Showing posts with label abusive plans. Show all posts

Abusive Welfare Benefit and Retirement Plans Can Lead to Severe Penalties for Accountants

By Lance Wallach

Accountants who are unaware of recent developments are likely to encounter a nightmarish

scenario that may play out something like this: you sign a client’s tax return that claims a tax

deduction for participation in a “welfare benefit plan”. A few years pass, and nothing happens.

Then, on audit, the deductions are disallowed and your client is hit with back taxes, penalties, and

interest. He discovers that he may be looking at a large penalty for not disclosing his participation

in the plan to the IRS.

Naturally, at this point, your client wants out of the plan. But he discovers that he cannot get the

money that he has contributed out of the plan. He finds that the money is being used by the plan

sponsor to fight the IRS; his money is being used to defend a plan that he no longer wants to be

in. This is claimed to be legal. Or he may even find that the money is simply gone, that it has

been stolen or otherwise misappropriated.

And now you find that you are a “material advisor” with respect to your client’s participation in

the plan. Like your client, you were supposed to disclose your role here; in your case, as a

“material advisor”. You also may be looking at a large penalty for failing to disclose.

If you think this could never happen to you, think again.

Welfare benefit plans are a creation of and are sanctioned by Section 419 of the Internal Revenue

Code. There are single employer plans and multiple employer plans; the latter rely mostly on IRC

Section 419A (f) (6) (in the most common cases where there are ten or more employers as part

of the same plan). The 419A(f)(6) plans are, and perhaps always were, generally regarded as

abusive, and were substantially curtailed in recent years by harsh IRS regulation. Amazingly,

however, they refuse to totally die, and are still being marketed. These plans are called listed

transactions (more on that later).

While the principle purpose of this article is to discuss the current state of the welfare benefit

plan, and everything outside of this paragraph will do just that, it is perhaps worth noting that

welfare benefit plans are not the only subject of current IRS scrutiny and/or regulation. The

Section 412(i) defined benefit plan, for example, is such a target that a task force has been

formed internally solely to audit 412(i) plans. Many of them are being deemed listed transactions,

many of the plans are being involuntarily terminated, and back taxes, penalties, and interest are

being assessed. Not surprisingly, all of this has resulted in considerable litigation.

Single employer welfare benefit plans are now more popular than multiple employer plans. All

welfare benefit plans tend to share certain characteristics, however. They tend to be marketed

most frequently by insurance agents and financial planners, and sometimes by accountants and

attorneys. Prospects tend to be professionals and profitable small businesses. The most attractive

selling point is the ability to claim large tax deductions and remove money tax free. Life insurance

tends to be the funding vehicle. Often cheap term insurance is purchased for rank and file

workers and some form of permanent coverage (universal life, variable life, etc., for the owners

and key employees. But many times workers are completely left out of the plan. For businesses

looking to do as little as possible for workers, a selling point is that the great majority of benefits,

in most cases, eventually go to the owners. This type of discrimination was recently addressed

by IRS Notice 2007-84, which disallowed tax deductions and penalties with respect to welfare

benefit plans that discriminate. If done correctly, the plans can accomplish things like facilitating

estate planning, business succession, and asset protection. But the promised tax deduction is

usually the sizzle that sells the steak.

In October of 2007, welfare benefit plans were affected by IRS rulings. The two most important

developments were Revenue Ruling 2007-65, which declared, in essence, that premiums paid

inside of a welfare benefit plan for cash value life insurance were not tax deductible, and Notice

2007-83, which identified the trust within welfare benefit plans involving cash value life insurance

policies, AND substantially similar arrangements, as listed transactions. In other words, in

essence, not only are premiums paid for cash value life insurance policies in welfare benefit plans

not tax deductible, but, and far more importantly, the plans themselves are now listed

transactions. This, in turn, means that most welfare benefit plans are now listed transactions,

because most feature cash value life insurance. This designation creates disclosure obligations

with absurdly harsh penalties both for failure to disclose or incorrectly or incompletely disclosing,

as we shall soon see.

A listed transaction, basically, is any transaction identified as such by specific IRS guidance OR

any transaction substantially similar to the specifically identified transaction. Participants in listed

transaction must file Form 8886 with both the Service and the Office of Tax Shelter Analysis.

Failure to timely and completely file leads to penalties of $100,000 for individuals and $200,000

for corporate taxpayers.

