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Ask Dr. Fiona Chen Your Own Question
Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 482
Experience:  Former IRS Revenue Agent
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If you are convicted of a federal crime and he government

Customer Question

if you are convicted of a federal crime and he government seizes your 401, are you also liable to pay taxes on this amount?
JA: I hope not.
Customer: stupid answer
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: i'll try someone more knowledgeable. thanks
JA: Is there anything else important you think the Accountant should know?
Customer: no that's it. Taxes are paid on an IRA if you take out funds for yourself. In this case, the government seized the account so it was not for personal use.
Submitted: 11 months ago.
Category: Tax
Expert:  Dr. Fiona Chen replied 11 months ago.

Dear Customer,

I searched on line and thought about this. There is no published law to waive the income tax in any way. The person's retirement account, say a 401(k), is ceased to pay certain financial or legal liabilities this person has. The money even if is not used for "enjoyment" but is used for this person's financial liability including whatsoever penalty, etc. The money can be paid from ceased house and/or other assets. The retirement account is one type of assets. The due tax on this asset belonging to this person is still owed by the person. This person can be relieved of certain other types of liabilities or penalties. That is the benefit this person obtained. Think it in another way. If we can choose to pay by the retirement account without tax consequence instead of other assets we have, won't this cease of the retirement account is actually becoming a tax benefit to reward the criminal. That cannot be right.

Please feel free to follow up.



Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP