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HAVE YOU BEEN THE VICTIM OF THE SALE OF ABUSIVE LIFE INSURANCE AND ANNUITY PRODUCTS SOLD AS PART OF A PENSION PLAN OR RETIREMENT PLAN?

Abusive Tax Shelters, Insurance and Annuity Product Fraud Lawsuit

RECOVER YOUR LOSSES FROM LIFE INSURANCE 412 (i) AND ANNUITY PRODUCTS SOLD AS PART OF A PENSION PLAN OR RETIREMENT PLAN

Insurance and Annuity Product Fraud Lawsuit

Life Insurance Companies and their Agents have been selling abusive life insurance and annuity products. Many pension plans have been promoted as legitimate retirement plans which contain various life insurance products and annuities. Unfortunately the Internal Revenue Service (“IRS”) has now attacked many of these pension and retirement plans and is conducting audits to demand payment for taxes, penalties and interest and attempting to disqualify many plans.

If you are an accountant, business owner, corporate officer, dentist, doctor, professional athlete, professional or corporation of high net worth, you were unscrupulously targeted by life insurance companies and their agents to purchase a 412i defined benefit pension plan. You were chosen to purchase a 412i plan because you have the net worth to pay for it.

Our investigation has disclosed that many life insurance companies, promoters, attorneys,

and accountants promoted and sold these plans, including but not limited to the following:

• American General Life Insurance Company
• Guardian Life Insurance Company
• Hartford Life and Annuity Insurance Company
• Indianapolis Life Insurance Company
• Pacific Life Insurance Company
• Pension Services, LLC
• Many Other Life Insurance Companies and Agents

The individuals and groups above devised a scheme to sell abusive tax shelters under the auspices of Section 412(i) of the tax code. A 412(i) is a defined benefit pension plan. It provides specific retirement benefits to participants once they reach retirement and must contain assets sufficient to pay those benefits. A 412(i) plan differs from other defined benefit pension plans in that it must be funded exclusively by the purchase of individual life insurance products. To create a 412(i) plan, there must

be a trust to hold the assets. The employer funds the plan by making cash contributions to the trust, and the Code allows the employer to take a tax deduction in the amount of the contributions, i.e. the entire amount.

The trust uses the contributed funds to purchase some combination of life insurance products (insurance or annuities) for the plan. As the plan participants retire, the trust will usually sell the policies for their present cash value and purchase annuities with the proceeds. The revenue stream from the annuities pays the specified retirement benefit to plan participants.

These defendants (with the aid and knowledge of the insurance companies) used the traditional structure and sold life insurance policies with excessively high premiums. The trust then uses the large cash contributions to pay high insurance premiums and the employer takes a deduction for the sum of those large contributions. As you might expect, these policies were designed with excessively high fees or “loads” which provided exorbitant commissions to the insurance companies and the agents who sold the products.

The policies that were sold were termed Springing Cash Value Policies. They had little or no cash value for the first 5-7 years, after which they had significant cash value. Under this scheme, after 5-7 years, and just before the cash value sprung, the participant typically purchases the policy from the trust for the policy’s surrender value. In theory, you have a tax free transaction.

The IRS does not recognize the tax benefit of such a plan and has repeatedly issued announcements indicating that such plans are contrary to federal tax laws and regulations.

Have you received a letter from the IRS either (1) informing you of an upcoming audit of your plan or (2) demanding payment for substantial tax “penalties and interest”? The “tax free” benefit pension plan you purchased might be a scam, a fraud. Please allow us to speak with you and review your documentation to help you to determine your best course of action. Your communications will be treated with the strictest attorney-client confidence.

If you were a victim of such a sale of a 412i or 419 plan, we encourage you to contact us immediately . You may also receive a free initial consultation by telephone at 516 9357346 If you desire a free initial phone consultation please leave a specific time or time period within which to contact you.

Since you have already expanded a substantial amount of money in your pension plan and believed it was a legitimate retirement plan, you are obviously shocked to now learn that major life insurance companies and their agents may have sold you improper retirement plans simply to generate enormous commissions on life insurance and annuities. www.taxaudit419 and www.vebaplan.com have more information.

