tag:blogger.com,1999:blog-44627925199728872592024-03-13T02:06:48.446-04:00We Want to Profile You in New Book412i, 419e plans litigation and IRS Audit Experts for abusive insurance based plans deemed reportable or listed transactions by the IRS.irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.comBlogger66125tag:blogger.com,1999:blog-4462792519972887259.post-62798007872560087272017-08-01T09:13:00.001-04:002017-08-01T09:13:52.601-04:00Small Business Search Engine Optimization<br />
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http://www.seoexpertssite.com/irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-37270361806362851822017-05-16T14:23:00.002-04:002017-05-16T14:23:20.718-04:006707A Penalties & 419 Plans Litigation: Audit Lottery, Captive insurance, 419, 412i, Secti...<a href="http://reportabletransactions3.blogspot.com/2012/03/audit-lottery-captive-insurance-419.html?spref=bl">6707A Penalties & 419 Plans Litigation: Audit Lottery, Captive insurance, 419, 412i, Secti...</a>: The audit lottery is a gambit in which taxpayers claim tax benefits to which they are not entitled in the hope that the IRS will never audit...irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-70020770205765243512017-05-16T14:23:00.001-04:002017-05-16T14:23:10.232-04:00IRS Offshore Voluntary Disclosure Program Reopens<div class="MsoNormal">
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By <a href="http://www.hgexperts.com/expert-witness.asp?id=54302" target="_blank" title="Expert Witness: Lance Wallach, CLU, CHFC">Lance Wallach, CLU, CHFC</a> <br />
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<a href="http://www.taxadvisorexperts.org/" target="_blank">Abusive Tax Shelter</a>, <a href="http://www.listedtransactions.com/" target="_blank">Listed Transaction</a>, Reportable Transaction <a href="http://www.lancewallach.com/" target="_blank">Expert Witness</a> </div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">Today, the Internal Revenue Service reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes. Additionally, the IRS revealed the collection of more than $4.4 billion so far from the two previous international programs.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">The Offshore Voluntary Disclosure Program (OVDP) was reopened following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of <a href="http://taxadvisorexperts.com/" target="_blank">international tax issues</a> and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion. This program will remain open indefinitely until otherwise announced.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">Lance Wallach and his associates have received thousands of phone calls from concerned clients with questions about the prior programs. Some of Lance’s associates are still very busy helping people with the last program. Not a single person has been audited and most are pleased with the results and are now able to sleep easily without worrying about the IRS. According to Lance, it requires years of experience to obtain a good result from the program.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">He suggests using a CPA-certified, ex-IRS agent with lots of international tax experience. While this is not a requirement to file under the program, Lance has heard many horror stories from people who have tried to file by themselves or who have used inexperienced accountants.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">“Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers,” said IRS Commissioner Doug Shulman. “We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system.”</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">The new program is similar to the 2011 program in many ways, but it has a few key differences. Unlike last year, there is no set deadline for people to apply. However, the terms of the program could change at any time going forward. For example, the IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">“As we've said all along, people need to come in and get right with us before we find you,” Shulman said. “We are following more leads and the risk for people who do not come in continues to increase.”</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">The third offshore effort accompanies another announcement that Shulman made today, that the IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program. That figure reflects closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program. That number will grow as the <a href="http://www.419-litigation.com/" target="_blank">IRS</a> processes the 2011 cases.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">In all, the IRS has seen 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. Since the 2011 program closed last September, hundreds of taxpayers have come forward to make voluntary disclosures. Those who come in after the closing of the 2011 program will be able to be treated under the provisions of the new OVDP program.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">The new program’s penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or the value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">Participants face a 27.5 percent penalty, but taxpayers in limited situations can qualify for a 5 percent penalty. Smaller offshore accounts will face a 12.5 percent penalty. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the new OVDP will qualify for this lower rate. As under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">The IRS recognizes that its success in offshore enforcement and in the disclosure programs has raised awareness related to tax filing obligations. This includes awareness by dual citizens and others who may be delinquent in filing, but owe no U.S. tax. </span></i></b></div>
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<b>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, abusive tax shelters, financial, international tax, and estate planning. He writes about 412(i), 419, Section79, FBAR, 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 Public 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 the 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.</b></div>
