FBAR/OVDI LANCE WALLACH: The IRS has kicked out an undisclosed number of ta...: Lance Wallach We have written at least 75 posts about the Offshore Voluntary Disclosure Program (called OVDI or OVDP) and the need t...
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IRS Attacks Business Owners in 419, 412, Section 79 and Captive Insurance Plans
Under Section 6707ABy Lance Wallach
Taxpayers who previously adopted 419, 412i, captive
insurance or Section 79 plans are in big trouble.
In recent years, the IRS has identified many of these arrangements as abusive devices to funnel tax
deductible dollars to shareholders and classified these
arrangements as listed transactions." These plans were sold by insurance agents, financial planners,
accountants and attorneys seeking large life insurance
commissions. In general, taxpayers who engage in a “listed transaction” must report such transaction to the
IRS on Form 8886 every year that they “participate” in
the transaction, and you do not necessarily have to make a contribution or claim a tax deduction to
participate. Section 6707A of the Code imposes severe penalties
for failure to file Form 8886 with respect to a listed transaction. But you are also in trouble if you file
incorrectly. I have received numerous phone calls from
business owners who filed and still got fined. Not only do you have to file Form 8886, but it also has to be
prepared correctly. I only know of two people in the U.
S. who have filed these forms properly for clients. They tell me that was after hundreds of hours of research
and over 50 phones calls to various IRS personnel.
The filing instructions for Form 8886 presume a timely filling. Most people file late and follow the directions
for currently preparing the forms. Then the IRS fines
the business owner. The tax court does not have jurisdiction to abate or lower such penalties imposed by the
IRS. Read more here
How to Avoid IRS Fines for You and Your ClientsPublished: 2010/2011
By Lance WallachBeware: The IRS is cracking down on small-business owners who participate in tax-reduction insurance plans sold by insurance
agents, including defined benefit retirement plans, IRAs, and even 401(k) plans with life insurance. In these cases, the business owner
is motivated by a large tax deduction; the insurance agent is motivated by a substantial commission.
A few years ago, I testified as an expert witness in a case in which a physician was in an abusive 401(k) plan with life insurance. It had
a so-called “springing cash value policy” in it. The IRS calls plans with these types of policies “listed transactions.” The judge called
the insurance agent “a crook.”
If your client was currently is in a 412(i), 419, captive insurance, or Section 79 plan, they may be in big trouble. Accountants who
signed a tax return for a client in one of these plans may be what the IRS calls a “material advisor” and subject to a maximum
$200,000 fine.
If you are an insurance professional who sold or advised on one of these plans, the same holds true for you. Read more here!
FBAR Foreign Bank Account ReportingThe IRS is assessing huge penalties for undisclosed foreign bank
accounts, assets & income. Click for more infoFBAR FILING DEADLING HAS BEEN EXTENDEDSpecialty: People from IndiaBreaking 419 plan news! U.S. District Attorney sues Maven LLC, Tracy Sunderlage & SRG
International for promoting illegal 419 welfare benefit plans.
Other plans face serious problems. raided by IRS.
Millenium files for bankruptcy, Niche out of business. If you are in a
419, 412i, captive insurance, or section 79 scam, the time to seek
competent, experienced help is now. |
Our tax resolution offices
have received calls
regarding the following
companies or plans:
CJA, CJA and
Associates, Sea Nine Veba,
Robin Weingast,Niche
Millennium
Jail time for failure to file TD F 90-22.1 Report of Foreign Bank and Financial AccountsA former UBS, AG ("UBS") client from Miami Beach, Florida was sentenced to four months in federal prison for
willfully failing to file a Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts ("FBAR"), for the UBS
account the man held with as much as $4,000,0000 in it. This information was released by the U.S. Attorney for the
Southern District of Florida on July 25 2012.
