For Federal Crimes, where does the money collected from penalties go?
"The SFGate had an article on this a few years ago: http://www.sfgate.com/business/networth/article/When-government-fines-companies-who-gets-cash-3189724.php ""Civil penalties, often referred to as fines, usually go to the U.S. Treasury or victims."" Short answer in the case you references it would be the US Treasury. In cases where there is a harmed party then they would get something to account for their loss. But it can get complicated depending on the crime."
"The 529 plan does outline your scenarios. There are stipulations for providing the funds should the child get the scholarship. If the child decides not to go into further education (vocational and community schools count), the money can be withdrawn with a 10% penalty and taxes paid on interest earnings. Taxes wouldn't have to be paid for contributions as taxes were already paid on that money by the gift giver. The 529 could also be transferred to another child in the family (including grandchildren).  Here's an excerpt from www.savingforcollege.com: You'll never lose all of your savings. A 529 plan offers tax-free earnings and tax-free withdrawals as long as the money is used to pay   for college. If you end up taking a non-qualified withdrawal, you'll   incur income tax as well as a 10% penalty - but only on the earnings   portion of the withdrawal. Since your contributions were made with   after-tax money, they will never be taxed or penalized. You can avoid the penalty if you get a scholarship. There are a few special exceptions to the 10% penalty rule, including when the   beneficiary becomes incapacitated, attends a U.S. Military Academy or   gets a scholarship. In the case of a scholarship, non-qualified   withdrawals up to the amount of the tax-free scholarship can be taken   out penalty-free, but you'll have to pay income tax on the earnings.   As Savingforcollege.com founder Joe Hurley likes to say, ""the   scholarships have turned your tax-free 529 investment into a   tax-deferred 529 investment"". Note, a 529 is ideal for the sum of money you are looking at. A proper trust, set up by a lawyer, will cost as much as $2000 to set up, and would require an annual tax return, both unnecessary burdens. To make matters worse, the trust counts as the child's asset where financial aid is concerned. The 529 counts, but to a much lesser extent." "&gt; and very doubtful once normalized for socioeconomics that race is at all a factor.  Very doubtful? Once you account for socioeconomic status in violent crime, you find that blacks commit way more violent crime. For example, there are twice as many white people under the poverty line in America than there are poor black people. And yet, [you get these results](https://infogram.com/us-crime-in-black-and-white-1gzxop49q0okmwy). So that's one instance where ""controlling for socioeconomic"" status doesn't matter.   Culture has more of an impact than you think. My friend works in an insurance industry where the target market is poor people. He no longer advertises heavily in black communities, after tracking his stats for years, as inevitably over 50% of his black clients do not pay their bills unless you literally swing by their house to collect the check whenever they forget to pay. Meanwhile, white people with the same amount of wealth stay on the books over 90% of the time after signing up. How do you explain that?   This study indicates that not everybody should be getting degrees. And certainly not joke degrees that leave people unemployable/in debt." "This is a fascinating question.  I am posting here only a partial answer because I haven't found official sources.  The upshot appears to be that a Puerto Rico IRA is a wholly different thing from a US IRA, and different rules apply.  This is said most succinctly in this post on the Boglehead forums: US federal tax code and Puerto Rican tax codes are separate. By contributing to a U.S. IRA, you defer US taxes. You need to pay these deferred US taxes, and take an early withdrawal penalty too, if you want to move the asset to PR. Other web pages give similar information, for instance, this post from ""Accountant Forums"": The Puerto Rico (PR) Internal Revenue Code (IRC) defines a Puerto   Rico IRA (I am assuming that this taxpayer has a PR IRA.). It is   unfortunate that they chose to use the same name as the US IRC   uses. A PR IRA is not a US IRA. It has different tax rules. In   addition, the US IRC defines an IRA as being ""a trust created or   organized in the United States."" The US IRC (Sec. 7701) defines   the United States as being the 50 states and the District of   Columbia. The Bogleheads thread also contains a link to a document from a Puerto Rican CPA school which appears to be a FAQ, and says (translated here from Spanish): Thus, any distribution from an IRA established in Puerto Rico does not qualify to be transferred to an IRA established outside Puerto Rico without the imposition of penalty and/or payment of corresponding income tax.  