We also help with abusive tax shelters like 419 welfare benefit plans. In 2002 Lance Wallach wrote to Hartford and other insurance companies telling them that IRS will be increasing 419 audits and law firms would be suing them. What did Hartford do? They sent out some emails to others including their compliance department and continued to sell 419 plans. Give us a call if you want a copy of this.

FBAR/OVDI LANCE WALLACH: IRS FBAR Voluntary Disclosure Initiative, opt out ...

FBAR/OVDI LANCE WALLACH: IRS FBAR Voluntary Disclosure Initiative, opt out ...: Lance Wallach The 2012 OVDI, which is still open, is patterned after the 2011 OVDI, but increases the maximum Report of Foreign Ban...

Tidbits from the IRS on Offshore Account Issues (6/7/14)

I understand from practitioners that the IRS has indicated the following. This is second hand, so those desiring to implement strategy based on the following might make their own inquiries to the IRS.

1. Readers may be aware that some or all Swiss Category 2 banks are requesting the U.S. depositor to supply proof of U.S. tax compliance. That proof can be used to mitigate the Swiss Category 2 bank's penalty in the program with the U.S. DOJ. In my limited experience with such requests, the banks may ask for various forms of proof (from the IRS preclearance letter into OVDP to the Form 906). The U.S. depositor is not required to provide that proof to the Swiss bank, of course.* The question has arisen, however, what if anything to provide the Swiss bank if the request comes after the U.S. depositor has submitted the request for preclearance but has not yet received the IRS letter of preclearance. I understand that the IRS believes banks will accept the preclearance request letter and perhaps a letter from the taxpayer or the representative to the bank that the preclearance request letter was filed and has not yet been acted on. I am sure the bank will make a follow through request for something more definite.

2. Clients concerned about the interim period between deciding to do something (whether OVDP or streamlined) might make a preclearance letter request for OVDP and then, if streamlined is appropriate, withdraw from OVDP. The advantage of filing the preclearance where the ultimate choice to do OVDP is not made is that the process of dealing with the issue, having been started with the preclearance letter, should be some protection if the IRS starts an audit later before the alternative strategy is implemented. If, after filing the preclearance letter, the client decides to pursue another strategy, the client should withdraw by letter advising of the withdrawal submitted before the due date for the intake letter to CI. The letter should be clear that the client is withdrawing. (Note, withdrawal is not the same as opting out; hence, unless the client qualifies for and completes streamlined procedure, the client will not have assurance of no criminal prosecution.) As I received the information, this withdrawal process might work also for later determining to proceed in some other way under 2011-13. Both the streamlined and the 2011-13, here, routes offer considerable uncertainties, but perhaps these uncertainties may be mitigated by the upcoming changes in the program that Commissioner Koskinen announced were coming. See IRS Commissioner Koskinen Announces that Changes -- Liberalizations -- Are In the Offing for OVDP 2012 (Federal Tax Crimes Blog 6/4/12), here.

3. If the client does not withdraw, the case will be processed under OVDP under normal procedures with the right to opt out.

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Help with Common IRS Problems: Section 79 Plans: Section 79, Captive Insurance, I...: Section 79 Plans: Section 79, Captive Insurance, IRS Audits and Lawsuits on 419 and 412i Plans (click the link to go to the page) Hg Expe...

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Welfare Benefit Plans Funded with Permanent Life Insurance Are Abusive Tax Scams

By Lance Wallach, CLU, CHFC

Firm's Profile & Articles

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• Millennium Plan
• Insured Security Plan
• Corporate Benefit Services Plan
• Sea Nine Associates VEBA
• Niche National Benefit Plans
• Professional Benefit Trust (PBT)
• Koresko STEP Plan
• Bisys Plan
• Xelan Plan
• Sterling Plan

Question: What is the IRS position on these plans?

Answer: The IRS position appears to be that all multiple employer welfare benefit plans funded with permanent life insurance are abusive tax scams. Their history is to open promoter audits on every such plan and eventually to obtain the client lists from the promoters and then audit their clients. The IRS position on single employer welfare benefit plans that are spin-offs of the multiple employer plans appears to be the same.