The former UBS client paid a civil penalty of $2,000,000 related to the $4,000,000 high account balance stemming from
tax year 2006. Additionally, the former UBS client was sentenced to four months in federal prison, three years of
supervised release, 250 hours of community service and a $20,000 criminal fine.
The UBS account related to two offshore corporations owned by the man, one in the Virgin Islands and one in the
Republic of Panama. These corporations opened accounts at UBS. The man was not named as the direct owner but
instead he was deemed only the "beneficial owner." The accounts with UBS were opened from tax years 2005
through 2007.
It is stated that the man was aware of the obligation on the FBAR to report as he had previously filed FBARs for other
offshore corporations. An FBAR is required to be filed by both U.S. citizens and residents who have a financial
interest in or signatory authority over a non-U.S. financial account with a value of more than $10,000 at any point
during the tax year. The $10,000 amount is an aggregation of all non-U.S. financial accounts and not just an analysis
on an account-by-account basis.
The information on the former UBS client was turned over after UBS agreed in February 2009 to pay $780,000,000
under a deferred prosecution agreement to settle the claim that UBS conspired to defraud the U.S. by impeding the
Internal Revenue Service ("IRS"). UBS also agreed to turn over information to the U.S. Department of Justice on 300
account holders. Google Lance Wallach for more articles on point.
A US citizen or resident that held an account with UBS or any other institution that has not filed the necessary FBARs
for the last eight tax years, should immediately reach out to get help to discuss any potential issues they may have
and their alternatives. Filing for amnesty and then opting out are two options that our former IRS agents have
successfully done for our clients. If not done properly it can be a disaster. We suggest you use a CPA with years of
prior experience with the IRS international division.
Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching
professionals, is a frequent speaker on FBAR, OVDI, IRS tax amnesty and opting-out abusive tax shelters,
international tax, and estate planning. He writes about 412(i), 419, Section79, FBAR, OVDI, IRS tax amnesty and
opting-out and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty
publications, is quoted regularly in the press and has been featured on television and radio financial talk shows
including NBC, National Public Radio’s All Things Considered, and others. Lance has written numerous books
including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education’
s CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the AICPA best-selling books,
including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert
witness testimony and has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or lanwalla@aol.
com visit www.taxadvisorexperts.com or www.Lawyer4Audits.com.
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.
FBAR fines, IRS coming after YOU
Lance WallachIf you had money overseas you need to act now. The IRS is coming to get you. Many
overseas banks are reporting to the IRS on people that had money in accounts. OVDI and
opting out are ways to deal with some problems.
Many tax clients with unreported offshore accounts ask if they will receive the maximum
penalties if they decide not to enter into the IRS’s tax amnesty program. That’s a great
question considering the IRS uses the threat of severe penalties to gain compliance with
the offshore reporting rules.
The current amnesty program, called the Offshore Voluntary Disclosure Program
(sometimes called “OVDI” or “OVDP”), allows those with unreported foreign bank and
brokerage accounts to pay a 27.5% penalty based on the highest balance of the
unreported accounts during the last 8 years. That means if you have an account worth
$800,000 today and $1 million in 2009, the IRS would extract a $275,000 penalty.
There are reduced penalties for small accounts and in certain other limited circumstances.
Why would anyone agree to such a huge civil penalty? The answer is simple. Failure to
disclose an offshore account can be a felony if intentional and carries civil penalties of up
to 50% of the highest balance for each year the account was unreported or $100,000 per
year, whichever is higher. That means if you have owned a $500,000 account for the last
4 years the penalty could be $1 million - an amount twice the value of the account! If you
don’t believe us, just look at FAQ 12 on the IRS own OVDI website.
Most people who approach the voluntary disclosure program feel like they are between a
rock and a hard place. Lose all your money and potentially go to prison versus paying a
huge 27.5% penalty. Remember, the penalty is based on the value of the account. Most U.
S. taxpayers with offshore accounts have already paid tax on the money they earned.
Unless the money is from drug dealing or other illegal activities, the money has already
been taxed once.