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<b><i><span style="color: black;">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.</span></i></b></div>
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</script>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com1tag:blogger.com,1999:blog-4462792519972887259.post-61866257592210076412017-05-16T14:22:00.004-04:002017-05-16T14:22:49.689-04:00Lance Wallach National Society of Accountants Speaker of The Year<div class="separator" style="clear: both; text-align: center;">
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irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com1tag:blogger.com,1999:blog-4462792519972887259.post-68331244408453193602017-05-16T14:22:00.002-04:002017-05-16T14:22:27.818-04:00The IRS Penalizes Millions of Taxpayers Published in Coatings Pro Magazine<br />
Lance Wallach<br />
<br />
It is tax time. There are many problems you can run into with the IRS. This article is a generalized overview of some of these confusing issues:<br />
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•IRS Penalties<br />
•Unfiled Tax Returns<br />
•IRS Liens<br />
•IRS Audits<br />
•Payroll Tax Problems<br />
•IRS Levies<br />
•Wage Garnishments<br />
•IRS Seizures<br />
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When dealing with the IRS, it can seem like they have all the power. That is not always true. As a small business owner--and a taxpayer--it is vital that you know your options and your rights.<br />
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<a href="http://taxadvisorexpert.com/" target="_blank">IRS Penalties</a><br />
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The IRS penalizes millions of taxpayers each year. In fact, they have so many penalties that it can be hard to understand which penalty they are hitting you with.<br />
<br />
The most common penalties are Failure to File and Failure to Pay. Both of these penalties can substantially increase the amount you owe the IRS in a very short period of time.<br />
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To make matters worse, the IRS charges interest on penalties. Many taxpayers often find out about IRS problems many years after they have occurred. As a result, the amount owed the IRS is substantially greater due to penalties and the accumulated interest on those penalties. Some IRS penalties can be as high as 75% to 100% of the original taxes owed. Often taxpayers can afford to pay the taxes owed, but the extra penalties make it impossible to pay off the entire balance.<br />
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The original goal of the IRS imposing penalties was to punish taxpayers in order to keep them in line. Unfortunately, the penalties have turned into additional sources of income for the IRS. So they are happy to add whatever penalties they can and to pile interest on top of those penalties. Your loss is their gain. It is important to know that under certain circumstances the IRS does abate or forgive penalties. Therefore before you pay the IRS any penalty amounts, you may want to<br />
consider requesting that the IRS abate your penalties.<br />
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Unfiled Tax Returns<br />
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Many taxpayers fail to file required tax returns for a variety of reasons. What you must understand is that failure to file tax returns may be construed as a criminal act by the IRS--a criminal act punishable by up to one year in jail for each year not filed. Needless to say, its one thing to owe the IRS money but another thing to potentially lose your freedom for failure to file a tax return.<br />
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The IRS may file “SFR” (Substitute For Return) Tax Returns on your behalf. This is the IRS’s version of an unfiled tax return. Because SFR Tax Returns are filed in the best interest of the government, the only deductions you’ll see are standard deductions and one personal exemption. You will not get credit for deductions to which you may be entitled, such as exemptions for a spouse or children, interest on your home mortgage and property taxes, cost of any stock or real estate sales, business expenses, etc.<br />
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Remember that regardless of what you have heard, you have the right to file your original tax return, no matter how late it is filed.<br />
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IRS Liens<br />
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The IRS can make your life miserable by filing Federal Tax Liens on your business or<br />
property. Federal Tax Liens are public records indicating that you owe the IRS various taxes. They are filed with the County Clerk in the county from which you or your business operates.<br />
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Because they are public records, they will show up on your credit report. This often<br />
makes it difficult to obtain financing on an automobile or a home. Federal Tax Liens can also tie up your personal property, meaning that you cannot sell or transfer that property without a clear title.<br />
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Often taxpayers find themselves in a Catch-22 in which they have property that they<br />
would like to borrow against, but because of the Federal Tax Lien, they cannot get a loan. Should a Federal Tax Lien be filed against you, a CPA can help get it lifted.<br />
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IRS Audits<br />
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The IRS conducts multiple types of audits. They can audit you by mail, in their offices, in your office or home. The location of the audit is a good indication of the severity.<br />
