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
Lance Wallach, CLU, CHFC
ReplyDeleteAbusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness
68 Keswick Lane
Plainview, New York 11803
USA
Tel: (516) 938-5007
Fax: (516) 938-6330
Lance Wallach, CLU, CHFC - Providing services in the following areas:
Accounting
Business
Business Appraisal
Business Strategy
Business Valuations
ERISA
Estate and Trust
Ethics
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Fraud
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Insurance, Bad Faith
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Section 79 Scams and Captive Insurance History
ReplyDeleteWhen trying to understand how a product becomes a target of government scrutiny it helps to know its history.
In the case of plans that fall under Internal Revenue Code Section 79, that history is complex.
Insurance companies, agents, financial planners, and others have pushed abusive 419 and 412i plans for
years. They claimed business owners could obtain large tax deductions. Insurance companies, agents and
others earned very large life insurance commissions in the process. Eventually, the IRS cracked down on the
unsuspecting business owners. Not only did they lose the tax deductions, but they were also fined, in addition
to being charged penalties and interest. A skilled CPA with extensive IRS experience could usually eliminate
the penalties and reduce the fines. Most accountants, tax attorneys and others have been unsuccessful in
accomplishing this.
Section 79 Plans
ReplyDeleteYour Best Resource for Section 79 Questions, Problems, Information
516-938-5007
You WILL Be Audited For Your Section 79 Plan
Section 79 plans, listed transactions, reportable transactions, 419e, 412i, and captive insurance plans
are all targets of IRS Auditors.
Do you know the ins and outs of these plans enough to protect yourself or clients? We do, and we can help you
too.
You WILL be audited. It's just a matter of when. You need help and you need it now.
Educate yourself here, then call for assistance. Your finances are at risk if you put off dealing with this problem.
Call 516-935-7346 to speak with an expert today.
National
Office
Section 79 Plans
ReplyDeleteYour Best Resource for Section 79 Questions, Problems, Information
516-938-5007
You WILL Be Audited For Your Section 79 Plan
Section 79 plans, listed transactions, reportable transactions, 419e, 412i, and captive insurance plans
are all targets of IRS Auditors.
Do you know the ins and outs of these plans enough to protect yourself or clients? We do, and we can help you
too.
You WILL be audited. It's just a matter of when. You need help and you need it now.
Educate yourself here, then call for assistance. Your finances are at risk if you put off dealing with this problem.
Expert Witness Directory
ReplyDeleteThe information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
ABOUT THE AUTHOR: Lance Wallach
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.
Copyright Lance Wallach, CLU, CHFC
More information about Lance Wallach, CLU, CHFC
While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
Expert Witness Directory
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Find an Expert Witness:
Abusive 412(i) Tax Shelter Litigation
By Lance Wallach, CLU, CHFC Abusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness
PhoneCall Lance Wallach at (516) 938-5007
Parties: Typically, these transactions will include an Insurance company, accountant, tax attorney, and a promoter (someone with an insurance background, perhaps an actuary, wh
While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
Expert Witness Directory
