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.
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.
Avoiding, or at least winning, an IRS challenge
Lance Wallach
Of course, a Captive insurance company can be extremely beneficial in many aspects, as
insurance profits are kept within the group and tax benefits may be obtained. As is true with any
business planning, however, the Captive must be a legitimate business entity and be in
compliance with the law. There are opportunities for the Service to challenge Captive insurance
companies; therefore, proper formation and ongoing administration is essential. The Service may
have given up on the economic family doctrine, but the Service specifically stated in Rev. Rul.
2001-31 that it may continue to challenge Captives based on the facts and circumstances of each
case.
Legitimate business reason. As is true with any business planning, a Captive must possess a
legitimate business reason to avoid being characterized as a sham by the Service. Some
legitimate business reasons are as follows:
(1) To obtain coverage where insurers are unwilling to do so.
(2) To reduce premium payments.
(3) To control risk.
(4) To increase cash-flow.
(5) To gain access to the reinsurance market
(6) To create diversification.
(7) To balance coverage.
Lance Wallach, CLU, ChFC, CIMC, speaks and writes extensively about financial planning, retirement plans, and tax reduction strategies. He is an American Institute of CPA’s course developer and instructor and has authored numerous bestselling books about abusive tax shelters, IRS crackdowns and attacks and other tax matters. He speaks at more than 20 national conventions annually and writes for more than 50 national publications. For more information and additional articles on these subjects, visit www.vebaplan.com, www.taxlibrary.us, lawyer4audits.com or call 516-938-5007.
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.
Captive Insurance Plans, Want to Get Audited? - HG.org
Captive Insurance Plans, Want to Get Audited? - HG.org
The insurance industry have been conjuring ways to make life insurance premiums tax deductible. Over the years we have seen many schemes that have failed IRS scrutiny. Welfare benefit plans set up under I.R.C. section 419, 412(e) plans and Producer Owned Reinsurance Companies (PORCs) are all common examples.
The insurance industry have been conjuring ways to make life insurance premiums tax deductible. Over the years we have seen many schemes that have failed IRS scrutiny. Welfare benefit plans set up under I.R.C. section 419, 412(e) plans and Producer Owned Reinsurance Companies (PORCs) are all common examples.
When one scheme fails it isn’t long before a resourceful promoter comes up with a different product. Inevitably promoters find some lawyer or accountant to draft a favorable opinion letter and a new industry is born. In a few years, however, the IRS catches up and declares the arrangement to be a listed transaction and abusive tax shelter. As an expert witness I have never lost a case in this field. It is easy to beat the deep pockets of the insurance companies who provide product to these plans. Even though they have business owners sign fraudulent disclaimers saying that the owners will get their own tax advice. These disclaimers are then used when the inevitable happens, the IRS audits and the business owner sues the insurance company.
The latest entries seeking to find a way to make life insurance premiums deductible is a small business captive insurance company or CIC.
The latest entries seeking to find a way to make life insurance premiums deductible is a small business captive insurance company or CIC.
How Hartford Life and Other Insurance Companies Tricked their Agents and Got People in Trouble with the IRS - HG.org
How Hartford Life and Other Insurance Companies Tricked their Agents and Got People in Trouble with the IRS - HG.org
Agents from Hartford and other insurance companies were shown ways to sell large life insurance policies. This “Welfare Benefit Trust 419 plan or 412i plan should be shown to their profitable small business owners as a cure for paying too much taxes.
A Welfare Benefit Trust 419 plan essentially works like this:
• The business provides a fringe benefit for their employees, such as health insurance and life insurance.
• The benefit is established in the name of a trust and funded with a cash value life insurance policy
• Here is the gravy: the entire amount deposited into the trust (insurance policy) is tax deductible to the company,and
• The owners of the company can withdraw the cash value from the policy in later years tax-free.
• The business provides a fringe benefit for their employees, such as health insurance and life insurance.
• The benefit is established in the name of a trust and funded with a cash value life insurance policy
• Here is the gravy: the entire amount deposited into the trust (insurance policy) is tax deductible to the company,and
• The owners of the company can withdraw the cash value from the policy in later years tax-free.
Read more by clicking the link above!
Re-entering The Tax System
Taxlanta.org July 2011
by Lance Wallach
by Lance Wallach
Taxpayers who have failed to file federal tax returns for three years or more and owe more than $75,000 in tax should find this section particularly interesting. (i.e., pure tax ― no interest, no penalties).
Rule No. 1:
Under no circumstances should you attempt to re-enter the tax system on your own. Tax evasion, failing to file a timely tax return, and perjury are very serious tax crimes, and one mistake can send you to federal prison for a very long time. Your voluntary admission of a tax crime is similar to Pandora’s box; once the lid has been opened there is nothing you can do to get it closed again. The biggest mistake that most people make is hiring advisors that do not specialize in failure-to-file cases and have little or no knowledge of the IRS/Criminal Investigation Division (IRS/CID) procedures and criminal-tax violations.
Rule No. 2
Under no circumstance should you assume that the IRS/CID and the U.S. Attorney’s Office (USAO) will grant you immunity from prosecution simply because you volunteered to come forward, bare your soul, and beg for forgiveness. The IRS terminated its guaranteed non-prosecution policy for voluntary disclosure of tax crimes in 1961. If you have not filed federal tax returns for three years or more and owe more than $75,000 in back taxes, then you will likely receive a visit from the IRS/CID six to eighteen months after you file your delinquent tax returns. The “reward” you get for filing true and correct delinquent tax returns is that you may be able to avoid additional perjury charges. But you will still have to pay a very large tax liability, which will include interest and a whopping 75% civil tax fraud penalty. Your full disclosure will be appreciated, and under current IRS guidelines you “may” avoid criminal prosecution only if you pay the entire amount due.
Call our office today for a free 3-5 minute consultation with Lance Wallach, the nation’s foremost tax expert, or visit www.experttaxadvisors.org.
Rule No. 3
You must hire the best tax advisors that money can buy. Preferably you will want someone with at least 23 years experience handling failure-to-file cases before the IRS, and preferably this same person will have experience as a former IRS Special Agent. That’s where we come in.
Last year I received over a thousand phone calls from business owners, accountants and other professionals who were in trouble with the IRS over a recent large fine. If you were in what the IRS considers an abusive, listed or similar to transaction, you face a hundred thousand dollar IRS fine under IRS code 6707A. The IRS is attacking thousands of people for either being in, selling, or advising about, various types of plans, which are primarily marketed by insurance professionals.
If you are or were in a 412i, 419, captive insurance, or section 79 plan, you should immediately file under 6707A protectively. If you have already filed you should find someone who knows what he is doing to review the forms. I only know of two people who know how to properly file. The IRS instructions are vague. If a taxpayer files wrong, or fills out the forms wrong he still gets the fine. I have had hundreds of phone calls from people in that situation.
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, financial and estate planning, and abusive tax shelters. He writes about 412(i), 419, 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 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.
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