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Typically, Correspondence Audits are conducted to locate missing documents in your tax return that have been flagged by IRS computers. These documents usually include W-2s and 1099 income items or interest expense items. This type of audit can typically be handled through the mail with the correct documentation.<br />
<br />
The IRS Office Audit--held in IRS offices--is usually conducted by a Tax Examiner who<br />
will request numerous documents and explanations of various deductions. During this<br />
type of audit you may be required to produce all bank records for a period of time so that the IRS can check for unreported income.<br />
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The IRS Home or Office Audit--held in your home or office--should be taken very<br />
seriously as these are conducted by IRS Revenue Agents. Revenue Agents receive more<br />
training and learn more auditing techniques than typical Tax Examiners. Of course, all IRS audits should be taken seriously as they often lead to examinations of<br />
other tax years and other tax problems not stated in the original audit letter.<br />
<br />
Payroll Tax Problems<br />
<br />
The IRS is very aggressive in their collection attempts for past-due payroll taxes. The penalties assessed on delinquent payroll tax deposits or filings can dramatically increase the total amount you owe in just a matter of months.<br />
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I believe that it is critical for business owners to have an attorney present in these situations. Your answers to the first five IRS questions may determine whether you stay in business or are liquidated by the IRS. We always advise clients to avoid meeting with any IRS representatives regarding payroll taxes until you have met with a professional to discuss your options.<br />
<br />
IRS Levies--Bank and Wage<br />
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An IRS Levy is an action taken by the IRS to collect taxes. For example, the IRS can<br />
issue a Bank Levy to obtain the cash in your savings and checking accounts. Or, the IRS can levy your wages or accounts receivable. The person, company, or institution that is served with the levy must comply or face its own IRS problems.<br />
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When the IRS levies a bank account, the levy can only be honored on the particular day on which the bank receives the levy. The bank is required to remove whatever amount of money is in your account on that day (up to the amount of the IRS Levy) and send it to the IRS within 21 days unless otherwise notified by the IRS. This type of levy does not affect any future deposits made into your bank account unless the IRS issues another Bank Levy.<br />
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An IRS Wage Levy is different. Wage Levies are filed with your employer and remain in<br />
effect until the IRS notifies the employer that the Wage Levy has been released. Most<br />
Wage Levies take so much money from the taxpayer’s paycheck that the taxpayer doesn’t even have enough money remaining to meet basic needs. Both Bank and Wage Levies create difficult situations and should be avoided if possible.<br />
<br />
Wage Garnishments<br />
<br />
The IRS Wage Garnishment is a very powerful tool used to collect taxes that you owe through your employer. Once a Wage Garnishment is filed with an employer, the employer is required to collect a large percentage of each paycheck. The funds that would have otherwise been paid to the employee will then be paid to the IRS.<br />
The Wage Garnishment stays in effect until the IRS is fully paid or until the IRS agrees to release the garnishment. Having wages garnished can create other debt problems because the amount left over after the IRS takes its cut is often small, so you may have difficulty with bills and other financial obligations.<br />
<br />
IRS Seizures<br />
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The IRS has extensive powers when it comes to seizures of assets. These powers allow them to seize personal and business assets to pay off outstanding tax liabilities. Seizures typically occur when taxpayers have been avoiding the IRS.<br />
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Similar to levies and garnishments, seizures are one of the IRS’s ultimate invasive collection tools. They can seize cars, television sets, jewelry, computers, collectibles, business equipment, or anything of value, which can be sold in order to acquire the money the IRS wants to pay off your tax debts. If you are facing a seizure, you have a serious problem.<br />
<br />
Hopefully this tax season will begin and end without any of these IRS issues coming into play. But if they do, help is out there. CPAs and attorneys can help you negotiate your rights should it become necessary.<br />
<br />
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, abusive tax shelters, financial, international tax, and estate planning. He writes about 412(i), 419, Section79, FBAR, 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 Public 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 the 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.<br />
<br />
The information provided herein is not intended as legal, accounting, financial or<br />
any type of advice for any specific individual or other entity. You should contact an<br />
appropriate professional for any such advice.<br />
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</script>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-61430480771893388212017-05-16T14:22:00.001-04:002017-05-16T14:22:18.294-04:00Some 419 Insurance Welfare Benefit Plans Continue To Get Accountants Into TroublePopular so-called “419 Insurance Welfare Benefit Plans”, sold by most insurance professionals, are getting accountants and their clients into more and more trouble. A CPA who is approached by a client about one of the abusive arrangements and/or situations to be described and discussed in this article must exercise the utmost degree of caution, not only on behalf of the client, but for his/her own good as well. The penalties noted in this article can also be applied to practitioners who prepare and/or sign returns that fail to properly <a href="http://reportabletransaction.com/" target="_blank">disclose</a> listed transactions, including those discussed herein.<br />
