412i, 419e plans litigation and IRS Audit Experts for abusive insurance reportable or listed transactions by the IRS,Section 79, Section 79 Lawsuits,412i
412i, 419e plans litigation and IRS Audit Experts for abusive insurance reportable or listed transactions by the IRS,Section 79, Section 79 Lawsuits,412i
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Posted 06 July 2010 - 11:04 AM
I'd also think the client, and the client's tax counsel, should take note of the "recurring and substantial" contribution requirement for a profit sharing plan, found in 1.401-1(b)(2). This whole arrangement seems improper to me.
#11 Life Insurance Purchase from Qualified Plan by ILIT: post #11 GTigers
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Posted 07 July 2010 - 12:11 PM
Bird, on Jul 1 2010, 07:45 PM, said:
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TEN PERCENT of the premium? How can this possibly comply with the FMV guidance in Rev Proc 2005-25? Ask the insurance company for a calculation of the FMV pursuant to the Rev Proc.
Amen. Google "springing cash value" while you're at it.
Thanks for all of the responses. I definitely didn't feel like the structure would be legitimate but wante
Posted 12 July 2010 - 01:47 PM
I was an expert witness in a Federal Court case on point. The Plaintiffs, my side won a lot of money. They went into a similar scam. Lance Wallach
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Copyright (C) 2010 - Lance Wallach
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".
If you signed a return or participated in the sale of these "welfare benefit plans", you are probably a "material
advisor" and subject to huge "IRS penalties and interest". No "Form 8886" or "Form 8918" that we have reviewed for
new clients has been properly prepared, which leaves the "material advisor" subject to the $200,000 "IRS penalty".
We fight for our clients to defend against the $200,000 IRS "6707A penalty" by providing "expert witness
testimony". Lance's side has never lost a case!
What is a 412(i) plan?
ReplyDeleteA 412(i) plan is a defined benefit pension plan used by small business owners. It can only be funded by insurance companies through fully guaranteed annuities or a combination of annuities and life insurance. These plans are tax qualified, meaning that any amount the owner contributes to the plan is immediately available as a tax deduction. When reviewed by an experienced 412(i) plan attorney, these plans can benefit small business owners who need to invest in their company while also saving for retirement.
Consumers lose benefits because of insurance company scams
Scams involving 412(i) plans have been prevalent since insurance companies first began marketing the plans. Pension plan promoters misled consumers by inaccurately marketing the plans as legitimate tax-deductible retirement plans with the following benefits:
Tax deferred earnings
Larger contributions than traditional plans
Availability of short-term tax-free loans against the policy
Only a five year commitment to the plan
By manipulating the plans so that consumers could make large contributions, promoters and insurance agents shared in extremely high commissions. In addition, promoters failed to comply with non-discrimination laws by promoting the plans only to the highest compensated employees. Despite regulations, insurers ensured that the plans were funded entirely by certain types of life insurance policies. This allowed them to defraud the IRS of income tax, because the type of insurance policy allowed removal of a large portion of the funds in the plan on a pre-tax basis. In response to these scams, the IRS made 412(i) transaction reportable transactions, requiring consumers who had a 412(i) plan to report this fact to the IRS.
Helping victims of pension fraud recover for their losses
made for every year the participant is in a plan. The forms need to be properly filed even for years that no contributions are made. I have received numerous calls from participants who did disclose and still got fined because the forms were not filled in properly. A plan administrator told me that he assisted hundreds of his participants with filing forms, and they still all received very large IRS fines for not properly filling in the forms.
ReplyDeleteIRS has targeted all 419 welfare benefit plans, many 412(i) retirement plans, captive insurance plans with life insurance in them and Section 79 plans.
Lance Wallach, National Society of Accountants Speaker of the Year and member of the American Institute of CPAs faculty of teaching professionals, is a frequent speaker on retirement plans, financial and estate planning, and abusive tax shelters. He speaks at more than ten conventions annually and writes for over fifty publications. 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. Mr. Wallach may be reached at 516/938.5007, wallachinc@gmail.com, or at www.taxaudit419.com or www.lancewallach.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