Question: Has the IRS approved any multiple or single employer welfare benefit plan invested in permanent life insurance?

Answer: Though an IRS private letter ruling is not immediately public, it is my understanding that the IRS has never “approved” of any multiple or single employer welfare benefit plan where permanent life insurance was used as a funding vehicle and the participating employer took a deduction for anything other than the current term insurance cost.

Question: Are the IRS audits coordinated?

Answer: Yes. The IRS audits are both targeted and coordinated. They are targeted meaning that the IRS obtains a list of the participating employers in a plan promotion and audits the participating employers (and owners) for the purpose of challenging the deductions taken with respect to the plan. The audits are coordinated meaning that there is an IRS Issue Management Team for each promotion that has responsibility for both managing the promoter audit(s) and also developing the coordinated position to be followed by the Examination Agents. Their intention is that all taxpayers under audit will receive the similar treatment in Exam. There are also IRS Offices that specialize in 419 audits. For example, IRS offices in upstate New York and in El Monte California will manage many audits of specific promotions.

Question: What is the general IRS position on these plans?

Answer: Though there can be some differences among plans, the basic IRS position is that the plans are not welfare benefit plans, but really plans of deferred compensation. As such, the contributions remain deductible at the business level but are included in the owner’s 1040 income for every open year and the value of the insurance policy with respect to contributions in closed years is included in the owner’s income either in the first open year or the year of termination or transfer. The IRS will normally apply 20% penalties on the tax applied and 30% with respect to non-reporting cases (see discussion below).

The above sales pitch was not written by Lance Wallach. Lance gets hundreds of phone calls yearly about 419 and other abusive tax shelters. As an expert witness Lance Wallach’s side has never lost a case. The above sales pitch fails to mention that unless the business owner has properly filed under 6707a they will probably receive an additional large IRS fine.

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.

ABOUT THE AUTHOR: Lance Wallach
Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning. He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He does expert witness testimony and has never lost a case.

Copyright Lance Wallach, CLU, CHFC
More information about Lance Wallach, CLU, CHFC

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

Did you purchase a Section 79 plan and run into trouble? Lance Wallach, insurance expert witness services can provide the help you need with your insurance problems.

Did you purchase a Section 79 plan and run into trouble? Lance Wallach, insurance expert witness services can provide the help you need with your insurance problems.

http://www.section79help.com/

IRS Criminal Investigation Department Audits Section 79, Captive Insurance, 412i and 419 Scams

First the IRS started auditing § 419 plans in the 1990s, and then continued going after § 412(i) and other plans that they considered abusive, listed, or reportable transactions, or substantially similar to such transactions. If an IRS audit disallows the § 419 plan or the § 412(i) plan, not only does the taxpayer lose the deduction and pay interest and penalties, but then the IRS comes back under IRC 6707A and imposes large fines for not properly filing.

http://www.hg.org/article.asp?id=35505

Don't face an audit alone! You can avoid 6707A penalties if you are facing an IRS 419 plan or 412i plan audit. Call these experts today for a free phone consultation.

Don't face an audit alone! You can avoid 6707A penalties if you are facing an IRS 419 plan or 412i plan audit. Call these experts today for a free phone consultation.

http://taxadvisorexperts.com/

Vebaplan.org helps with IRS audit issues of 419e, 412i, tax shelter penalties, IRS fines of listed transactions & material advisors. Retirement, benefit plans experts for small business and CPAs, financial advisors,419 plan,captive Insurance plan

Vebaplan.org helps with IRS audit issues of 419e, 412i, tax shelter penalties, IRS fines of listed transactions & material advisors. Retirement, benefit plans experts for small business and CPAs, financial advisors,419 plan,captive Insurance plan
http://taxaudit419.com/

IRS tax relief firm, Lance Wallach, speaking: Help with Common IRS Problems: KENNETH ELLIOT: Sea Nine VEBA Important

IRS and tax shelters, 5344 views, 123 likes | Lance Wallach | Pulse | LinkedIn

How Hartford Life and Other Insurance Companies Tricked their Agents and Got People in Trouble with the IRS - HG.org

A Welfare Benefit Trust 419 plan essentially works like this:

• The business provides a fringe benefit for their employees, such as health insurance and life insurance.

