State form, you may still get fined," says
Wallach, adding that he only knows of two people that know how to properly prepare and file the forms,
especially forms being filed late. As an expert witness in such cases, Lance Wallach’s side has never lost.
The result of the all of the above was many lawsuits against insurance companies, including Hartford, Pacific
Life, Indianapolis Life, AIG, and Penn Mutual, to name just a few. Agents, accountants, and attorneys were
also successfully sued.
Lately, insurance companies, agents, accountants, and others have been selling captive insurance and
Section 79 scams. The motivations are exactly the same. They push large tax deductions for business
owners. There are also huge commissions for salespeople, though this is usually mentioned only in passing, if
at all.
Anyone participating in a listed or reportable transaction must properly file Form 8886 or face large IRS fines.
A listed transaction is any transaction specifically identified as such by published IRS guidance, or one
substantially similar to that transaction.
A reportable transaction is any transaction that has the potential for tax avoidance or evasion. In my
experience, the desire to avoid taxes is usually the principal and sometimes the only reason why people
participate in Section 79, captive insurance, or 419 plans. That is why I generally take the position that
virtually everyone participating in one of these arrangements should PROPERLY file Form 8886, if only
protectively as a precaution.
If you do not properly file Form 8886, there is no Statute of Limitations. That means the IRS can come back
and fine you many years later.
Anyone that wants to risk an IRS audit by utilizing a captive insurance or Section 79 scam should, at the very
least, engage a competent professional to file 8886 forms. By filing protectively and properly, the Statute of
Limitations starts running and you avoid the very large IRS penalties under 6707A. But as I have previously
stated, I only know two people who I would trust to undertake the preparation of the forms, especially if the
forms are not being filed timely.
Never utilize directions from a plan promoter or salesman as to how to fill out 8886 forms. They would only be
attempting to protect themselves, and doing so usually results in you being fined. Lance Wallach knows of
many examples of this happening, including a plan promoter who assisted almost 200 business owners in
preparing and filing 8886 forms. All of them got fined for improper preparation of the forms.
The two people that have been successful in filing 8886 forms for business owners have had numerous
conversations with IRS personnel. They get the impression that it is almost impossible for an accountant, tax
attorney, or anyone else to properly prepare and file the forms. One of them, who spent 35 plus years with
the IRS, has also been successful in fighting the IRS on penalties and fines assessed against business
owners who participate in these plans, though the IRS publicly claims that you cannot appeal the fine under
6707A.
The information provided herein is not intended as legal, accounting, financial or any type of advice for any
specific individual or other entity. You should contact an appropriate professional for any such advice.
Wallach, adding that he only knows of two people that know how to properly prepare and file the forms,
especially forms being filed late. As an expert witness in such cases, Lance Wallach’s side has never lost.
The result of the all of the above was many lawsuits against insurance companies, including Hartford, Pacific
Life, Indianapolis Life, AIG, and Penn Mutual, to name just a few. Agents, accountants, and attorneys were
also successfully sued.
Lately, insurance companies, agents, accountants, and others have been selling captive insurance and
Section 79 scams. The motivations are exactly the same. They push large tax deductions for business
owners. There are also huge commissions for salespeople, though this is usually mentioned only in passing, if
at all.
Anyone participating in a listed or reportable transaction must properly file Form 8886 or face large IRS fines.
A listed transaction is any transaction specifically identified as such by published IRS guidance, or one
substantially similar to that transaction.
A reportable transaction is any transaction that has the potential for tax avoidance or evasion. In my
experience, the desire to avoid taxes is usually the principal and sometimes the only reason why people
participate in Section 79, captive insurance, or 419 plans. That is why I generally take the position that
virtually everyone participating in one of these arrangements should PROPERLY file Form 8886, if only
protectively as a precaution.
If you do not properly file Form 8886, there is no Statute of Limitations. That means the IRS can come back
and fine you many years later.
Anyone that wants to risk an IRS audit by utilizing a captive insurance or Section 79 scam should, at the very
least, engage a competent professional to file 8886 forms. By filing protectively and properly, the Statute of
Limitations starts running and you avoid the very large IRS penalties under 6707A. But as I have previously
stated, I only know two people who I would trust to undertake the preparation of the forms, especially if the
forms are not being filed timely.
Never utilize directions from a plan promoter or salesman as to how to fill out 8886 forms. They would only be
attempting to protect themselves, and doing so usually results in you being fined. Lance Wallach knows of
many examples of this happening, including a plan promoter who assisted almost 200 business owners in
preparing and filing 8886 forms. All of them got fined for improper preparation of the forms.
The two people that have been successful in filing 8886 forms for business owners have had numerous
conversations with IRS personnel. They get the impression that it is almost impossible for an accountant, tax
attorney, or anyone else to properly prepare and file the forms. One of them, who spent 35 plus years with
the IRS, has also been successful in fighting the IRS on penalties and fines assessed against business
owners who participate in these plans, though the IRS publicly claims that you cannot appeal the fine under
6707A.
The information provided herein is not intended as legal, accounting, financial or any type of advice for any
specific individual or other entity. You should contact an appropriate professional for any such advice.
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