The practitioner has filing requirements, also, which can lead to equally severe penalties, if the

practitioner qualifies as a “material advisor” with respect to one of these transactions. What is a

material advisor? Basically, someone who gives advice, sells, or otherwise plays a significant part

in the promotion, sale, or paperwork with respect to a taxpayer’s participation in a listed

transaction. Put simply, from an accountant’s standpoint, you must give advice, the client must

do it, and you must satisfy a certain income threshold with respect to the transaction, usually

$10,000. The accountant who signs a return taking a tax deduction with respect to the

transaction is surely a material advisor, if the income threshold is met.

A problem is that many accountants are not even aware of these plans. Often it is discovered

when preparing the client’s tax return, at which point the client expects you to allow the

deduction and sign the return, since the client was sold a tax deduction. Or worse yet, the

deduction may already have been disallowed on audit. The point is that, far too frequently, the

practitioner does not even discover a client’s involvement in a listed transaction until too much

damage has already been done. This is often the case if the contribution has already been made,

as it usually has, and irretrievably so if the deductions have already been disallowed on audit. And

added to all of this is the distaste that most professionals must have for all of these policing types

of duties, to say nothing of the difficulties that are created with clients and, probably, the loss of

some clients.

The material advisor must file Form 8918 describing her exact role in the client’s participation in

the transaction. Failure to file can lead to penalties imposed on the advisor that are as severe as

those imposed on taxpayers ($100,000 for individuals and $200,000 for corporations) who fail to

file Form 8886. The accountant may escape material advisor status by not meeting the $10,000

income threshold. A problem, however, is the accountant who is paid $10,000 in the aggregate

by the client, but not that much specifically with respect to the listed transaction. Does such a

person satisfy the income threshold? The author and his associates have discussed this point,

among others, directly with IRS personnel who actually wrote published guidance in this area.

The best we have been able to get is a declaration that any test that would be applied to the

determination of any of these issues would have to consider all surrounding facts and

circumstances. This would be unlikely to yield any general rules, for each situation has its own

facts and circumstances.

Another section that the practitioner, or at least the prudent one, should be aware of, largely apart

from what has been discussed so far in this article, is Section 6701, entitled “penalties for aiding

and abetting understatement of tax liability.” This penalty is imposed upon those who assist in,

procure, or advise while knowing or having reason to believe that the subject matter will be used

in connection with any material matter arising under the tax laws and who know that the use

thereof would result in the understatement of another person’s tax liability. The penalty may be

applied separately to each occurrence, and it is $1,000 if an individual is the taxpayer and $10,000

for a corporate taxpayer.

Three (3) definitions are now in order, which will hopefully help to clarify any confusion that

may exist in the reader’s mind. A “material advisor” is any person who provides any material aid,

assistance, or advice with respect to organizing, managing, promoting, selling, implementing,

insuring, or carrying out any reportable transaction, and who directly or indirectly derives gross

income in excess of a certain threshold amount. More on threshold soon, but the most common

one is $10,000 for listed transactions. A “reportable transaction”, basically, is any transaction

which has been deemed to have a potential for tax avoidance or evasion. That is pretty broad, and

the reader should consult the regulations under section 6011 for more on this. Finally, a “listed

transaction” is a reportable transaction which is identical or substantially similar to a transaction

specifically identified as a tax avoidance transaction.

As for threshold amounts, in the case of reportable transactions, it is $50,000, if substantially all

tax benefits are provided to natural persons, and $250,000 in other cases. Natural person is

construed most broadly, generally ignoring trusts, corporations, and other such entities. For listed

transactions, the numbers are $10,000 (previously discussed) and $25,000.

Lance Wallach speaks and writes about benefit plans, and has authored numerous books for the

AICPA, Bisk Total tape, and others. He can be reached at (516) 938-5007 or

wallachinc@gmail.com. For more articles on this or other subjects, feel free to visit his website

at www.taxlibrary.us.

The information contained in this article is not intended as legal, accounting, financial or any

other type of advice for any specific individual or entity. You should seek such advice from an

appropriate professional.

Tax Adviser Experts - Expert Legal Advice

New Site Makeover!

Victim of an Abusive Tax Shelter Fraud Litigation? Participated in 419 and/or 412i Plans? Had an IRS fine or audit? Problems with a reportable transaction?

You'll be happy you found this page!

Lance Wallach, Managing Director, is the nation's leading expert on "employee benefit plans", "tax problem resolution" and IRS audits defense. Mr. Wallach's team of highly experienced tax attorneys, CPAs, and ex-IRS agents have helped his clients save hundreds and thousands of dollars successfully defending them in lawsuits and "IRS audits".

