My friend said last year he transfer his IRA Rollover money into a regular trading account, non-IRA at another brokerage. He thinks either accepting brokerage or the one where he had his rollover money before...screwed up as he did NOT get any tax bills, nor was his account adjusted for conversion or penalty. It went from a tax-differed account straight to taxable account with no tax consequences. Is this even possible? It sounds like he pulled his money out TAX FREE.
Your "Friend" will either pay the taxes on gains in an IRA later, or pay yearly in a non-qualified, individual account. There's no way around the taxes. Lol Have your friend check to see if he possibly converted it to a Roth.
No kidding man, many years ago I had to move some money around. I kept most of my "safe money" in an S&P index fund in a Roth. And put my personal money in a trading account. In retrospect I wish I done it the other way. Yes, in a Roth you can trade to your hearts content with no tax consequences. In a Reg IRA you pay taxes only when you withdraw. (plus it's tax deferred going in. So the S&P index fund was sitting there tax sheltered, when in fact I was just going to leave it there anyway and would have had practically no tax liability due to the fact that there is practically no cap gains tax in an index fund. And I paid cap gains on my trading account. The only problem was my sole income at the time was from trading. Now, I don't know, maybe someone else can tell me, I was able to write off all my trading expenses like hardware and software. Not sure how that works in a Roth.
Oh, ok now I get it. Sorry, I just awakened. Yeah, I don't know how long it will take, but sooner or later they'll get you. And when they do, there's probably some penalty they will charge you for their mistake.
Ok he says it went into regar trading accout and Not Roth ROTH Also I thought he did it last year but he tranfsred in 2009. So no word of taxman in 2 years...
You will not get a "tax bill" from the IRS. Your friend should have gotten a Tax Form (can't think of the form number) from the IRA broker reflecting that you closed the IRA account and transferred the funds somewhere else. I am not talking about the customary year end 1099 form from the broker. At the time of transfer your friend had 30 days to get that money into another qualified plan. Either IRA without any tax liabilities or Roth with tax liabilities that would have to paid when filing his/her 2009 tax return. Sounds like this did not happen. IMO your friend is in big trouble. IRS will eventually get around to your friend. I think they have 5 years, more if they consider this to be fraud. Your friend is not looking at taxes due but penalties and interest that is accruing every single day. The IRS could freeze ALL of your friend's accounts. Your friend should get to a good accountant immediately.
IRA has millions of tax payers to deal with, he probably got away with it. Is 7 years the statue of limitations for fed tax?
Yes, then the money would be considered non-qualified, meaning he pays taxes on the gains each year. If it's been a few years since he's paid taxes, he's had no gains. Not a good track record if a trader...
that happens with sloppy paper works, tell your friend stay cool. if he was asked to pay tax on it ask for proof of money was transferred. I bet they cant produce one.