Wednesday, April 30, 2014 Why You Should Stay Away from Section 79 Life Insurance Plans I’ve had several calls lately from doctors who are being pitched Section 79 plans and are wondering if these plans are any good. The doctors are being told that Section 79 plans are the best wealth-building tool they can use to reduce their income taxes and create a tax-free retirement income
Must Read Posted by Lance Wallach at 9:02 AM 42 comments: Email This BlogThis! Share to Twitter Share to Facebook Share to Pinterest
Labels: Class Action Lawsuit, Financial, insurance, insurance plans, Section 79 Friday, March 28, 2014 Life Insurance In many of Lance Wallachs CPE books he discusses 412i or 412e3 and listed transactions. One day when you were complaining about what you pay the government, your cousin Tilly suggested that she knew a life insurance agent who could help you with your taxes. You met with him, you listened to his pitch about a deferred benefit plan, and you asked a lot of questions. He suggested a 412i plan, whatever that is. From the initial description it sounded as if you would have to fund retirement for your rotating staff which you weren’t interested in doing, but he told you that he could arrange an executive carve out. You really didn’t have the income to fund it initially but he convinced you to sell your investment real estate, declare your gain as ordinary income, and then buy the plan to offset that. You’ve been hearing that the IRS is after “listed transactions” and you’re worried. Suddenly you’re having a tough time having cousin Tilly’s friend return your calls. The insurance company whose products fund your plan has taken your calls, but for the fourth time in as many months a representative has promised to get back to you. Honest he will! You have gone to a new accountant and you learn that the plan was unsuited for you, it was formed improperly, and it’s going to cost you a lot more money than you have to pay the IRS not to mention the accountant and the actuary to sort it all out. Now you are worried that the problems may wipe out your retirement nest-egg and keep you working years longer than you intended. Fortunately, there are ways to provide for your retirement that can afford you tax benefits while creating a solid retirement fund for your future so that you won’t have to be “that doctor”. However, getting there doesn’t necessarily start with cousin Tilly’s insurance agent friend or the “financial planner” you met on the golf course. If you want to avoid problems in your retirement plans, there are some things you should do.
Raymond Ankner -Expected to be the biggest life insurance failure in Illinois Raymond Ankner -Expected to be the biggest life insurance failure in Illinois : IRS Attacks CJA & CJA and Associates’ plans, 412i, 419e plans litigation and IRS Audit Experts for abusive insurance based plans deemed reportable or listed transactions by the IRS.Benistar,412i Lawsuits,419 lawsuits,412i Help,419 Help, IRS Audits,412i Problems,412i
Accounting. Audit and Tax (Forum Locked Forum Locked) CPAnet Forum : Accounting. Audit and Tax Subject Topic: IRS audits section 79 419 412i CPA fines Post ReplyPost New Topic
Joined: 18 Jul 2012 Location: United States Online Status: Offline company first marketed a 419A(F)(6) plan that the IRS audited. They then marketed a 419(e) plan that the IRS audited. Niche, insurance companies, agents, and many accountants were then sued after their clients lost their deductions, paid fines, interest, and penalties, and then paid huge fines for failure to file properly under 6707A. Niche then went out of business.
Millennium sold 419 plans through insurance companies. They stupidly filed for a private letter ruling to the effect that they were not a listed transaction. They got exactly the opposite: a private letter ruling saying that they were a listed transaction. Then many participants were audited. The IRS disallowed the deductions, imposed penalties and interest, and then assessed large fines for not filing properly under Section 6707A. The result was lawsuits against agents, insurance companies and accountants. Millennium sought bankruptcy protection after a lot of lawsuits.
I have been an expert witness in a lot of the lawsuits in these 419 plans, 412i plans, and the like, and my side has never lost a case. I have received thousands of phone calls over the years from business owners, accountants, angry plan promoters, insurance agents, and other various professionals. In the 1990's, when I started writing for the AICPA and other publications warning about these abusive plans, most people laughed at me, especially the plan promoters.