• The benefit is established in the name of a trust and funded with a cash value life insurance policy

• Here is the gravy: the entire amount deposited into the trust (insurance policy) is tax deductible to the company,and

• The owners of the company can withdraw the cash value from the policy in later years tax-free.

Can I get in trouble with the IRS for participating in a section 79 plan? | Yahoo Answers

IRS Attacks Business Owners in 419, 412, Section 79 and Captive Insurance Plans Under Section 6707A | Stacey Arenas | LinkedIn

200K Report Update- Lance Wallach 419, 412i, Sect 79, Captive Insurance

EP Abusive Tax Transactions - Certain Trust Arrangements Seeking to Qualify for Exemption from Section 419

EP Abusive Tax Transactions - Certain Trust Arrangements Seeking to Qualify for Exemption from Section 419

Notice 95-34 discusses tax problems raised by certain trust arrangements seeking to qualify for exemption from IRC section 419. This transaction involves the claiming of deductions under IRC sections 419 and 419A for contributions to multiple employer welfare benefit funds. In general, an employer may deduct contributions to a welfare benefit fund when paid, but only if the contributions qualify as ordinary and necessary business expenses of the employer and only to the extent allowable under IRC sections 419 and 419A. There are strict limits on the amount of tax-deductible pre-funding permitted for contributions to a welfare benefit fund.
IRC section 419A(f)(6) provides an exemption from IRC sections 419 and 419A for a welfare benefit fund that is part of a 10 or more employer plan. In general, for this exemption to apply, an employer normally cannot contribute more than 10 percent of the total contributions contributed under the plan by all employers, and the plan must not be experience rated with respect to individual employers.
Promoters have offered trust arrangements that are used to provide life insurance, disability, and severance pay benefits. The promoters enroll at least 10 employers in their multiple employer trusts and claim that all employer contributions are tax deductible when paid, relying on the 10-or-more-employer exemption from the limitations under IRC sections 419 and 419A. Often the trusts maintain separate accounting of the assets attributable to each subscribing employer’s contributions.
Notice 95-34 puts taxpayers on notice that deductions for contributions to these arrangements are disallowable for any one of several reasons (e.g., the arrangements may provide deferred compensation, the arrangements may be separate plans for each employer, the arrangements may be experience rated in form or operation, or the contributions may be nondeductible prepaid expenses).
On July 17, 2003, final regulations (T.D. 9079) relating to whether a welfare benefit fund is part of a 10 or more employer plan (as defined in section 419A(f)(6) of the Internal Revenue Code) were published in the Federal Register (68 FR 42254).

In addition, in a case decided by the Third Circuit Court of Appeals, the contributions to the plan were taxable to the owners of the corporate employers as constructive dividends (Neonatology Associates, P.A., Et Al. v. Commissioner, 299 F.3rd 221 - 3rd Cir. 2002).

Plan Administrators Frustrated with IRS attacks with 8886 forms filed

audits | Lance Wallach | Pulse | LinkedIn

IRS: Disclose Offshore Accounts or Go to Jail

Brian

That's pretty much the headline from a CNBC article on Friday. And it's true.

In 2009, 15,000 Americans came forward and admitted having foreign bank accounts. Unfortunately, Uncle Sam estimates there are some 500,000 more people hiding money offshore. Opening a bank account in another country isn't illegal. There are a whole host of reasons why people may wish to send money offshore. It only becomes illegal when you send money to a foreign country in the hopes of cheating Uncle Sam.

U.S. law makes it a felony if you fail to declare the income from foreign investments on your U.S. tax return and makes it illegal to not disclose the existence of the foreign account.