<br />
On October 17, 2007, the <a href="http://irsdog.com/" target="_blank">IRS</a> issued Notice 2007-83, Notice 2007-84, and Revenue Ruling 2007-65. Notice 2007-83 essentially lists the characteristics of welfare benefit plans that the Service regards as listed transactions. Put simply, to be a listed transaction, a plan cannot rely on the union exception set forth in IRC Section 419A(f)(5),there must be cash value life insurance within the plan and excessive tax deductions for life insurance, in excess of what may be permitted by Sections 419 and 419A, must have been claimed.<br />
<br />
In Notice 2007-84, the Service expressed concern with plans that provide all or a substantial portion of benefits to owners and/or key and highly compensated employees. The notice identified numerous specific concerns, among them:<br />
<br />
1. The granting of loans to participants<br />
2. Providing deferred compensation<br />
3. Plan terminations that result in the distribution of assets rather than being used post-<br />
retirement, as originally established.<br />
4. Permitting the transfer of life insurance policies to participants.<br />
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Alternative tax treatment may well be in the offing for such arrangements, as the IRS intends to re-characterize such arrangements as dividends, non-qualified deferred compensation (under IRC Section 404(a)(5) or Section 409A), split-dollar life insurance arrangements, or disqualified benefits pursuant to Section 4976. Taxpayers participating in these <a href="http://listedtransactions.com/" target="_blank">listed transactions</a> should have, in most cases, already disclosed such participation to the Service. Those who have not should do so at the earliest possible moment. Failure to disclose can result in severe penalties – up to $100,000 for<br />
individuals and $200,000 for corporations.<br />
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Finally, Revenue Ruling 2007-65 focused on situations where cash value life insurance is purchased on owner employees and other key employees, while only term insurance is offered to the rank and file. These are sold as 419(e), 419A (f)(6), and 419 plans. Life insurance premiums are not inherently tax deductible and authority must be found in <a href="http://section79plan.org/" target="_blank">Section 79</a> to justify such a deduction. Section 264(a), in fact, specifically disallows tax deductions for life insurance, at least in some cases. And moreover, the Service declared, interposition of a trust does not change the nature of the transaction.<br />
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<i>Lance Wallach, CLU, ChFC, CIMC, speaks and writes extensively about financial planning, retirement plans, and tax reduction strategies. He speaks at more than 70 national conventions annually and writes for more than 50 national publications. For more information and additional articles on these subjects, visit www.taxadvisorexperts.org or call 516-938-5007.<br />
<br />
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.</i>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-64433191751436454042017-05-16T14:22:00.000-04:002017-05-16T14:22:09.417-04:00Captive Insurance and Other Tax Reduction Strategies – The Good, Bad, and Ugly<div align="center" class="MsoNormal" style="text-align: center;">
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<span style="color: black; font-family: "tahoma";">By Lance Wallach May 14th</span></div>
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<span style="color: black; font-family: "tahoma";">Every accountant knows that increased cash flow and cost savings are critical for businesses. What is uncertain is the best path to recommend to garner these benefits.<br />
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Over the past decade business owners have been overwhelmed by a plethora of choices designed to reduce the cost of providing employee benefits while increasing their own retirement savings. The solutions ranged from traditional pension and profit sharing plans to more advanced strategies.<br />
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Some strategies, such as IRS section <a href="http://www.taxaudit419.com/" target="_blank">419</a> and <a href="http://www.419-litigation.com/" target="_blank">412(i)</a> plans, used life insurance as vehicles to bring about benefits. Unfortunately, the high life insurance commissions (often 90% of the contribution, or more) fostered an environment that led to aggressive and noncompliant plans.<br />
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The result has been thousands of audits and an IRS task force seeking out tax shelter promotion. For unknowing clients, the tax consequences are enormous. For their accountant advisors, the liability may be equally extreme.<br />
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Recently, there has been an explosion in the marketing of a financial product called <a href="http://www.lancewallach.com/CaptiveInsurance.html" target="_blank">Captive Insurance Plans</a> These so called “Captives” are typically small insurance companies designed to insure the risks of an individual business under <a href="http://www.lawyer4audits.com/" target="_blank">IRS</a> code section 831(b). When properly designed, a business can make tax-deductible premium payments to a related-party insurance company. Depending on circumstances, underwriting profits, if any, can be paid out to the owners as dividends, and profits from liquidation of the company may be taxed as capital gains.<br />
