The IRS and U.S. Department Justice De Last month the government took action against Tracy L. Sunderlage and his wife, Linda Sunderlage, SRG International, Ltd., of Nevis, West Indies, and three related Illinois companies – SRG International U.S. LLC, Maven U.S. LLC and Randall Administration LLC . Prosecutors say they improperly helped high income taxpayers avoid taxes by funneling monies into phony welfare benefit plans. These plans are often known as 419 plans based on a provision found in section 419 of the tax code. (The Sunderlages mostly called their plans Employee Benefit Plans, Maven Structures or PBT Multiple Employer Plans- same basic concept with a different name; the IRS says they are all scams.)
Although there are legitimate plans in existence, the IRS contends that many welfare benefit plans have been vehicles for rampant tax abuse. In one common tax avoidance scheme, employers pay excessive contributions to purported welfare benefit funds that obtain cash value insurance policies or otherwise set the money aside for the company owners’ future benefit. In doing so, the companies are not really contributing for their business or the benefit of the employees, but rather, are either distributing excess corporate profits or providing deferred compensation to their owners and, in the process, avoiding current federal taxes.
Lest you think the IRS is wrongfully singling out the Sunderlages, the husband and wife couple are no strangers to legal problems. Although Tracy Sunderlage is licensed to sell insurance, prosecutors say that he has a long history of compliance issues.
419 plan litigationThe IRS says Tracy Sunderlage has been sued by clients on multiple occasions. Two years ago a Nebraska state court judge sanctioned him in a related employee benefit case and noted his “delay, misstatements of fact, and harassment with respect to that lawsuit”, his “willful disregard of Orders” made by the Court, and his protraction of the litigation in a manner that was “both unnecessary and wasteful.”
In 1986, the SEC obtained a permanent injunction against Sunderlage after finding he misrepresented the risks of an investment, was dishonest about his commissions, failed to disclose potential conflicts of interest, and misrepresented expected returns on investments.
Apparently his definition of “permanent injunction” is not the same as mine as mine. After the 1986 injunction the feds say he participated in a massive tax evasion scheme known as Aegis. We have represented several clients who were scorched by the Aegis promoters and lost hundreds of thousands of dollars relying on their advice.
Somehow Sunderlage slipped through the cracks and was never sent to prison.
What does this mean for someone holding one of these questionable plans? Seek competent tax counsel or a CPA immediately.
The IRS has long declared these type plans to be subject to abuse. While the promoters of these plans always claim differently, the courts have sided with the IRS. As early as 1995 the IRS warned taxpayers that these plans are often abusive transactions. In 2007, the IRS said that purported single employer plans or 419(e) involving cash value life insurance are “listed transactions.” That means the IRS says they are so subject to abuse that bo
The IRS and U.S. Department Justice De
ReplyDeleteLast month the government took action against Tracy L. Sunderlage and his wife, Linda Sunderlage, SRG International, Ltd., of Nevis, West Indies, and three related Illinois companies – SRG International U.S. LLC, Maven U.S. LLC and Randall Administration LLC . Prosecutors say they improperly helped high income taxpayers avoid taxes by funneling monies into phony welfare benefit plans. These plans are often known as 419 plans based on a provision found in section 419 of the tax code. (The Sunderlages mostly called their plans Employee Benefit Plans, Maven Structures or PBT Multiple Employer Plans- same basic concept with a different name; the IRS says they are all scams.)
Although there are legitimate plans in existence, the IRS contends that many welfare benefit plans have been vehicles for rampant tax abuse. In one common tax avoidance scheme, employers pay excessive contributions to purported welfare benefit funds that obtain cash value insurance policies or otherwise set the money aside for the company owners’ future benefit. In doing so, the companies are not really contributing for their business or the benefit of the employees, but rather, are either distributing excess corporate profits or providing deferred compensation to their owners and, in the process, avoiding current federal taxes.
Lest you think the IRS is wrongfully singling out the Sunderlages, the husband and wife couple are no strangers to legal problems. Although Tracy Sunderlage is licensed to sell insurance, prosecutors say that he has a long history of compliance issues.
419 plan litigationThe IRS says Tracy Sunderlage has been sued by clients on multiple occasions. Two years ago a Nebraska state court judge sanctioned him in a related employee benefit case and noted his “delay, misstatements of fact, and harassment with respect to that lawsuit”, his “willful disregard of Orders” made by the Court, and his protraction of the litigation in a manner that was “both unnecessary and wasteful.”
In 1986, the SEC obtained a permanent injunction against Sunderlage after finding he misrepresented the risks of an investment, was dishonest about his commissions, failed to disclose potential conflicts of interest, and misrepresented expected returns on investments.
Apparently his definition of “permanent injunction” is not the same as mine as mine. After the 1986 injunction the feds say he participated in a massive tax evasion scheme known as Aegis. We have represented several clients who were scorched by the Aegis promoters and lost hundreds of thousands of dollars relying on their advice.
Somehow Sunderlage slipped through the cracks and was never sent to prison.
What does this mean for someone holding one of these questionable plans? Seek competent tax counsel or a CPA immediately.
The IRS has long declared these type plans to be subject to abuse. While the promoters of these plans always claim differently, the courts have sided with the IRS. As early as 1995 the IRS warned taxpayers that these plans are often abusive transactions. In 2007, the IRS said that purported single employer plans or 419(e) involving cash value life insurance are “listed transactions.” That means the IRS says they are so subject to abuse that bo