ReplyDeleteTrust,Beta 419,Millennium Plan,Bisys,Creative Services Group,Sterling Benefit Plan,Compass 419,Niche 419,CRESP,Sea Nine Veba, American Benefits Trust, National Benefit Plan and Trust, ABT, Professional Benefits Trust Benistar 419 Plan, nova trust, Grist mill trust, Sadi Trust IRS raids, Millennium 419 Plan,Bisys 419,Creative Services Group 419 Plan,Sterling Benefit 419 Plan,CRESP 419,Sea Nine Veba 419, National Benefit Plan and Trust 419, American Benefits Trust 419,ABT 419,Old Mutual, Allmerica Financial, American Heritage Life, Commercial Union Life, National Life of Vermont, Old Line Life, Security Mutual Life, West Coast Life "Grist Mill Trust" "Real Veba""Section 79 GEAR" GEAR" "United Financial Group" "Kenny Hartstein" "Millennium Plan" Kenny Hartstein" "Millennium Plan" "Tom Crosswhite" "Greg Roper""captive insurance" cresp "Ridge Plan" "Professional benefits Trust" "PBT " "Professional Planning Associates" "National Pension Associate" "NPA""Heritage Plan" ""Insurance fraud""pension and benefit plan fraud""insurance company fraud""ECI Pension Services""Pension Professionals of America""ABI""Hartford""AIG""Indy Life""Indianapolis Life""Advantage" Names of People who SOLD: "Kenny Hartstein""Dennis Cunning""Steve Toth""Michael Sonnenberg"Larry Bell""Scott Ridge""Randall Smith""Greg Roper""Tracy Sunderlage""Warren Trust""Joseph Donnelly""Norm Bevan""Judy Carsrud""Dan Carpenter""Ed Waesche" "Tom Crosswhite""David Struckman""George Huff" "Tom Crosswhite" "Greg Roper""Christopher Jarvis" David Mandell" Gen Von Oder Insurance Companies -- need to be 412 AND 419: Hartford 419, Pacific Life 419, PAC Life 419, AVIVA, 419, Indianpolis Life, Penn Mutual419,Bankers Life 419, John Hancock 419, Security Mutual 419, Transamerica 419,Prudential 419, Kansas City Life 419, Mass Mutual419, Guardian 419, Amerus 419, Wells Fargo 419, Fifth Third Bank 419, Arrow Head Trust 419, U.S. Benefits Group, Benefit Plan Advisors, Rex Insurance Service,Advantage,AIG, Old Mutual, Allmerica Financial, American Heritage Life, Commercial Union Life, National Life of Vermont, Old Line Life, Security Mutual Life, West Coast Life
ReplyDeleteDelete
The Truth About Section 79 Permanent Insurance Plans
ReplyDeleteSection 79 plans are a part of the employee benefit section of the Internal Revenue Service code (IRC). This code (IRC code Section 1.79) has been a part of the IRC since it was initially adopted in 1953. The President of the United States at that time was Dwight D. Eisenhower.
Section 79 permanent insurance plans are sold within the United States by large national life insurance companies, all of whom have internal legal and compliance departments whose role is to ensure that the products sold by those companies are legal and comply with the rules and spirit of the law. Section 79 permanent insurance plans are sold legally in all 50 states of these United States of America. For the protection of consumers, each state has an insurance department that reviews and approves all company and agent licensing and products sold within that state. (see National Association of Insurance Commissioners at this link).
So, here’s the truth about Section 79 Permanent Insurance Plans:
• This is a legal insurance product, covered in the IRS Code number 1.79.
• All group life insurance is covered under this IRS Code. Most governmental agencies, non-profit organizations and large Fortune 1,000 companies have section 79 as an employee benefit.
• This is not a new code. The IRC 1.79 has been in the code since 1953.
• All Section 79 products are fully vetted by major national insurance companies, their lawyers and compliance staffs, for sale in all 50 states. These are companies with long and successful histories of selling insurance products in the United States since the mid-1800’s.
• Every state insurance department has fully vetted these Section 79 products and approved them for sales in their states. These products are legal for sale in all 50 states.
• Section 79 plans are not “listed transactions.” Here is a list of all listed transactions according to the IRS – http://www.irs.gov/Businesses/Corporations/Listed-Transactions---LB&I-Tier-I-Issues
For REAL information about Section 79 plans, contact Business Planning Group at (888)545-2205 or visit our website at BusinessPlanningGroup.com/truth .
ReplyDeleteIs a group term life plan a solid employee benefit program that is of high value for many
employers and their employees? Yes. The value of such a plan to every participating employee
in providing extra life insurance security to family members is clear, and the small tax incentives
provided under Section 79 make the deal that much sweeter for both employees and their
sponsoring employer.
