A 412(i) plan is a “defined benefit plan” – a retirement plan, a pension plan that claims to offer very large tax deductions. It is funded with annuity and life insurance products.
Late 1990's/early 2000's, agents sold life insurance, and annuity policies to fund such plans.
Type of policy typically had high surrender charges, depressed cash value in early years - premiums paid by employer
After premiums funded for a few years, employee purchases policy for the current depressed cash surrender value
After policy purchased, surrender charges dramatically reduced, cash value “springs” to a high level
Employee could then borrow from high value policy for tax-free cash flow. They were called springing cash value policies.
Not all policies were of that type.
In 1995 IRS issued IRS notice 9534 warning that they would come after 419 plans. In 2004/2005, IRS began investigating and issued regulations deeming such plans as abusive tax shelters - began nationwide audits of such plans.
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RAMESH SARVA CPA CROOK GET YOUR MONEY BACK
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Stacey Arenas
Stacey Arenas
Assistant Managing Director, Marketing Manager at Vebaplan LLC
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Federal Court Bars New York Man from Promoting Alleged Tax Scheme
Accountant Allegedly Marketed Benefit Plans That Unlawfully Increased Tax Deductions and Avoided Income Taxes
A federal court has permanently barred Ramesh Sarva, a certified public accountant in Little Neck, N.Y., from promoting and selling an alleged nationwide tax scheme, the Justice Department announced today. Judge Josephine L. Staton of the U.S. District Court for the Central District of California entered the permanent injunction order yesterday, to which Sarva consented.
According to the complaint, welfare benefit plans permit companies to pool together and make monetary contributions toward the purchase of life insurance for the benefit of each company’s employees or principals. Participants in legitimate welfare benefit plans may be able to deduct the full amount of their plan contributions as a business expense. The complaint alleged that Sarva falsely informed his customers that the welfare benefit plans he promoted were legal, but in fact, Sarva has been promoting plans that illegally permitted his customers to both claim substantial tax deductions for their plan contributions and later access the full cash value of their plan contributions by taking out loans against the life insurance policies purchased. The complaint alleged that Sarva’s promotion of these unlawful welfare benefit plans deprived the U.S. Treasury of significant amounts of tax and subjected his customers to audits and IRS scrutiny.
The injunction order bars Sarva from promoting and selling any purported welfare benefit plans. The court also ordered Sarva to provide the United States with a list of his customers and to send copies of the injunction order to his customers.
In the past decade, the Justice Department’s Tax Division has obtained more than 500 injunctions to stop tax fraud promoters and tax return preparers. Information about these cases is available on the Justice Department website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division(link sends e-mail)
with details.
Related Materials:
United States v. Kenneth Elliott, et al.