Showing posts with label 412(i). Show all posts
Showing posts with label 412(i). Show all posts

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

       Investment News
    Five-year-old change in tax has left some small businesses and certain benefit plans subject to IRS fines; the advisors who sold these plans may pay the price.

    Financial advisors who have sold certain types of retirement and other benefit plans to small businesses might soon be facing a wave of lawsuits — unless Congress decides to take action soon.

    For years, advisors and insurance brokers have sold the 412(i) plan, a type of defined-benefit pension plan, and the 419 plan, a health and welfare plan, to small businesses as a way of providing such benefits to their employees, while also receiving a tax break.

    However, in 2004, Congress changed the law to require that companies file with the Internal Revenue Service if they had these plans in place. The law change was intended to address tax shelters, particularly those set up by large companies.

    Many companies and financial advisors didn't realize that this was a cause for concern, however, and now employers are receiving a great deal of scrutiny from the federal government, according to experts.

    The IRS has been aggressive in auditing these plans. The fines for failing to notify the agency about them are $200,000 per business per year the plan has been in place and $100,000 per individual.

    So advisors who sold these plans to small businesses are now slowly starting to become the target of litigation from employers who are subject to these fines.

    “There is a slew of litigation already against advisors that sold these plans,” said Lance Wallach, an expert on 412(i) and 419 plans. “I get calls from lawyers every week asking me to be an expert witness on these cases.”  

    Mr. Wallach declined to cite any specific suits. But one advisor who has been selling 412(i) plans for years said his firm is already facing six lawsuits over the sale of such plans and has another two pending. “My legal and accounting bills last year were $864,000,” said the advisor, who asked not to be identified. “And if this doesn't get fixed, everyone and their uncle will sue us.”

    Currently, the IRS has instituted a moratorium on collecting these fines until the end of the year in the hope that Congress will address the issue.

    In a Sept. 24 letter to Sens. Max Baucus, D-Mont., Charles Boustany Jr., R-La., and Charles Grassley, R-Iowa, IRS Commissioner Douglas H. Shulman wrote: “I understand that Congress is still considering this issue and that a bipartisan, bicameral bill may be in the works … To give Congress time to address the issue, I am writing to extend the suspension of collection enforcement action through Dec. 31.”

    But with so much of Congress' attention on health care reform at the moment, experts are worried that the issue may go unresolved indefinitely.

    If Congress doesn't amend the statute, and clients find themselves having to pay these fines, they will absolutely go after the advisors that sold these plans to them.
Investment News - Lance Wallach - 412i and 419 plan litigatation

Insurance Agents: Help for those who sold 419 and 412i plans.

Insurance Agents: Help for those who sold 419 and 412i plans.



Our team of experienced consulting "tax attorneys", CPAs, and "insurance experts" specializing in 412i" and "419 "IRS 
audits
" that resulted from plans you sold to your clients, mainly "419 plans", "412i plans", "captive insurance" plans 
and 
"Section 79" plans as well as other similar "employee benefit plans" or "welfare benefit plans" that the IRS is 
targeting as
 "abusive tax shelters".

Our firm has been successful in
 "defending life insurance agents" and "material advisors" who have participated in 
the sale of these
 "benefit plans".

Abusive Tax Shelters again on the IRS “Dirty Dozen” List of Tax Scams for the 2015 Filing Season

The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them," said IRS Commissioner John Koskinen. "The vast majority of taxpayers pay their fair share, and we are warning everyone to watch out for people peddling tax shelters that sound too good to be true.”

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.

Servicers for 419, 419e, 412i, Section 79, captive insurance, listed transactions

The Offices of Lance Wallach Offer help with the following:
Tax penalty abatement
IRS audit appeals
U.S. Tax Court cases
Multinational taxation consulting
Incorporating your business
Recovering losses from insurance   
companies & brokerage firms
Tax shelter analysis
Pension plan reviews & evaluations
419 & 412 type benefit plan analysis,
remediation
Offshore tax shelter issues
IRS listed transactions assistance
Expert witness testimony for tax,
insurance & retirement plan cases
SSI & Disability benefits advocates
Pension & Benefit Plan Fraud
Insurance Company Fraud


OR Better Yet, How to Avoid It!

PRODUCERSWEB.com
For Smart Advisers


Get Sued

By Lance Wallach Wednesday, April 8, 2009

The IRS is cracking down on what it considers to be abusive tax shelters. Many of them are being marketed to small business owners by insurance professionals, financial planners and even accountants and attorneys. I speak at numerous conventions, for both business owners and accountants. And after I speak, I am always approached by many people who have questions about tax reduction plans that they have heard about. Below are the most common.

419 tax reduction insurance plans

These come in various versions, and most of them have or will get the participant audited and the salesman sued. They purportedly allow the business owner to make a large tax-deductible contribution, and some or all of the contribution pays for a life insurance product. The IRS has been disallowing most versions of these plans for years, yet they continue to be sold. After everyone gets into trouble and the insurance agents get sued, the promoters of the abusive versions sometimes change the name of their company and call the plan something else. The insurance companies whose policies are sold are legitimate companies. What usually is not legitimate is the way that most of the plans are operated. There can also be a $200,000 IRS fine facing the insurance agent who sold the plan if Form 8918 has not been properly filed. I've reviewed hundreds of these forms for agents and have yet to see one that was filled out correctly.

When the IRS audits a participant in one of these plans, the tax deductions are lost. There is also the interest and large penalties to consider. The business owner can also be facing a $200,000-a-year fine if he did not properly file Form 8886. Most of these forms have been filled out improperly. In my talks with the IRS, I was told that the IRS considers not filling out Form 8886 properly almost the same as not filing at all.

412(i) retirement plans

The IRS has been auditing participants in these types of retirement plans. While there is generally nothing wrong with many of the newer plans, the IRS considered most of the older abusive plans. Forms 8918 and 8886 are also required for abusive 412(i) plans.

I have been an expert witness in a lot of these 419 and 412(i) lawsuits and I have not lost one of them. If you sold one or more of these plans, get someone who really knows what they are doing to help you immediately. Many advisers will take your money and claim to be able to help you. Make sure they have experience helping agents that have sold these types of plans. Don't let them learn on the job, with your career and money at stake.

Do not wait for IRS to come and get you, or for your client to sue you. Time is of the essence. Most insurance professionals need help to correct their improperly completed Form 8918 or to fill it out properly in the first place. If you have not previously filled out the form it is late, and therefore you should immediately seek assistance. There are plenty of legitimate tax reduction insurance plans out there. Just make sure that you know the history of the people with whom you conduct business.

Remember, if something looks too good to be true, it usually is. Be careful.

Lance Wallach, the National Society of Accountants Speaker of the Year, speaks and writes extensively about retirement plans, Circular 230 problems and tax reduction strategies. He speaks at more than 40 conventions annually, writes for over 50 publications, is quoted regularly in the press, and has written numerous best-selling AICPA books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Business Hot Spots. Contact him at 516.938.5007 or visit www.vebaplan.com.

The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.