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The Professionals of Irsform8886.com have years of experience properly completing these forms to the satisfaction of both the IRS and our clients. Their attention to detail, years of research and artful application of the most minute details to their finished products have helped their clients keep thousands of dollars safe from IRS attack. Partnering with renowned teams of CPAs, EAs, lawyers and finance experts, they put their expertise to work for you quickly and effectively. If you are having tax problems as a result of 419e or 412i participation, Section 79, Captive Insurance, or other listed transaction, you owe it to yourself and your family to contact these experts to determine what help you need to protect your assets. |
Retirement Today Sept 2011
Lance Wallach
Did you get a letter from the IRS threatening to impose this fine? If you haven’t
already, you still may. Consider yourself lucky if you have not because this
means that you have more time to straighten this situation out. Do not wait for
this letter to come from the IRS before you call an expert to help you. Even if
you have been audited already, you could still get the letter and/or fine. One
has nothing to do with the other, and once the fine has been imposed, it is not
able to be appealed.
Many businesses that participated in a 412i retirement plan or the IRS is
auditing a 419-welfare benefit plan. Many of these plans were not in
compliance with the law and are considered abusive tax shelters. Many
business owners are not even aware that the welfare benefit plan or
retirement plan that they are participating in may be an abusive tax shelter and
that they are in serious jeopardy of huge IRS penalties for each year that they
have been in this type of plan.
Insurance companies, CPAs, sellers of these 419 welfare benefit plans or
412i retirement plans, as well as anyone that gave tax advice or
recommended participation in one or more of these plans, also known as a
material advisor, is in danger of being sued, fined by the IRS, or both.
There is help available if you think you may be involved with one of these 419
welfare benefit plans, 412i retirement plans, or any abusive tax shelter. IRS
penalty abatement is an option if you act now. Feel free to contact me for more
information. www.lancewallach.com
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.taxadvisorexpert.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.
Lance Wallach
Did you get a letter from the IRS threatening to impose this fine? If you haven’t
already, you still may. Consider yourself lucky if you have not because this
means that you have more time to straighten this situation out. Do not wait for
this letter to come from the IRS before you call an expert to help you. Even if
you have been audited already, you could still get the letter and/or fine. One
has nothing to do with the other, and once the fine has been imposed, it is not
able to be appealed.
Many businesses that participated in a 412i retirement plan or the IRS is
auditing a 419-welfare benefit plan. Many of these plans were not in
compliance with the law and are considered abusive tax shelters. Many
business owners are not even aware that the welfare benefit plan or
retirement plan that they are participating in may be an abusive tax shelter and
that they are in serious jeopardy of huge IRS penalties for each year that they
have been in this type of plan.
Insurance companies, CPAs, sellers of these 419 welfare benefit plans or
412i retirement plans, as well as anyone that gave tax advice or
recommended participation in one or more of these plans, also known as a
material advisor, is in danger of being sued, fined by the IRS, or both.
There is help available if you think you may be involved with one of these 419
welfare benefit plans, 412i retirement plans, or any abusive tax shelter. IRS
penalty abatement is an option if you act now. Feel free to contact me for more
information. www.lancewallach.com
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.taxadvisorexpert.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.
Small Business Retirement Plans Fuel Litigation
Maryland Trial Lawyer
Dolan Media Newswires January
Lance Wallach
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.