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While captives can be a great cost saving tool, they also are expensive to build and manage. Also, captives are allowed to garner tax benefits because they operate as real insurance companies. Advisors and business owners who misuse captives or market them as estate planning tools, asset protection vehicles, tax deferral or other benefits not related to the true business purpose of an insurance company face grave regulatory and tax consequences.<br />
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A recent concern is the integration of small captives with life insurance policies. Small captives under section 831(b) have no statutory authority to deduct life premiums. Also, if a small captive uses life insurance as an investment, the cash value of the life policy can be taxable at corporate rates, and then will be taxable again when distributed. The consequence of this double taxation is to devastate the efficacy of the life insurance, and it extends serious liability to any accountant who recommends the plan or even signs the tax return of the business that pays premiums to the captive.</span></div>
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The IRS is aware that several large insurance companies are promoting their life insurance policies as investments with small captives. The outcome looks eerily like that of the <a href="http://419plans.com/" target="_blank">419 and 412(i) plans</a> mentioned above.<br />
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Remember, if something looks too good to be true, it usually is. There are safe and conservative ways to use captive insurance structures to lower costs and obtain benefits for businesses. And, some types of captive insurance products do have statutory protection for deducting life insurance premiums (although not 831(b) captives). Learning what works and is safe is the first step an accountant should take in helping his or her clients use these powerful, but highly technical insurance tools. </span></div>
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<i><span style="color: black; font-size: 11pt;">Lance Wallach speaks and writes extensively about VEBAs, retirement plans, and tax reduction strategies. He speaks at more than 70 conventions annually, writes for 50 publications, and was the National Society of Accountants Speaker of the Year. Contact him at 516.938.5007 or visit <a href="http://www.vebaplan/" title="http://www.vebaplan/">www.vebaplan</a>.com.</span></i></div>
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<i><span style="color: black; font-size: 11pt;"> 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.</span></i></div>
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</script>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com1tag:blogger.com,1999:blog-4462792519972887259.post-40556678294690341852017-05-16T14:21:00.005-04:002017-05-16T14:21:58.934-04:00CJA & Associates and 412i, 419, and Other Abusive Plans<br />
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<b><span style="color: #cc0000;">For help with CJA & Associates and 412i, 419, and other
abusive plans contact Lance Wallach at <a href="mailto:lawallach@aol.com">lawallach@aol.com</a>
or call 516-938-5007. Lance Wallach is the leading expert on 412i, 419, Section
79 and Captive Insurance Plans. Lance has helped hundreds of people resolve
their problems and get all their money back, usually without a lawsuit. Google
Lance Wallach and see why CJA & Associates, insurance companies, and the
IRS do not want to fight with Lance Wallach.</span></b></div>
irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com72tag:blogger.com,1999:blog-4462792519972887259.post-25148604540797741402017-05-16T14:21:00.004-04:002017-05-16T14:21:48.924-04:00Protecting Clients from Fraud, Incompetence and Scams<div class="MsoNormal">
<b>Lance Wallach </b></div>
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<b>Parts of this article are from the book published by John Wiley and Sons, </b><i><b><u>Protecting Clients from Fraud, Incompetence and Scams</u></b></i><b>, authored by Lance Wallach.</b><br />
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Every financial expert out there knows that bad faith and bad planning can take down even the biggest firms, wiping out millions of dollars of value in an instant. Whether it's <a href="http://taxadvisorexpert.com/" target="_blank">internal fraud</a>, a scammer, or an incompetent planner that takes your client's cash, the bottom line is: The money is <i>gone</i> and the loss should have been prevented.<br />
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Filled with authoritative advice from financial expert Lance Wallach, <i><u>Protecting Clients from Fraud, Incompetence, and Scams</u> </i>equips you as an accountant, attorney, or financial planner with the weaponry you need to detect bad investments before they happen and protect your clients' wealth - as well as your own.<br />
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Sharp and savvy in its frank, often humorous, and authoritative examination of financial fraud and mismanagement, you'll learn about the dysfunctional sectors in the financial industry and:<br />
<ul type="disc">
<li class="MsoNormal">Protecting your retirement assets</li>
<li class="MsoNormal">Asset protection basics</li>
<li class="MsoNormal">Shifting the risk equation: insurance maneuvers</li>
<li class="MsoNormal">Reevaluating existing insurance</li>
<li class="MsoNormal">What financial advisors and insurance agents "forget" to tell their clients</li>
<li class="MsoNormal">The truth about variable annuities</li>
<li class="MsoNormal">What you must know about life settlements</li>
<li class="MsoNormal">The smart way to approach college funding</li>