Does it make sense for the sole owner of a company to implement a Section 79 plan as a way to
achieve tax leverage for needed personal permanent life insurance coverage? The answer to that
question is more nuanced. The idea may make sense where
• The employer is organized as a C corporation,
• The business principal makes substantially more than the other employees,
• There are relatively few employees of the company,
• The non-owner employees are highly sensitive to increases in taxes,
• The cost of hiring the third party administrator is low relative to the premium,
• The owner of the company does not require estate tax exclusion of the death benefit, and
• The owner is satisfied with a permanent life policy with relatively low early cash values.
Where all the factors described above do not align, the employer is probably better off buying
the needed personal coverage under a bonus arrangement, or simply paying the premium with
personal money.
section-79Section 79 Plans Why You Shouldn't Use Them Get the Facts
ReplyDeleteirs-2009-report
Tax Planning That Works Use Time Tested Plans To Grow Your Wealth
What is a Section 79 Plan? It depends on who you ask.
If you ask an insurance company that offers these plans or an insurance agent that sells them, they will tell you that they are one of the last “tax-favorable” wealth building tools a business owner can use to grow their wealth.
If you ask me what a Section 79 Plan is, I’ll tell you that it’s one of the most over-sold and over-abused life insurance sales gimmicks in the insurance industry. Business owners can grow more wealth NOT using these plans (something you’ll never hear from an insurance agent pitching them).
Who is the ideal client for an insurance agent to pitch this plan to? A profitable small business who has an owner that would like an additional “tax-deductible” wealth building tool to use for retirement (so the market is large).
The sales pitch—Business owner, how you like to fund a plan that…
…allows your money to grows tax-free and where the money can be removed tax free in retirement (unlike a qualified plan where the money coming out is fully taxable)?
…is 30-40% deductible through your business?
…has limited expenses for employees?
Sound great right? Sure, if you don’t know the “real” math and pitfall to these plans.
That’s why I created this site. I wanted consumers and advisors alike learn in a “full-disclosure” manner the problems with Section 79 Plans.
After you learn about the problems with Section 79 Plans, I think, like me, you’ll come to the conclusion that the best course of action is to avoid these plans altogether.
Why You Should Stay Away From Section 79 Life Insurance Plans!
I created a more detailed two part series on why you should stay away from Section 79 plans.
To read Part I of my series on why you shouldn’t use Section 79 Plans, click here.
To read Part II of my series on why you shouldn’t use Section 79 Plans, click here.
While I strongly recommend you read my more detailed summaries, the following are the main bullet points explaining why you should stay away from these plans:
1) You have to lie to employees to implement them.
2) The life illustrations given by ignorant or crooked insurance agents are not realistic (most use today’s historically low lending rates with 2-3% loan spreads on variable loans on EIUL policies (ones that do not have a fixed lending rate)).
3) You have to be a C-Corporation to use them.
4) The life policies sold in these plans are so bad that the companies don’t want them sold unless they are in Section 79 plans (the policies are designed to have poor performance so the income tax deduction is increased).
5) Another very good reason not to use these plans is because there are better alternatives like Captive Insurance Companies (click here to learn the power of growing wealth through a CIC).
6) And the best reason not to use a Section 79 plan is because when you run the real numbers the client would be better off NOT funding the plan, taking his/her money home after taxes, and funding a “good” EIUL policy (a Retirement Life™ policy).
Conclusion
If you are an insurance agent and are being told by an IMO or insurance company that you need to start selling Section 79 plans so you can get in the business market and make a bunch of money, resist the sales pitch. If you are a business owner being pitched a plan, resist the sales pitch.
If you’ve been told this is a can’t-miss program, have them give you what they think is a good illustration for a client and forward it to me at
mployer has not engaged in a listed transaction simply because it is a 412(i) plan.
ReplyDelete· Just because a 412(i) plan was audited and sanctioned for certain items, does not necessarily mean the plan engaged in a
listed transaction. Some 412(i) plans have been audited and sanctioned for issues not related to listed transactions.
