accounts in which they put their money take enough in fees and expenses to not even keep up with inflation.

I once had someone actually tell me that he'd trust the word of his "best buddy" over mine because I was an "expert" and dependent on the industry for my daily bread (and thus not to be trusted). It seems to me that I've heard excuses like that on Quatloos, now and then....

[Gregg]

Now that it comes up, I get asked by people at work lately about to retire if they can take their Ford Sponsored TESPHE plan (in house 401K) and roll it over the an IRA where they can have more direct control. I tell them first that I was a corporate accountant, and that was 20 years ago, but I believe you can DIRECT TRANSFER II without paying any tax on the transfer, but if you touch it yourself on the way, assuming you're 591/2 it's regular income, and if you're younger than 59 1/2 you have to pay the penalty ONLY ON ANY MONEY YOU TOOK POSSESSION OF, for whatever period of time. And then I tell them to get a practicing accountant to be sure, and that the broker who wants you to do it will refer you to one, or a tax attorney. If it's a decent sized firm, or one you trust, and you don't have a good professional of your own, go ahead and trust the one he refers but get second opinion anyway.

My question is, am I still essentially correct on the direct transfer not being a taxable event?

[Cathulhu]

Best of my knowledge Gregg, you're correct about the direct transfer. There's a code for it on the 1099R (box 7) which tells the IRS computer that it was direct, and therefore the filer can still use a shorter form 1040, and doesn't have to report the direct transfer on their return. See instructions to current 1099R and/or IRS pubs 575 or 590.

[Pottapaug1938]

Now that it comes up, I get asked by people at work lately about to retire if they can take their Ford Sponsored TESPHE plan (in house 401K) and roll it over the an IRA where they can have more direct control. I tell them first that I was a corporate accountant, and that was 20 years ago, but I believe you can DIRECT TRANSFER II without paying any tax on the transfer, but if you touch it yourself on the way, assuming you're 591/2 it's regular income, and if you're younger than 59 1/2 you have to pay the penalty ONLY ON ANY MONEY YOU TOOK POSSESSION OF, for whatever period of time. And then I tell them to get a practicing accountant to be sure, and that the broker who wants you to do it will refer you to one, or a tax attorney. If it's a decent sized firm, or one you trust, and you don't have a good professional of your own, go ahead and trust the one he refers but get second opinion anyway.

My question is, am I still essentially correct on the direct transfer not being a taxable event?

Yes. We call it a "direct rollover". It's even possible to do an "indirect rollover" where you move the money into the new account within 60 days (I don't deal with retirement accounts that much, anymore, so it's possible that the rules have changed; but years ago when I was still practicing law), I cashed out a 401k and then, a few weeks later, moved it into another retirenent account and paid no penalty.

[Arthur Rubin]

Yes. We call it a "direct rollover". It's even possible to do an "indirect rollover" where you move the money into the new account within 60 days (I don't deal with retirement accounts that much, anymore, so it's possible that the rules have changed; but years ago when I was still practicing law), I cashed out a 401k and then, a few weeks later, moved it into another retirenent account and paid no penalty.

In general, that's still good, but the taxpayer may have automatic 20% withholding on the payout, which has to be restored to the IRS from taxpayer's other funds. The withholding will be returned with the taxpayer's next return.

[Kestrel]

My question is, am I still essentially correct on the direct transfer not being a taxable event?

If the money is sent from the 401(k) directly to the firm holding the Rollover IRA account (Fidelity, Vanguard, Edward Jones, whatever...) the transaction is not taxable.

If the money is sent from the 401(k) in the form of a check, and the payee name on the check is the firm holding the Rollover IRA account (Fidelity, Vanguard, Edward Jones, whatever...) but the check is sent to you at your home address, the transaction is still not taxable. But DON'T sit on that check until the 60th day! Make sure the rollover account is opened and you hand over that check within 60 days, or it becomes taxable.

If the money is sent from the 401(k) in the form of a check made out to you, or a direct deposit to an account you control, the 401(k) company is REQUIRED to withhold 20% and turn it over to the IRS. But that withheld 20% is still considered part of the distribution. You can redeposit the full amount (100%) and make it all a non-taxable transaction, but you will have to replace the missing 20% with money from other sources. You won't see the originally withheld 20% again until you file your tax return.

See IRS Publication 590

[Kestrel]

There is also an exception to the Age 59 1/2 rule, but ONLY from "qualified" retirement plans such as a 401(k). IMPORTANT: This exception rule does NOT apply to IRAs.

The 10% early withdrawal penalty does not apply to withdrawals from qualified plans if you "separated from service" (quit, got canned, retired...) during or after the calendar year in which you attained age 55, so long as you take the money directly from the qualified plan.

See IRS Publication 575

So if you got canned in July, and you hit the magic age 55 in November, you can take the money out of the old employer's 401(k) that same year, or any later year, without getting the 10% early withdrawal penalty. There's an exception code which should appear on the 1099R. If it doesn't appear, you have to file a special IRS form with your tax return. Don't ask me which tonight; I've got all that in my desk at work.

But if you roll the old employer's 401(k) into a Rollover IRA, or go work somewhere else and roll it over into your new employer's 401(k), then you try to withdraw some money before age 59 1/2, you're screwed.

[Mider]

Hello all, new member, very long time viewer.

The last 3 "1099-B"'s would have been stock sales from a brokerage account, probably thinking that since the stock was ownership of a private company, IBM or something that this would have not fallen into the government bucket.
It was also probably long term at 15% tax, I wonder what his effective tax rate will end up being after all is said and done.

Mider

[Mider]

Correct, so it appears he actually had a gain on the stock sales, so he was trying to show no income from it, if it had been a loss, than he would have been a fool to correct the 1099-B, because he could have legitimately reduced his income.

[JamesVincent]

Yeah, were going through that right now with my mother. She just retired at 65. She has to be 65 1/2 to take her pension fund with no penalties and 66 to get social security at any decent amount. So what we ended up doing is we went to where I have my life insurance and other policies done at and they did an IRA cd rollover for her. It goes straight into it with no penalties, she owes no taxes on it since it rolled over, and they have a policy on it since she is over 59 1/2 she can make early deductions against with no early withdrawal penalties. So now she can wait the extra year to get the better rate of her social security without being really bound up on her mortgage and whatnot.