Click here to find out how he can help you!

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

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.

"Many taxpayers who are no longer taking current tax deductions for these plans continue to enjoy the benefit of previous tax deductions by continuing the deferral of income from contributions and deductions taken in prior years."

Many business owners adopted 412i, 419, captive insurance and Section 79 plans based upon representations provided by insurance professionals that the plans were legitimate plans and were not informed that they were engaging in a listed transaction. Upon audit, these taxpayers were shocked when the IRS asserted penalties under Section 6707A of the Code in the hundreds of thousands of dollars. Numerous complaints from these taxpayers caused Congress to impose a moratorium on assessment of Section 6707A penalties.

The moratorium on IRS fines expired on June 1, 2010. The IRS immediately started sending out notices proposing the imposition of Section 6707A penalties along with requests for lengthy extensions of the Statute of Limitations for the purpose of assessing tax. Many of these taxpayers stopped taking deductions for contributions to these plans years ago, and are confused and upset by the IRS’s inquiry, especially when the taxpayer had previously reached a monetary settlement with the IRS regarding its deductions. Logic and common sense dictate that a penalty should not apply if the taxpayer no longer benefits from the arrangement. Treas. Reg. Sec. 1.6011-4(c)(3)(i) provides that a taxpayer has participated in a listed transaction if the taxpayer’s tax return reflects tax consequences or a tax strategy described in the published guidance identifying the transaction as a listed transaction or a transaction that is the same or substantially similar to a listed transaction.

Clearly, the primary benefit in the participation of these plans is the large tax deduction generated by such participation. Many taxpayers who are no longer taking current tax deductions for these plans continue to enjoy the benefit of previous tax deductions by continuing the deferral of income from contributions and deductions taken in prior years. While the regulations do not expand on what constitutes “reflecting the tax consequences of the strategy,” it could be argued that continued benefit from a tax deferral for a previous tax deduction is within the contemplation of a “tax consequence” of the plan strategy. Also, many taxpayers who no longer make contributions or claim tax deductions continue to pay administrative fees. Sometimes, money is taken from the plan to pay premiums to keep life insurance policies in force. In these ways, it could be argued that these taxpayers are still “contributing,” and thus still must file Form 8886.

It is clear that the extent to which a taxpayer benefits from the transaction depends on the purpose of a particular transaction as described in the published guidance that caused such transaction to be a listed transaction. Revenue Ruling 2004-20, which classifies 419(e) transactions, appears to be concerned with the employer’s contribution/deduction amount rather than the continued deferral of the income in previous years. Another important issue is that the IRS has called CPAs material advisors if they signed tax returns containing the plan, and got paid a certain amount of money for tax advice on the plan. The fine is $100,000 for the CPA, or $200,000 if the CPA is incorporated. To avoid the fine, the CPA has to properly file Form 8918.

Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, Wallach is a frequent speaker on retirement plans, financial and estate planning, and abusive tax shelters. He is also a featured writer and has been interviewed on television and financial talk shows including NBC, National Pubic Radio’s All Things Considered and others. Lance authored 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.

Contact him at:

516.938.5007,

wallachinc@gmail.com, or

www.taxadvisorexperts.org, or

www.taxlibrary.us.

Expert Witness in IRS tax and finance cases.

Investment News - Lance Wallach - 412i and 419 plan litigatation

Potential Disadvantages of a 412(i) Plan

Because of their large required contributions, these plans work only with established, highly profitable businesses. They usually work best when the business owner is within 10 years or so of retirement and is older than most of the company’s relatively few employees. In addition, the plan cannot make policy loans. Such a loan invalidates the plan altogether. There is no flexibility in investments, because the plan is funded entirely with insurance and annuity contracts. Finally, there may be limitations to the deductions or the amount of insurance that is purchased, and there may be an income component that is recaptured by the business owner.

Recent Abuses

During the past five years, the life insurance industry promoted a number of techniques to distort the conservative use of 412(i) plans. One common distortion was to encourage the plan to invest heavily in a life policy rather than an annuity. In many plans, 100% of the plan is invested in the life policy, with no annuity at all. Although this strategy is good for the insurance agent’s commission, it does not meet the business’ goal of a retirement plan. Conservative plans have at least 50% of the plan invested in annuities.