So what is a person to do? Taxpayers can do nothing and hope they don't lose the "audit lottery" (there are no winners with the IRS). Or taxpayers can come into compliance, report the account and pay the government ¼ of the highest dollar amount that was in the account. That's right, if you had an account with $200,000 in it, get out the checkbook and write a check to the IRS for $50,000.

Taxpayers wanting to take advantage of the current amnesty program (called the Offshore Voluntary Disclosure Initiative) must move quickly, however. Unlike the 2009 program, which simply said you had to apply be the deadline, the current amnesty requires that all missing forms ("FBAR's"), amended returns and payment must be made by the deadline. There is a great deal of paperwork involved with the new program, waiting until the last minute is a recipe for disaster.

Those that don't comply face prison and loss of 50% of their highest account value.

So what is the risk of getting caught? We think it is quite high.

Transparency within the international banking community is at an all time high. And the developed countries are exchanging information. That means if Germany obtains information about accounts in a Bermuda bank it will likely share that information with other countries.

The U.S. has been issuing "John Doe" subpoenas to foreign banks fishing for the names of American account holders. Countries like Germany have been bribing foreign bank officials to simply steal the information and turn it over.

Still not convinced? The IRS paid its first award under the new whistleblower program - $4.5 million to an accountant who reported his employer! If anyone, anywhere knows you have a foreign account; they may report you and keep a large percentage of what you pay.

The world suddenly got much smaller.

This is interesting article but I do not believe everything in it is correct. I have received numerous phone calls from participants in these plans and the IRS is auditing. For the most accurate information contact: Lance Wallach at lancewallach.com or call 516-935-7346

Avoid IRS Penalties

HAVE YOU BEEN THE VICTIM OF THE SALE OF ABUSIVE LIFE INSURANCE AND ANNUITY PRODUCTS SOLD AS PART OF A PENSION PLAN OR RETIREMENT PLAN?

FBAR/OVDI LANCE WALLACH: IRS FBAR Voluntary Disclosure Initiative, opt out ...

Tidbits from the IRS on Offshore Account Issues (6/7/14)

Life insurance Litigation : About

IRS to Audit Sea Nine VEBA Participating Employers - Finance - Taxes

Help with Common IRS Problems: Section 79 Plans: Section 79, Captive Insurance, I...

Find Legal Articles

Welfare Benefit Plans Funded with Permanent Life Insurance Are Abusive Tax Scams

Did you purchase a Section 79 plan and run into trouble? Lance Wallach, insurance expert witness services can provide the help you need with your insurance problems.

IRS Criminal Investigation Department Audits Section 79, Captive Insurance, 412i and 419 Scams

Don't face an audit alone! You can avoid 6707A penalties if you are facing an IRS 419 plan or 412i plan audit. Call these experts today for a free phone consultation.

Vebaplan.org helps with IRS audit issues of 419e, 412i, tax shelter penalties, IRS fines of listed transactions & material advisors. Retirement, benefit plans experts for small business and CPAs, financial advisors,419 plan,captive Insurance plan

IRS tax relief firm, Lance Wallach, speaking: Help with Common IRS Problems: KENNETH ELLIOT: Sea Nine VEBA Important

IRS and tax shelters, 5344 views, 123 likes | Lance Wallach | Pulse | LinkedIn

How Hartford Life and Other Insurance Companies Tricked their Agents and Got People in Trouble with the IRS - HG.org

Can I get in trouble with the IRS for participating in a section 79 plan? | Yahoo Answers

IRS Attacks Business Owners in 419, 412, Section 79 and Captive Insurance Plans Under Section 6707A | Stacey Arenas | LinkedIn

200K Report Update- Lance Wallach 419, 412i, Sect 79, Captive Insurance

EP Abusive Tax Transactions - Certain Trust Arrangements Seeking to Qualify for Exemption from Section 419

Plan Administrators Frustrated with IRS attacks with 8886 forms filed

audits | Lance Wallach | Pulse | LinkedIn

IRS: Disclose Offshore Accounts or Go to Jail

IRS: Disclose Offshore Accounts or Go to Jail

Brian

Tax Resolution Sevices - Attorneys-USA.org Lance Wallach | Attorneys-usa.org Reviews