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The news for the past two years has been filled with gloom and dangers: Swindles, Bernie Madoff, rip-offs, and the collapse of Bear Stearns and Lehman Brothers. But the party's over, and with <i>that</i> era done, it's more important than ever for you to perform the due diligence on all financial maneuvers affecting the money you oversee and provide your clients with assurance in the form of practical solutions for risk and asset management.<br />
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A pragmatic blueprint for identifying trouble spots you can expect and immediately useful solutions, <i>Protecting Clients from Fraud, Incompetence, and Scams </i>equips you with the resources, strategies, and tools you need to effectively protect your clients from frauds and financial scammers.<br />
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<b>Herewith is an excerpt from Lance Wallach's book, </b><i><b><u>Protecting Clients from Fraud, Incompetence and Scams:</u></b></i><br />
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The<a href="http://lawyer4audits.com/" target="_blank"> IRS </a>has been cracking down on what it considers to be abusive tax shelters. Many of them are being marketed to small business owners by insurance professionals, financial planners, and even accountants and attorneys. I speak at numerous conventions, for both business owners and accountants. And after I speak, many people who have questions about tax reduction plans that they have heard about always approach me.<br />
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I have been an expert witness in many of these <a href="http://419-litigation.com/" target="_blank">419</a> and 412(i) lawsuits and I have not lost one of them. If you sold one or more of these plans, get someone who really knows what they are doing to help you immediately. Many advisors will take your money and claim to be able to help you. Make sure they have experience helping agents that have sold these types of plans. Make sure they have experience helping accountants who signed the tax returns. IRS calls them material advisors and fines them $200,000 if they are incorporated or $100,000 if not. Do not let them learn on the job, with your career and money at stake.<br />
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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, abusive tax shelters, financial, international tax, and estate planning. He writes about 412(i), 419, Section79, <a href="http://taxadvisorexpert.com/" target="_blank">FBAR</a>, 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 Public 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 the 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 <a href="http://www.taxadvisorexpert.com/">www.taxadvisorexpert.com</a> or <i><a href="http://www.taxaudit419.com/">www.taxaudit419.com</a>.</i></div>
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.<br />
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</script>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-66795767512761427952017-05-16T14:21:00.003-04:002017-05-16T14:21:39.158-04:00Get Published and Increase Your Sales! Advice from expert author Lance Wallach<a href="http://taxaudit419.com/Get_Published.html">Get Published and Increase Your Sales! Advice from expert author Lance Wallach</a>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-7069145946930356692017-05-16T14:21:00.002-04:002017-05-16T14:21:29.021-04:00419.Tax | Tax Resolution Services<a href="https://419taxblog.wordpress.com/">419.Tax | Tax Resolution Services</a>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-62840085319209574692017-05-16T14:21:00.000-04:002017-05-16T14:21:09.202-04:00All the 419 and 412i resources you need in one place and more<a href="http://taxlibrary.us/#.UKvYcR3nPTQ.blogger">All the 419 and 412i resources you need in one place and more</a>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com1tag:blogger.com,1999:blog-4462792519972887259.post-1386574991892370792017-05-16T14:20:00.001-04:002017-05-16T14:20:48.449-04:00IRS Auditing 412i, 419e Plans<br />
<a href="http://reportabletransaction.com/article-010-CLetter.html">Plan Administrator Frustrated With IRS Attacks on 412i, 412e Plans</a>
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<a href="http://taxaudit419.com/Article-16-IRS_Auditing_412i_Plans.html">IRS Auditing 412(i) Plans</a>
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<iframe allowfullscreen="allowfullscreen" frameborder="0" height="349" src="http://www.youtube.com/embed/ce5EHM5Wat4" width="425"></iframe>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-78684404312787513392017-05-16T14:20:00.000-04:002017-05-16T14:20:21.537-04:00Should you File, and then Opt Out?<div align="center" class="MsoNormal" style="line-height: 150%; text-align: center;">
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<a href="http://www.irs.gov/newsroom/article/0,,id=235695,00.html" target="_blank" title="http://www.irs.gov/newsroom/article/0,,id=235695,00.html"><span style="color: windowtext; text-decoration: none;">Announced</span></a> February 8, 2011, the IRS <a href="http://www.irs.gov/newsroom/article/0,,id=234900,00.html" target="_blank" title="http://www.irs.gov/newsroom/article/0,,id=234900,00.html"><span style="color: windowtext; text-decoration: none;">2011 Offshore Voluntary Disclosure Initiative</span></a> (OVDI) program is a welcome but conditional amnesty allowing taxpayers with foreign accounts to come clean and get into compliance with the IRS. The program runs through Sept. 9, 2011.</div>
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There’s been discussion of “opting out” of the program to take your chances in audit, but it’s a topic fraught with danger. Now, however, there is guidance about opting out of the program that makes much of it transparent. <b><span style="font-weight: normal;">Because of this late date it is recommended that you properly file <a href="http://www.taxadvisorexpert.com/" target="_blank">FBARs </a>and the 90-day request for amnesty extension. This is the first important step. If the forms are not done properly, you will have extensive problems and will not have to think about opting out. If your forms are properly done and filed, then your situation should be discussed with someone who is experienced in these matters.</span></b></div>