Most notably, however, some insurance promoters have used the 412(i) plan as a tool for purchasing a very large life insurance policy with tax-deductible dollars that would then be transferred out, by either distribution or purchase from the plan, at a value much less than the amount paid for it. Prior to Revenue Procedure 2004-16 (issued February 13, 2004), one could make a case that the value used for the purchase or distribution of a life policy out of a plan could be the policy’s cash surrender value (CSV). Often, specially designed life insurance contracts were used to suppress the CSV at the time of transfer from the plan. This would allow the participant to reduce his cost of purchasing the policy, or his tax liability if the plan were to distribute the policy to him. Then, either by the design of the product itself or by language in the contract allowing for certain changes (e.g., a right of exchange to another contract or a right to reduce the face amount), the contract would be structured so that the CSV increased significantly after it was transferred to the employee. Eventually, the IRS figured out this “pension rescue” structure, and on February 13, 2004, it released proposed regulations dealing with this valuation strategy.

New rules. On February 13, 2004, the U.S. Treasury Department and the IRS issued guidance to shut down abusive transactions involving specially designed life insurance policies in retirement plans, and further guidance specific to 412(i) plans. “The guidance targets specific abuses occurring with section 412(i) plans,” stated Assistant Secretary for Tax Policy Pam Olson. “There are many legitimate section 412(i) plans, but some push the envelope, claiming tax results for employees and employers that do not reflect the underlying economics of the arrangements.”

The guidance covered three specific issues. First, a set of proposed regulations stated that any life insurance contract transferred from an employer or a tax-qualified plan to an employee must be taxed at its full “fair market value.” Until the regulations are finalized, the IRS has given interim guidance for determining the fair market value to be used. In the author’s opinion, conservative planners should assume that the interim guidance will be finalized. The fair market value formula under Revenue Procedure 2004-16 is as follows:

Cash Value (without reduction for surrender charges) may be treated as the fair market value of a contract as of a determination date provided such cash value is at least as large as the aggregate of: (1) the premiums paid from the date of issue through the date of determination, plus (2) any amounts credited (or otherwise made available) to the policyholder with respect to those premiums, including interest, dividends, and similar income items (whether under the contract or otherwise), minus (3) reasonable mortality charges and reasonable charges (other than mortality charges), but only if those charges are actually charges on or before the date of determination and are expected to be paid.

Under this definition, an artificially low CSV can no longer be used to enjoy a valuation arbitrage. Furthermore, CSV in general is no longer a relevant figure. In the commentary subsequent to the release of these regulations, it has generally been accepted that the IRS accomplished its intent: to put an abrupt end to this valuation scheme. “Pension rescue” as applied to both 412(i) plans and qualified plans is effectively dead.

Second, a revenue ruling released at the same time stated that where excessive amounts of life insurance are purchased on 412(i) plan participants, one of two outcomes is possible:

If the death benefit payable to the beneficiaries is in excess of amounts allowed by the IRC, the plan would be disqualified.
If the excess death benefit is payable to the plan to offset future premium requirements, the premiums for any death benefit amounts in excess of what would be allowed by the plan documents will not be fully deductible in the year paid. Instead, only the “normal cost” would be deductible in the year the full premium is paid, with the balance deductible in later years. In addition, these payments will be considered “listed transactions” as part of a tax avoidance scheme, with additional reporting burdens. If records are not kept or reports not filed as required, penalties may be due under the tax shelter rules of IRC sections 6111 and 6112.

Through this revenue ruling, the IRS also achieved its goal of discouraging unscrupulous insurance agents from funding 412(i) plans with disproportionate amounts of life insurance.

Finally, another revenue ruling stated that a section 412(i) plan cannot use differences in life insurance contracts to discriminate in favor of highly paid employees. This guidance has been effective in curtailing abusive 412(i) arrangements aimed only at benefiting the highest-paid employees at the expense of other employees. Even under the new regulations, 412(i) plans remain effective tools. As long as a business does not engage in valuation schemes, buy disproportionate amounts of insurance, or inappropriately allow top employees to benefit, section 412(i) plans still make good planning sense.

Will A Captive Insurance Plan Save You Money?

Call 5 1 6 - 9 3 8 - 5 0 0 7
Nationwide Assistance
WallachInc@gmail.com

Small Business Retirement Plans Fuel Litigation

Maryland Trial Lawyer
Dolan Media Newswires January

Small businesses facing audits and potentially huge tax penalties over certain types of retirement plans are filing lawsuits against those who marketed, designed and sold the plans. The 412(i) and 419(e) plans were marketed in the past several years as a way for small business owners to set up retirement or welfare benefits plans while leveraging huge tax savings, but the IRS put them on a list of abusive tax shelters and has more recently focused audits on them.