There is hope, however. The penalties most often quoted are for willful violations. Yes,
there are some business people that intentionally try to hide money from the IRS or a
spouse. Most violators, however, simply didn’t know about the law. The typical amnesty
applicant is a dual national, an American living overseas, a foreign born American or a
person sending money “home” to family in India, Mexico or China.
The IRS’ website does not draw a distinction between these groups. That causes many
people who have truly made an honest mistake to needlessly panic.
Recently there has been a growing thought that the courts could strike down the FBAR*
penalties law as a violation of the Eighth Amendment to the U.S. Constitution. The Eight
Amendment, adopted in 1791, says that “Excessive bail shall not be required, nor
excessive fines imposed, nor cruel and unusual punishments inflicted.” While most people
think of criminal and death penalty cases, there is a growing body of law surrounding the
“excessive fines” language. [*An FBAR is a Report of Foreign Bank and Financial
Account, the form that U.S. taxpayers must use to report foreign financial accounts yearly.]
In 1998, the U.S. Supreme Court ruled it was unconstitutional to fine a person $357,144
for failing to report cash in excess of $10,000 being removed from the country. Removing
cash is not illegal just like opening a foreign account isn’t illegal. The law requires you to
report both transactions, however.
In striking down the fine, the court found it was “grossly disproportionate” to the violation.
There is little guidance thus far from the courts, however the IRS has recognized the
dangers in enforcing the 50% - per - year penalties on innocent violations. The Internal
Revenue Manual used by IRS employee’s notes that the penalties established by
Congress is the maximum amounts that can be imposed. Revenue agents are instructed
to consider warning letters or lower penalties except in the most egregious cases. You
need to be very careful and get good help. You get what you pay for. I am getting lots of
calls from people in trouble because their accountants do not know what they are doing
on these issues
If you have an unreported foreign account, contact a CPA experienced in foreign
reporting requirements. The best would be someone who was in the international division
of the IRS. He can probably tell you right away your situation and make suggestions. The
decision to file under the OVDI amnesty program or seek a traditional disclosure is one
that requires careful investigation. Once you make a traditional disclosure it is impossible
to seek amnesty, however an amnesty applicant can always “opt out.”
Lance Wallach, National Society of Accountants Speaker of the Year and member of the
American Institute of CPAs faculty of teaching professionals, is a frequent speaker on
retirement plans, financial and estate planning, and abusive tax shelters. He speaks at
more than ten conventions annually and writes for over fifty publications. Lance has
written numerous books including Protecting Clients from Fraud, Incompetence and
Scams published by John Wiley and Sons, Bisk Education's CPA's Guide to Life Insurance
and Federal Estate and Gift Taxation, as well as AICPA best-selling books, including
Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots.
He does expert witness testimony and has never lost a case. Mr. Wallach may be reached
at 516/938.5007, wallachinc@gmail.com, or at www.taxaudit419.com or www.lancewallach.
com.
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.
OVDI, FBAR, INTERNATIONAL TAX UPDATE: Deadlines, E-Filing Option and New IRS Form 8938
Lance Wallach
June 15, 2012American taxpayers. person with a financial interest in, or signature or other authority over, any financial
account outside the U.S. must file an annual report on Treasury Form TD F 90-22.1 Report of Financial
Accounts, commonly known as an “FBAR” if the aggregate value of all such accounts exceeds 10,000 at any
time during the calendar year. Unlike tax returns, which may be mailed on the filing deadline and be
considered timely, the FBAR for 2011 must have been received by Treasury by June 30
With the April 17 deadline to file income tax returns now upon us, U.S. taxpayers with foreign financial assets are finding out that they need to file some extra forms this year.
The Foreign Account Tax Compliance Act, FATCA for short, requires any taxpayers to disclose on their tax returns for the tax year 2011 the location and amount of their foreign assets in excess of $50,000, or $100,000 for married couples.