In 2002, when I spoke at the annual national convention of the American Society of Pension Actuaries in Washington, people took notice. The IRS chief actuary Jim Holland also held a meeting similar to mine on abusive 412i plans. Many IRS agents attended my meeting. I was also invited to IRS headquarters, at the request of the acting IRS commissioner, to meet with high-level IRS officials and Treasury officials to discuss 419 issues in depth, which I did after the meeting.
The IRS then set up task forces and started going after 419 and 412i plans. I have been profusely warning accountants to properly file under 6707A to avoid the large fines, but most do not. Even if they file, if they make a mistake on the forms, the IRS will fine them. Very few accountants have had experience filing the forms, and the IRS instructions are complicated and therefore difficult to follow. I only know of two people who have been successful in properly filing the forms, especially after the fact. If the forms are filled out incorrectly, they should be amended and corrected Most accountants call me a few years later when they and their clients get the large fines, either after improperly filling out the forms or failing to fill them out at all. Unfortunately, by then it is too late. If they don’t call me then, then they call me when their clients sue them.
Lance Wallach is a frequent speaker on retirement plans, financial and estate planning, and abusive tax shelters, and writes about 412(i), 419 and captive insurance plans. He can be reached at (516) 938-5007, wallachinc@gmail.com, or visit www.vebaplan.com. Don’t Become a ‘Material Advisor
Homeeneral, 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. Section 6707A of the Code imposes severe penalties ($200,000 for a business and $100,000 for an individual) for failure to file Form 8886 with respect to a listed transaction. But you are also in trouble if you file incorrectly. To Read More Click Link The dangers of being "listed" A warning for 419, 412i, Sec.79, and Captive insurance Accounting today:
By: Lance Wallach
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 transation" 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 clain a tax deduction to participate. Section 6707A of the code imposes severe penalties($200,000 for a business and $100,000 for an individual) for failure to file Form 8886with respect to a listed transaction. But you are also in trouble in you file incorrectly.To Read More Click Here.
AccountingToday October 25,2010
California Broker, June 2011
Employee Retirement Plans
By Lance Wallach
412i, 419, Captive Insurance and Section 79 Plans; Buyer Beware
nsurance
ReplyDeleteWednesday, April 30, 2014
Why You Should Stay Away from Section 79 Life Insurance Plans
I’ve had several calls lately from doctors who are being pitched Section 79 plans and are wondering if these plans are any good. The doctors are being told that Section 79 plans are the best wealth-building tool they can use to reduce their income taxes and create a tax-free retirement income
Must Read
Posted by Lance Wallach at 9:02 AM 42 comments:
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Labels: Class Action Lawsuit, Financial, insurance, insurance plans, Section 79
Friday, March 28, 2014
Life Insurance
In many of Lance Wallachs CPE books he discusses 412i or 412e3 and listed transactions.
One day when you were complaining about what you pay the government, your cousin Tilly suggested that she knew a life insurance agent who could help you with your taxes. You met with him, you listened to his pitch about a deferred benefit plan, and you asked a lot of questions. He suggested a 412i plan, whatever that is. From the initial description it sounded as if you would have to fund retirement for your rotating staff which you weren’t interested in doing, but he told you that he could arrange an executive carve out. You really didn’t have the income to fund it initially but he convinced you to sell your investment real estate, declare your gain as ordinary income, and then buy the plan to offset that.
You’ve been hearing that the IRS is after “listed transactions” and you’re worried. Suddenly you’re having a tough time having cousin Tilly’s friend return your calls. The insurance company whose products fund your plan has taken your calls, but for the fourth time in as many months a representative has promised to get back to you. Honest he will!
You have gone to a new accountant and you learn that the plan was unsuited for you, it was formed improperly, and it’s going to cost you a lot more money than you have to pay the IRS not to mention the accountant and the actuary to sort it all out. Now you are worried that the problems may wipe out your retirement nest-egg and keep you working years longer than you intended.
Fortunately, there are ways to provide for your retirement that can afford you tax benefits while creating a solid retirement fund for your future so that you won’t have to be “that doctor”. However, getting there doesn’t necessarily start with cousin Tilly’s insurance agent friend or the “financial planner” you met on the golf course. If you want to avoid problems in your retirement plans, there are some things you should do.