The penalties for such transactions are extremely high and can pile up quickly.

There are business owners who owe taxes but have been assessed 2 million in penalties. The existing cases involve many types of businesses, including doctors’ offices, dental practices, grocery store owners, mortgage companies and restaurant owners. Some are trying to negotiate with the IRS. Others are not waiting. A class action has been filed and cases in several states are ongoing. The business owners claim that they were targeted by insurance companies; and their agents to purchase the plans without any disclosure that the IRS viewed the plans as abusive tax shelters. Other defendants include financial advisors who recommended the plans, accountants who failed to fill out required tax forms and law firms that drafted opinion letters legitimizing the plans, which were used as marketing tools.

A 412(i) plan is a form of defined benefit pension plan. A 419(e) plan is a similar type of health and benefits plan. Typically, these were sold to small, privately held businesses with fewer than 20 employees and several million dollars in gross revenues. What distinguished a legitimate plan from the plans at issue were the life insurance policies used to fund them. The employer would make large cash contributions in the form of insurance premiums, deducting the entire amounts. The insurance policy was designed to have a “springing cash value,” meaning that for the first 5-7 years it would have a near-zero cash value, and then spring up in value.

Just before it sprung, the owner would purchase the policy from the trust at the low cash value, thus making a tax-free transaction. After the cash value shot up, the owner could take tax-free loans against it. Meanwhile, the insurance agents collected exorbitant commissions on the premiums – 80 to 110 percent of the first year’s premium, which could exceed million.

Technically, the IRS’s problems with the plans were that the “springing cash” structure disqualified them from being 412(i) plans and that the premiums, which dwarfed any payout to a beneficiary, violated incidental death benefit rules.

Under §6707A of the Internal Revenue Code, once the IRS flags something as an abusive tax shelter, or “listed transaction,” penalties are imposed per year for each failure to disclose it. Another allegation is that businesses weren’t told that they had to file Form 8886, which discloses a listed transaction.

According to Lance Wallach of Plainview, N.Y. (516-938-5007), who testifies as an expert in cases involving the plans, the vast majority of accountants either did not file the forms for their clients or did not fill them out correctly.

Because the IRS did not begin to focus audits on these types of plans until some years after they became listed transactions, the penalties have already stacked up by the time of the audits.

Another reason plaintiffs are going to court is that there are few alternatives – the penalties are not appeasable and must be paid before filing an administrative claim for a refund.

The suits allege misrepresentation, fraud and other consumer claims. “In street language, they lied,” said Peter Losavio, a plaintiffs’ attorney in Baton Rouge, La., who is investigating several cases. So far they have had mixed results. Losavio said that the strength of an individual case would depend on the disclosures made and what the sellers knew or should have known about the risks.

In 2004, the IRS issued notices and revenue rulings indicating that the plans were listed transactions. But plaintiffs’ lawyers allege that there were earlier signs that the plans ran afoul of the tax laws, evidenced by the fact that the IRS is auditing plans that existed before 2004.

“Insurance companies were aware this was dancing a tightrope,” said William Noll, a tax attorney in Malvern, Pa. “These plans were being scrutinized by the IRS at the same time they were being promoted, but there wasn’t any disclosure of the scrutiny to unwitting customers.”

A defense attorney, who represents benefits professionals in pending lawsuits, said the main defense is that the plans complied with the regulations at the time and that “nobody can predict the future.”

An employee benefits attorney who has settled several cases against insurance companies, said that although the lost tax benefit is not recoverable, other damages include the hefty commissions – which in one of his cases amounted to 400,000 the first year – as well as the costs of handling the audit and filing amended tax returns.

Defying the individualized approach an attorney filed a class action in federal court against four insurance companies claiming that they were aware that since the 1980s the IRS had been calling the policies potentially abusive and that in 2002 the IRS gave lectures calling the plans not just abusive but “criminal.” A judge dismissed the case against one of the insurers that sold 412(i) plans.

The court said that the plaintiffs failed to show the statements made by the insurance companies were fraudulent at the time they were made, because IRS statements prior to the revenue rulings indicated that the agency may or may not take the position that the plans were abusive. The attorney, whose suit also names law firm for its opinion letters approving the plans, will appeal the dismissal to the 5th Circuit.

In a case that survived a similar motion to dismiss, a small business owner is suing Hartford Insurance to recover a “seven-figure” sum in penalties and fees paid to the IRS. A trial is expected in August.