Companies should carefully evaluate proposed investments in plans such as the Benistar plan. The claimed deductions will not
be available and penalties will be assessed for lack of disclosure if the investment is similar to the investments described in Notice
95-34. In addition, under IRC 6707A, IRS fines participants a large amount of money for not properly disclosing their participation
in listed, reportable, or similar transactions; an issue that was not before the Tax Court in either Curico or McGehee. The
disclosure needs to be made for every year the participant is in a plan. The forms need to be filed properly 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 helps hundreds of his participants file forms, and they all
still received very large IRS fines for not filling in the forms properly.
Lance Wallach is National society of Accountants Speaker of the Year and member of the AICPA faculty of teaching
professionals. He does expert witness testimony and has never lost a case. Contact him at 516-938-5007, wallachinc@gmail.
com, or visit www.taxaudit419.com or www.lancewallach.com. The information provided herein is not intended as legal,
accounting, financial, or any other type of advice for any specific individual or other entity. You should contact an appropriate
professional for any such advice.
Section 79 Scams and Captive Insurance History
ReplyDeleteeing filed timely.
Never utilize directions from a plan promoter or salesman as to how to fill out 8886 forms. They would only be
attempting to protect themselves, and doing so usually results in you being fined. Lance Wallach knows of
many examples of this happening, including a plan promoter who assisted almost 200 business owners in
preparing and filing 8886 forms. All of them got fined for improper preparation of the forms.
The two people that have been successful in filing 8886 forms for business owners have had numerous
conversations with IRS personnel. They get the impression that it is almost impossible for an accountant, tax
attorney, or anyone else to properly prepare and file the forms. One of them, who spent 35 plus years with
the IRS, has also been successful in fighting the IRS on penalties and fines assessed against business
owners who participate in these plans, though the IRS publicly claims that you cannot appeal the fine under
6707A.
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.
79 Plans
ReplyDelete412i, 419e plans litigation and IRS Audit Experts for abusive insurance reportable or listed transactions by the IRS,Section 79, Section 79 Lawsuits,412i, 419e plans litiga CPA tax practitioners are most likely to encounter are employee benefit insurance plans that the IRS has deemed abusive. Many of these plans have been sold by promoters in conjunction with life insurance companies.
As long ago as 1984, with the addition of IRC §§ 419 and 419A, Congress and the IRS took aim at unduly accelerated deductions and other perceived abuses. More recently, with guidance and a ruling issued in fall 2007, the Service declared as abusive certain trust arrangements involving cash-value life insurance and providing post-retirement medical and life insurance benefits.
Notices 2007-83 and 2007-84
ReplyDelete
Lance WallachMarch 18, 2014 at 1:13 PM
IRS tax relief firm, Lance Wallach, speaking
Tuesday, March 11, 2014
Abusive Insurance and Retirement Plans
Abusive Insurance and Retirement Plans
As an expert witness Lance Wallach side has never lost a case
MONDAY, APRIL 22, 2013
Sometimes the IRS might disagree with planning you did with other advisors and you need to find help to ensure that your rights are protected, the facts are interpreted accurately and the law applied correctly. Lance Wallach is among the few in this country who fully understand the mechanics and legal issues surrounding what has become known as “419 Pl
ReplyDelete
lance wallachMarch 25, 2014 at 1:00 PM
26 U.S. Code § 412 - Minimum funding standards
Current through Pub. L. 113-86, except 113-79. (See Public Laws for the current Congress.)
US Code
Notes
Updates
PREV | NEXT
(a) Requirement to meet minimum funding standard
(1) In general
A plan to which this section applies shall satisfy the minimum funding standard applicable to the plan for any plan year.
(2) Minimum funding standard
For purposes of paragraph (1), a plan shall be treated as satisfying the minimum funding standard for a plan year if—
(A) in the case of a defined benefit plan which is not a multiemployer plan, the employer makes contributions to or under the plan for the plan year which, in the aggregate, are not less than the minimum required contribution determined under section 430 for the plan for the plan year,
(B) in the case of a money purchase plan which is not a multiemployer plan, the employer makes contributions to or under the plan for the plan year which are required under the terms of the plan, and
ReplyDelete
Lance WallachMarch 27, 2014 at 4:52 AM
Lance Wallach
Shared publicly - Mar 20, 2014
#IRS
Internal Revenue Code Section 79
www.section79.info/
Internal Revenue Code Section 79, Tax Deductible Permanent Life Insurance Plans, and Tax Deductible Group Term Life Insurance.