Raymond Ankner -Expected to be the biggest life insurance failure in Illinois
ReplyDeleteRaymond Ankner -Expected to be the biggest life insurance failure in Illinois : IRS Attacks CJA & CJA and Associates’ plans, 412i, 419e plans litigation and IRS Audit Experts for abusive insurance based plans deemed reportable or listed transactions by the IRS.Benistar,412i Lawsuits,419 lawsuits,412i Help,419 Help, IRS Audits,412i Problems,412i
ReplyDeleteAccounting. Audit and Tax (Forum Locked Forum Locked)
CPAnet Forum : Accounting. Audit and Tax
Subject Topic: IRS audits section 79 419 412i CPA fines Post ReplyPost New Topic
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Lance Wallach
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Joined: 18 Jul 2012
Location: United States
Online Status: Offline
company first marketed a 419A(F)(6) plan that the IRS
audited. They then marketed a 419(e) plan that the IRS
audited. Niche, insurance companies, agents, and many
accountants were then sued after their clients lost their
deductions, paid fines, interest, and penalties, and then
paid huge fines for failure to file properly under 6707A.
Niche then went out of business.
Millennium sold 419 plans through insurance companies.
They stupidly filed for a private letter ruling to the
effect that they were not a listed transaction. They got
exactly the opposite: a private letter ruling saying that
they were a listed transaction. Then many participants
were audited. The IRS disallowed the deductions, imposed
penalties and interest, and then assessed large fines for
not filing properly under Section 6707A. The result was
lawsuits against agents, insurance companies and
accountants. Millennium sought bankruptcy protection
after a lot of lawsuits.
I have been an expert witness in a lot of the lawsuits in
these 419 plans, 412i plans, and the like, and my side
has never lost a case. I have received thousands of phone
calls over the years from business owners, accountants,
angry plan promoters, insurance agents, and other various
professionals. In the 1990's, when I started writing for
the AICPA and other publications warning about these
abusive plans, most people laughed at me, especially the
plan promoters.
In 2002, when I spoke at the annual national convention
of the American Society of Pension Actuaries in
Washington, people took notice. The IRS chief actuary Jim
Holland also held a meeting similar to mine on abusive
412i plans. Many IRS agents attended my meeting. I was
also invited to IRS headquarters, at the request of the
acting IRS commissioner, to meet with high-level IRS
officials and Treasury officials to discuss 419 issues in
depth, which I did after the meeting.
The IRS then set up task forces and started going after
419 and 412i plans. I have been profusely warning
accountants to properly file under 6707A to avoid the
large fines, but most do not. Even if they file, if they
make a mistake on the forms, the IRS will fine them. Very
few accountants have had experience filing the forms, and
the IRS instructions are complicated and therefore
difficult to follow. I only know of two people who have
been successful in properly filing the forms, especially
after the fact. If the forms are filled out incorrectly,
they should be amended and corrected Most accountants
call me a few years later when they and their clients get
the large fines, either after improperly filling out the
forms or failing to fill them out at all. Unfortunately,
by then it is too late. If they don’t call me then, then
they call me when their clients sue them.
Lance Wallach is a frequent speaker on retirement plans,
financial and estate planning, and abusive tax shelters,
and writes about 412(i), 419 and captive insurance plans.
He can be reached at (516) 938-5007,
wallachinc@gmail.com, or visit www.vebaplan.com. Don’t
Become a ‘Material Advisor
Homeeneral, 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. Section 6707A of the Code imposes severe penalties ($200,000 for a business and $100,000 for an individual) for failure to file Form 8886 with respect to a listed transaction. But you are also in trouble if you file incorrectly.
ReplyDeleteTo Read More Click Link
The dangers of being "listed" A warning for 419, 412i, Sec.79, and Captive insurance Accounting today:
By: Lance Wallach
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 transation" 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 clain a tax deduction to participate. Section 6707A of the code imposes severe penalties($200,000 for a business and $100,000 for an individual) for failure to file Form 8886with respect to a listed transaction. But you are also in trouble in you file incorrectly.To Read More Click Here.
AccountingToday October 25,2010
California Broker, June 2011
Employee Retirement Plans
By Lance Wallach
412i, 419, Captive Insurance and Section 79 Plans; Buyer Beware