But tax experts say the audits and penalties continue. “There’s a bit of a disconnect between what members of Congress thought they meant by suspending collection and what is happening in practice. Clients are still getting bills and threats of liens,” Wallach said.“Thousands of business owners are being hit with million-dollar-plus fines. … The audits are continuing and escalating. I just got four calls today,” he said. A bill has been introduced in Congress to make the penalties less draconian, but nobody is expecting a magic bullet.

“From what we know, Congress is looking to make the penalties more proportionate to the tax benefit received instead of a fixed amount.”

Lance Wallach can be reached at: WallachInc@gmail.com

For more information, please visit www.taxadvisorexperts.org 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 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 Pubic 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 visit www.taxadvisorexperts.com.

Lance Wallach
68 Keswick Lane
Plainview, NY 11803
Ph.: (516)938-5007
Fax: (516)938-6330 www.vebaplan.com

National Society of Accountants Speaker of The Year

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.

Abusive Insurance and Retirement Plans

Wednesday, April 30, 2014

Why You Should Stay Away from Section 79 Life Insurance Plans

I’ve had several calls lately from doctors who are being pitched Section 79 plans and are wondering if these plans are any good. The doctors are being told that Section 79 plans are the best wealth-building tool they can use to reduce their income taxes and create a tax-free retirement income

Must Read

Friday, March 28, 2014

Life Insurance

In many of Lance Wallachs CPE books he discusses 412i or 412e3 and listed transactions.

One day when you were complaining about what you pay the government, your cousin Tilly suggested that she knew a life insurance agent who could help you with your taxes. You met with him, you listened to his pitch about a deferred benefit plan, and you asked a lot of questions. He suggested a 412i plan, whatever that is. From the initial description it sounded as if you would have to fund retirement for your rotating staff which you weren’t interested in doing, but he told you that he could arrange an executive carve out. You really didn’t have the income to fund it initially but he convinced you to sell your investment real estate, declare your gain as ordinary income, and then buy the plan to offset that.

You’ve been hearing that the IRS is after “listed transactions” and you’re worried. Suddenly you’re having a tough time having cousin Tilly’s friend return your calls. The insurance company whose products fund your plan has taken your calls, but for the fourth time in as many months a representative has promised to get back to you. Honest he will!

You have gone to a new accountant and you learn that the plan was unsuited for you, it was formed improperly, and it’s going to cost you a lot more money than you have to pay the IRS not to mention the accountant and the actuary to sort it all out. Now you are worried that the problems may wipe out your retirement nest-egg and keep you working years longer than you intended.

Fortunately, there are ways to provide for your retirement that can afford you tax benefits while creating a solid retirement fund for your future so that you won’t have to be “that doctor”. However, getting there doesn’t necessarily start with cousin Tilly’s insurance agent friend or the “financial planner” you met on the golf course. If you want to avoid problems in your retirement plans, there are some things you should do.

Educate yourself. When you need a new car, do you go to your dry cleaner’s brother who is a car salesman to tell you what you want? Of course not. You choose some cars that interest you, you study them, and then you work with dealers to get the best car for you at the best deal. Why should your retirement planning be different? There are many types of financial advisors. There are also different types of retirement plans available and one is probably more suitable for your current financial capabilities and retirement needs. A great and easy tool is the IRS Retirement Plans Navigator.www.retirementplans.irs.gov.
Then find a financial advisor. There are lots of folks who want to sell you their retirement services: insurance agents, accountants, lawyers, stockbrokers and financial planners. Do research about them, search the internet, read about them, contact local professional associations, and use similar resources.
Interview potential advisors. There are a number of things you will want to find out, but one question is paramount – are you a fee-only advisor? A fee-only financial advisor is compensated solely by you the customer and not by some mega insurance company or broker for selling you their products. Advisors paid by insurance companies or brokers are not necess

Abusive Tax Shelters: Lance Wallach tells national radio audience how IR...

Abusive Tax Shelters: Lance Wallach tells national radio audience how IR...: Click hear to listen to the radio interview on this subject. Lance Wallach, National Society of Accountants Speaker of the Year and member...

obin weingast 419 audit google lance wallach for more

robin weingast 419 audit google lance wallach for more Summary

robin weingast 419 audit google lance wallach for more received their first complaint on 12/19/2012.

Information about robin weingast 419 audit google lance wallach for more was first submitted to Scambook on Dec 19, 2012. Since then the page has accumulated 0 consumer complaints. On average users reported $0 of damages.
Company Information
Phone:Phone Number Not Yet on File
Email:Email Not Yet on File
Additional Employees:No known Employees

Avoid IRS Penalties