6707a "captive insurance" "section 79""tax letter" "irs letter" "irs letters" "irs determination letter" 419e 412i
6707a "form 8886" "listed transactions" "abusive tax shelter assistance" "expert witness irs" veba "Grist Mill
Trust" Benistar "SADI Trust" "Beta 419" "Millennium Plan" Bisys "Creative Services Group" "Sterling Benefit
Plan" "Compass 419" "Niche 419" "Sea Nine Veba" "419 plan" 412i 419e "expert witness insurance" "welfare
benefit plans" "419 plan help" "expert witness irs" ""419 plan help" "412i plan help" "tax resolution services" "irs
problem solvers" "form 8886" 6707a "irs letter" "abusive tax shelters" "abusive tax shelter" "listed transactions"
"listed transaction" "8886 help" "insurance expert" "tax expert" "irs audit defense" "abusive tax shelter help"
6707a "form 8886" "listed transactions" "abusive tax shelter assistance" "expert witness irs" veba "Grist Mill
Trust" Benistar "SADI Trust" "Beta 419" "Millennium Plan" Bisys "Creative Services Group" "Sterling Benefit
Plan" "Compass 419" "Niche 419" "Sea Nine Veba" "419 plan" 412i 419e "expert witness insurance" "welfare
benefit plans" "419 plan help" "expert witness irs" ""419 plan help" "412i plan help" "tax resolution services" "irs
problem solvers" "form 8886" 6707a "irs letter" "abusive tax shelters" "abusive tax shelter" "listed transactions"
"listed transaction" "8886 help" "insurance expert" "tax expert" "irs audit defense" "abusive tax shelter help"
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Information and Links about IRC 6707A
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Become further informed about IRC 6707A and its 419e, 412i, listed transaction consequences through these links. California Broker, June 2011 Employee Retirement Plans By Lance Wallach 412i, 419, Captive Insurance and Section 79 Plans; Buyer Beware The IRS has been attacking all 419 welfare benefit plans, many 412i retirement plans, captive insurance plans with life insurance in them, and Section 79 plans. IRS is aggressively auditing various plans and calling them “listed transactions,” “abusive tax shelters,” or “reportable transactions,” participation in any of which must be disclosed to the Service. The result has been IRS audits, disallowances, and huge fines for not properly reporting under IRC 6707A. Read more here. Click here for the PDF version. *** IRC 6707A is a complex code and it takes an expert with years of experience to know how to handle its nuances properly. Our focus on 6707A penalties, coupled with our extensive accounting and IRS background makes IRS6707Apenalty.com the place to get that help. Don't Get Caught in Section 79 Trap One Doctor Almost Lost Everything... An expert explains how accountants and business owners are facing huge fines under 6707A that they were not even aware of Tax Shelter Penalty Cases Continue to Hurt Thousands of Small Business Owners Highlights of § 6707A Temporary and Proposed Regulations Bulletin: Notice of Proposed Rulemaking by Cross- Reference to Temporary Regulations Section 6707A New Penalty Section 6707A and Rescission Authority Imposition of the Section 6707A Penalty The Service will impose a penalty under section 6707A with respect to each failure to disclose a reportable transaction within the time and in the form and manner provided by section 6011 and the regulations thereunder. Accordingly, a taxpayer will be subject to a penalty under section 6707A for: (1) the failure to attach a reportable transaction disclosure statement to an original or amended return; or (2) the failure to provide a copy of a disclosure statement to OTSA, if required. A taxpayer that fails to attach a reportable transaction disclosure statement to an original or amended return and fails to provide a copy of a required disclosure statement to OTSA will be subject to a single penalty under section 6707A. The following examples illustrate this provision: 6707A Frustrates Plan Administrators The Importance of 8886 Forms |
| IRC 6707A Penalties |
| IRS Form 8886 |
| Filing disclosure forms for listed transactions |
| Tax Planning Strategies |
| Tax representation - IRS |
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State compliance:
Some state tax departments have
"listed transaction" reporting rules in
addition to the federal reporting.
Depending on your state, you may
have to file amended returns there in
addition to your federal requirements.
Some state tax departments have
"listed transaction" reporting rules in
addition to the federal reporting.
Depending on your state, you may
have to file amended returns there in
addition to your federal requirements.