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Under the <a href="http://taxadvisorexpert.com/" target="_blank">OVDI</a>, taxpayers are subject to a penalty of 25 percent of the highest aggregate account balance on their undisclosed account(s) between 2003 and 2010. If the value was less than $75,000 at all times during those years, the penalty is only 12.5 percent.</div>
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These account balance penalties are in lieu of all other penalties that may apply, including <a href="http://www.irs.gov/businesses/small/article/0,,id=148849,00.html" target="_blank" title="http://www.irs.gov/businesses/small/article/0,,id=148849,00.html"><span style="color: windowtext; text-decoration: none;">FBAR</span></a> and offshore-related information return penalties. Plus, participants are required to pay taxes and interest on any monies (such as interest income on foreign accounts) they previously failed to report. Finally, they must pay an accuracy-related penalty equal to 20 percent of the underpayment of tax, plus interest.</div>
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Opting out of the program can make sense for some, though it involves taking your chances with an IRS examination. Someone should represent you with extensive experience in this. We always suggest they should at least be a CPA with years of experience in international tax. It’s even better if you use one that was with the international tax division of the <a href="http://www.419-litigation.com/" target="_blank">IRS</a> for a number of years. The IRS has published a separate guide detailing the rules and procedures for opting out. </div>
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Here are some of the rules: </div>
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1.<span style="font-size: 7pt;"> </span><i><span style="font-style: normal;">IRS Summary</span></i><b><span style="font-weight: normal;">.</span></b> The IRS employee who has been handling your case summarizes it, agreeing or disagreeing with your view of penalties, and listing how extensive an audit he or she recommends.</div>
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2.<span style="font-size: 7pt;"> </span><i><span style="font-style: normal;">Program Status Report</span></i><b><span style="font-weight: normal;">.</span></b> Before you can opt out, the IRS sends a letter reporting on the status of your disclosure and what you still must submit. If you’ve given enough data, the IRS will calculate what you would owe under the OVDI. You should provide any missing items within 30 days.</div>
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3.<span style="font-size: 7pt;"> </span><i><span style="font-style: normal;">Taxpayer Submission</span></i><b><span style="font-weight: normal;">.</span></b> Within 20 days, the taxpayer opts out in writing and makes a written case what penalties should apply and why. </div>
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4.<span style="font-size: 7pt;"> </span><i><span style="font-style: normal;">Central Committee</span></i><b><span style="font-weight: normal;">.</span></b> A Committee of IRS Managers reviews the summary and decides how extensive an audit to conduct. The IRS says <b><span style="font-weight: normal;">“the taxpayer is not to be punished (or rewarded) for opting out.”</span></b> The Committee also decides whether to assign your case for a normal civil audit or to assign it for a criminal exam. </div>
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5.<span style="font-size: 7pt;"> </span><i><span style="font-style: normal;">Written Warning</span></i><b><span style="font-weight: normal;">.</span></b> The IRS sends another letter explaining that opting out must be in writing and is irrevocable. You have 20 days thereafter to opt out in writing.</div>
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6.<span style="font-size: 7pt;"> </span><i><span style="font-style: normal;">Interview? </span></i>Some audits will include taxpayer interviews.</div>
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<b><span style="font-weight: normal;">Bottom Line?</span></b> The “opt out” procedure is helpful but still a bit daunting. If you are considering it, make sure you get some solid advice from an experienced person who, in my opinion, should have worked for the IRS and is a CPA about the nature of your case. This is just one of the many options that should be discussed with your advisor. There are many other strategies that you may want to utilize. Your advisor should be aware of all your options, and should explain them. If not, consider engaging someone else. Remember, the penalties can be very large, especially if your advisor is not skilled at this. There is even the potential for criminal prosecution. See taxadvisorexpert.com for the latest information in this area or to contact one of our professionals today. </div>
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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, abusive tax shelters, international tax, and other subjects. He writes about FBAR, OVDI, international taxation, captive insurance plans and other topics. He speaks at more than ten conventions annually, writes for more than 50 publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Public 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 the 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, <a href="mailto:lawallach@aol.com" target="_blank">lawallach@aol.com</a>,<a href="mailto:lanwalla@aol.com" target="_blank">lanwalla@aol.com</a> or visit <a href="http://www.taxadvisorexpert.com/" target="_blank">www.taxadvisorexpert.com</a>.</div>
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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.</div>