Lance Wallach shared this on Google+
ReplyDelete
lance wallachMarch 28, 2014 at 5:03 AM
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FROM THE OCTOBER 01, 2010 ISSUE OF AGENT’S SALES JOURNAL • SUBSCRIBE!
How to Avoid IRS Fines for You and Your Clients
BY LANCE WALLACH
OCTOBER 26, 2010 • REPRINTS
ReplyDelete
Lance WallachApril 8, 2014 at 8:47 AM
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CJA and associates 419 412i section 79 scam audits la
BEACIViSEd
ReplyDeletefewyears ago, I testified as an
expertwitness in a case where ,
a physician was in an abusive
a0l(k) plan with life insur- ,
Everything is not fine
ance. It had a so-called "springing cash
value" policyin it. The IRS calls plans
with these types of policies "listed transactionsl'
The judge called the insurance
broker "a crookl'
Keeping that in mind, you should
know that the IRS is cracking dor,r'n on
small business ov,rrers who participate
in tax reduction insurance plans and the
brokers who sold them. Some of these
plans include defined benefit retirement
plans, IRAs, or even 401(k) plans with life
insurance.
i:.!,' ! I * it, i i i i:;1 1 ir':.:;11
For the business owne{, the motivation is
a large tax deduction. For the insurance
broker and the insurance carrier,
the motivation is a substantial
commission. Thus, the
IRS is cracking dor,r'n on
accountants, insurance
brokers and others.
Ifyour client
is (or
was) in
aar2(1),
419, captive
insurance, or Section
79 pIan, then you
maybe in big
trouble.
Ifyou are
an accountant
and signed a tax
return for a client
in one ofthese plans, you are probably
what the IRS calls a "material adviser"
BY LANCE WALLACH
and subject to a maximum $200,000 fine.
Ifyou are an insurance professional
that sold or advised on one ofthese plans,
the same holds true for you.
'ti1l:l i:i i'i :..:;l j i t;: :.: i.ii
Both business owners and brokers need
to file properlyunder Section 67O7Aor
face large IRS fines. In many cases, the accountant
filed the appropriate forms, but
the IRS still levied the fine because the
accountant made a mistake when filling
out the form.
The improper preparation of these
forms usually results in the client being
fined more quickly than if the form were
not filed at all. My office has reviewed
many forms and we have not yet seen one
that was filled out properly.
The IRS will be soon attacking Section
79 scams as well, I am told. In Section
79 scams, small business owners are
told that they can take a tax deduction
through their businesses to purchase
life insurance. That sounds good, but
when you break dor.tryr the math and
the sales pitch, it doesn't make sense.
In articles I lvrote for
the American Institute
for Certified Public Accountants
back in the
'90s, I predicted attacks
by the IRS on 419s. Those
predictions came true.
Then I predicted attacks
on 412s. They came
true too.
Now I'm predicting that these Section
79 scams will be attacked.
* !t;:'rr i* lLi."i
To protect themselves, everyone in these
Section 79 plans should file protectively
under Section 67074, and anyone who
has not filed protectively in a 419 or
412(i) had better get some good advice
from someone who knows what is going
on and has extensive experience filing
protectively.
The IRS has its task forces auditing
these plans now; after tha! theywill
move on to the Section 79 scams and the
brokers who sold them.
I have been an expert witness in
a lot of cases involving 412(i) and 419
issues. They rarely go well for brokers, accountants,
plan promoters, or insurance
companies.
i','i:;,:i r.:h r,,i,ill ;' li ::f !.
Ifyou are an insurance professional, it's
important to understand thatyou should
not count on your insurance company to
backyou up.
Based on what I have seen, insurance
companies are more likelyto stab
you in the back. In an IRS investigation,
the insurance companies settle first, leaving
the brokers