| 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. |
| IRS Audits 419, 412i, Captive Insurance Plans With Life Insurance, and Section 79 Scams Article Biz June 2011 Lance Wallach The IRS started auditing 419 plans in the ‘90s, and then continued going after 412i and other plans that they considered abusive, listed, or reportable transactions. Listed designated as listed in published IRS material available to the general public or transactions that are substantially similar to the specific listed transactions. A reportable transaction is defined simply as one that has the potential for tax avoidance or evasion. In a recent Tax Court Case, Curcio v. Commissioner (TC Memo 2010-15), the Tax Court ruled that an investment in an employee welfare benefit plan marketed under the name "Benistar" was a listed transaction in that the transaction in question was substantially similar to the transaction described in IRS Notice 95-34. A subsequent case, McGehee Family Clinic, largely followed Curcio, though it was technically decided on other grounds. The parties stipulated to be bound by Curcio on the issue of whether the amounts paid by McGehee in connection with the Benistar 419 Plan and Trust were deductible. Curcio did not appear to have been decided yet at the time McGehee was argued. The McGehee opinion (Case No. 10-102) (United States Tax Court, September 15, 2010) does contain an exhaustive analysis and discussion of virtually all of the relevant issues. Taxpayers and their representatives should be aware that the Service has disallowed deductions for contributions to these arrangements. The IRS is cracking down on small business owners who participate in tax reduction insurance plans and the brokers who sold them. Some of these plans include defined benefit retirement plans, IRAs, or even 401(k) plans with life insurance. In order to fully grasp the severity of the situation, one must have an understanding of Notice 95-34, which was issued in response to trust arrangements sold to companies that were designed to provide deductible benefits such as life insurance, disability and severance pay benefits. The promoters of these arrangements claimed that all employer contributions were tax- deductible when paid, by relying on the 10-or-more- employer exemption from the IRC § 419 limits. It was claimed that permissible tax deductions were unlimited in amount. In general, contributions to a welfare benefit fund are not fully deductible when paid. Sections 419 and 419A impose strict limits on the amount of tax-deductible prefunding permitted for contributions to a welfare benefit fund. Section 419A(F)(6) provides an exemption from Section 419 and Section 419A for certain "10-or- more employers" welfare benefit funds. In general, for this exemption to apply, the fund must have more than one contributing employer, of which no single employer can contribute more than 10% of the total contributions, and the plan must not be experience-rated with respect to individual employers. According to the Notice, these arrangements typically involve an investment in variable life or universal life insurance contracts on the lives of the covered employees. The problem is that the employer contributions are large relative to the cost of the amount of term insurance that would be required to provide the death benefits under the arrangement, and the trust administrator may obtain cash to pay benefits other than death benefits, by such means as cashing in or withdrawing the cash value of the insurance policies. The plans are also often designed so that a particular employer’s contributions or its employees’ benefits may be determined in a way that insulates the employer to a significant extent from the experience of other subscribing employers. In general, the contributions and claimed tax deductions tend to be disproportionate to the economic realities of the arrangements. Benistar advertised that enrollees should expect to obtain the same type of tax benefits as listed in the transaction described in Notice 95-34. The benefits of enrollment listed in its advertising packet included: Virtually unlimited deductions for the employer; Contributions could vary from year to year; Benefits could be provided to one or more key executives on a selective basis; No need to provide benefits to rank-and-file employees; Contributions to the plan were not limited by qualified plan rules and would not interfere with pension, profit sharing or 401(k) plans; Funds inside the plan would accumulate tax-free; Beneficiaries could receive death proceeds free of both income tax and estate tax; The program could be arranged for tax-free distribution at a later date; Funds in the plan were secure from the hands of creditors. The Court said that the Benistar Plan was factually similar to the plans described in Notice 95-34 at all relevant times. In rendering its decision the court heavily cited Curcio, in which the court also ruled in favor of the IRS. As noted in Curcio, the insurance policies, overwhelmingly variable or universal life policies, required large contributions relative to the cost of the amount of term insurance that would be required to provide the death benefits under the arrangement. The Benistar Plan owned the insurance contracts. Following Curcio, as the parties had stipulated, on the question of the amnesty paid by Mcghee in connection with benistar, the Court held that the contributions to Benistar were not deductible under section 162(a) because participants could receive the value reflected in the underlying insurance policies purchased by Benistar—despite the payment of benefits by Benistar seeming to be contingent upon an unanticipated event (the death of the insured while employed). As long as plan participants were willing to abide by Benistar’s distribution policies, there was no reason ever to forfeit a policy to the plan. In fact, in estimating life insurance rates, the taxpayers’ expert in Curcio assumed that there would be no forfeitures, even though he admitted that an insurance company would generally assume a reasonable rate of policy lapses. The McGehee Family Clinic had enrolled in the Benistar Plan in May 2001 and claimed deductions for contributions to it in 2002 and 2005. The returns did not include a Form 8886, Reportable Transaction Disclosure Statement, or similar disclosure. The IRS disallowed the latter deduction and adjusted the 2004 return of shareholder Robert Prosser and his wife to include the $50,000 payment to the plan. The IRS also assessed tax deficiencies and the enhanced 30% penalty totaling almost $21,000 against the clinic and $21,000 against the Prossers. The court ruled that the Prossers failed to prove a reasonable cause or good faith exception. More you should know: In recent years, some section 412(i) plans have been funded with life insurance using face amounts in excess of the maximum death benefit a qualified plan is permitted to pay. Ideally, the plan should limit the proceeds that can be paid as a death benefit in the event of a participant’s death. Excess amounts would revert to the plan. Effective February 13, 2004, the purchase of excessive life insurance in any plan makes the plan a listed transaction if the face amount of the insurance exceeds the amount that can be issued by $100,000 or more and the employer has deducted the premiums for the insurance. A 412(i) plan in and of itself is not a listed transaction; however, the IRS has a task force auditing 412i plans. An employer has not engaged in a listed transaction simply because it is in a 412(i) plan. Just because a 412(i) plan was audited and sanctioned for certain items, does not necessarily mean the plan is a listed transaction. Some 412(i) plans have been audited and sanctioned for issues not related to listed transactions. Companies should carefully evaluate proposed investments in plans such as the Benistar Plan. The claimed deductions will not be available, and penalties will be assessed for lack of disclosure if the investment is similar to the investments described in Notice 95-34. In addition, under IRC 6707A, IRS fines participants a large amount of money for not properly disclosing their participation in listed or reportable or similar transactions; an issue that was not before the Tax Court in either Curcio or McGehee. The disclosure needs to be made for every year the participant is in a plan. The forms need to be properly filed even for years that no contributions are made. I have received numerous calls from participants who did disclose and still got fined because the forms were not prepared properly. A plan administrator told me that he assisted hundreds of his participants file forms, and they still all received very large IRS fines for not properly filling in the forms. IRS has been attacking all 419 welfare benefit plans, many 412i retirement plans, captive insurance plans with life insurance in them, and Section 79 plans. 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. |