In the same way, the transfer of an IRA established outside Puerto Rico to one established in Puerto Rico also does not qualify as a transfer. It is not clear whether the exact meaning of ""transfer"" (given as either ""transferencia"" or ""traspaso"" in the document) corresponds to the US usage of IRA transfers (i.e., nontaxable events); some information I found indicates that the end of the quote above might be translated as ""does not qualify as a rollover"".  In any case, it seems that moving an IRA to or from Puerto Rico at least potentially has tax consequences.  There is also a previous question on this site which likewise says ""You cannot transfer or rollover an IRA that was established in PR to USA and vice versa"". These are not exactly authoritative sources, but they all seem to point towards the same conclusion, namely that you won't be able to avoid taxation on your IRA by moving to Puerto Rico.  Of course, I am no expert.  To be sure, you would have to talk to an accountant versed in the tax laws of both Puerto Rico and the incorporated US (and probably also whatever state you'd be moving from, to be on the safe side.)" "Set aside any perceived positive aspects of being owed a refund and weigh those with the negatives. What are the reasons you should not have your money tied up with the IRS? You'll see that Uncle Sam does not have a good track record as a financial institution: Many thousands of refunds every year are delayed for many months due to IRS systems glitches. Yet, many people count on that refund which is not always guaranteed within the stated time-frame. You have no legal recourse. You cannot sue the federal government for the money you lent them when they decide not to pay you back for an extended period of time. Yet, if you decide to delay paying them, they have all the power and will use it to charge you fee's that no corporate / private institution would get away with. ""owing some tax money is better than having a refund from a ID theft/fraud/security aspect"" Again, there is zero financial incentive to lend free money to Uncle Sam, he is not a bank. The only time interest comes into play is when the refund is overdue. Even then, it is not an incentive / doesn't come close to the penalty burden on you if you don't pay your taxes on time. I would ask the followup question: What sane person would engage in business with such a financial institution?" "The underpayment ""penalty"" is just interest on the late payments--willful or not has nothing to do with it.  When they feel it's willful there will be additional penalties." There are penalties for failure to file and penalties for failure to pay tax.  The penalties for both are based on the amount of tax due.  So you would owe % penalties of zero, otherwise meaning no penalties at all. The IRS on late 1040 penalties: Here are eight important points about penalties for filing or paying late. A failure-to-file penalty may apply if you did not file by the tax filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owe by the tax filing deadline. The failure-to-file penalty is generally more than the failure-to-pay penalty. You should file your tax return on time each year, even if you’re not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should  explore other payment options such as getting a loan or making an installment agreement to make payments. The IRS will work with you. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date. If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date. If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time. If the IRS owes you a refund, April 15 isn't much of a deadline. I suppose the real deadline is April 15, three years later - that's when the IRS keeps your refund and it becomes property of the Treasury.  Of course, there's little reason to wait that long.  Don't let the Treasury get all your interest. You got me wondering.  Initially, I read it as a fine, but it seems like that's the case anyway.  [The states are splitting it](http://newyork.cbslocal.com/2014/08/21/new-york-gets-800m-in-bank-of-america-settlement/).  Sadly enough, they're using some of the money to get the houses.  &gt;The bank has agreed to contribute at least $20 million in cash and property to local governments and nonprofits. Schneiderman’s office said that contribution should allow the state to take over as many as 300 properties that were left vacant by their previous occupants once foreclosure proceedings began. In THEORY, you don't have to pay income tax in such a situation. In actual fact, the transaction looks suspicious because the money went into your account.  Presumably, the money should have gone OUT of your account in equal amount.  Having allowed all this to happen, what you need to do is to DOCUMENT this activity ASAP. The first thing to do is to retain the paperwork showing the sending of the funds to the third party. The second thing to do is to ask your friend for a letter dated TODAY (don't use an earlier date) as to why the money was delivered into your account, and corroborating the fact that it was sent to the third party. Then if the IRS comes calling, you will have documentation to prove your point and protect yourself.