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</script>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com2tag:blogger.com,1999:blog-4462792519972887259.post-5371955474494406052017-05-16T14:19:00.000-04:002017-05-16T14:19:46.019-04:00Bad Broker or Bad Luck?Legal.com July 2011<br />
<br />
By Lance Wallach<br />
<br />
You’ve lost money in the market—maybe a substantial amount. Money you thought could be used to plan your future or maybe put your kids through school is now gone. You’re hurt, you’re angry, and we understand. Can you sue your broker, fund manager, or financial advisor? It depends.<br />
<br />
The Big Question: Were You a Victim of <a href="http://taxadvisorexpert.com/" target="_blank">Fraud</a> or the Market? The big question is whether your broker did anything illegal. You can only sue if what your broker did was beyond just “bad” in the sense of “unfortunate” or even “awful.” Instead, there must have been actual wrongdoing.<br />
<br />
Losing money in today’s bad market does not in and of itself give you the right to sue. Sometimes it is just bad luck. After all, investing — even in blue chip investments – carries risks, and the main risk is that the value of your investment could decline. What if your broker gave you bad advice? Again, it will depend on “how bad” the advice was. If your broker recommended investments that were in line with your investor profile and those recommendations were reasonable based on everything your broker knew or should have known, then no – you cannot sue. Well, what kind of bad behavior does leave them liable, you ask? Basically, there are four kinds of bad behavior that may give you the right to sue:<br />
<br />
1. Lying or misrepresenting claims;<br />
2. Your broker acting in his interests, not yours, by means of, among others, misrepresentation, churning, unsuitability, and lack of diversification;<br />
3. Not following instructions including claims of unsuitability, lack of diversification, and breach of contract; and,<br />
4. Unreasonable carelessness, like claims of breach of duty and negligence.<br />
<br />
<span class="Apple-style-span" style="color: red; font-size: large;">Call our office today for a free 3-5 minute consultation with Lance Wallach, the nation’s foremost expert on financial advising, or visit <a href="http://www.financeexperts.org./">www.financeexperts.org.</a></span><br />
<br />
There are a number of different claims that can come out of these types of bad behavior, but fundamentally, if your broker didn’t do one or more of these things, there is no claim. To put it another way: if your broker followed your instructions, was always honest with you, and was reasonably careful, then you cannot sue him – even if his advice or your investments went horribly wrong.<br />
<br />
So before suing or filing the paperwork for arbitration, take a deep breath and ask yourself if your broker lied, ignored instructions, or was unreasonably careless by putting his own needs and interests instead of yours. If you find yourself answering no to more than a few of these questions, then, sadly, your broker probably acted with the best intentions, and based on what he reasonably knew at the time, there is no liability.<br />
<br />
You will notice that we did not answer the question, “What if my broker stole or embezzled money from my account?” That is because the answer is simple – sue them and report them to law enforcement. Theft is theft, whether it’s by your broker, a guy on a street corner with a gun, or that cousin you never really trusted. For example, two common criminal schemes involving investments and securities are the Ponzi scheme and the pyrimad scheme, though these tend to be complex and hidden. Sometimes theft is simpler. But the short answer is that theft is always actionable. For help with this or if you are still not sure, contact our offices today. As an expert witness, my side has never lost a case. I work with attorneys who will usually take these cases on a contingent basis, and who, more importantly, often obtain great results.<br />
<br />
<i>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 Public 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.</i><br />
<br />
<b>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.</b><br />
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</script>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-24888505387336775582017-05-16T14:07:00.002-04:002017-05-16T14:07:27.385-04:00TAX MATTERS: ABUSIVE INSURANCE PLANS GET RED FLAG<i style="font-family: Arial, Helvetica, FreeSans, sans-serif; line-height: 16.8pt;"><span style="color: #3f3f3f; font-family: "verdana"; font-size: 13.5pt; font-style: normal;">By <a class="" href="http://www.blogger.com/blogger.g?blogID=4462792519972887259" style="color: #009999; text-decoration: initial;" target="_self">Lance Wallach</a></span></i><br />
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<span style="color: #3f3f3f; font-family: "verdana"; font-size: 13.5pt;"> <o:p></o:p></span></h1>
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<span class="apple-converted-space"><span style="color: #3f3f3f; font-family: "verdana"; font-size: 9pt;"> </span></span><span style="color: #3f3f3f; font-family: "verdana"; font-size: 9pt;"><a href="http://www.blogger.com/blogger.g?blogID=4462792519972887259" style="color: #009999; text-decoration: initial;" target="_self">Finance</a><span class="apple-converted-space"> </span>/<span class="apple-converted-space"> </span><a href="http://www.blogger.com/blogger.g?blogID=4462792519972887259" style="color: #009999; text-decoration: initial;" target="_self">Taxes</a></span><span class="apple-converted-space"><span style="color: #3f3f3f; font-family: "verdana"; font-size: 9pt;"> </span></span><span style="color: #3f3f3f; font-family: "verdana"; font-size: 9pt;"> <o:p></o:p></span></h2>
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<span style="color: #222222; font-family: "verdana"; font-size: 10pt;">The IRS in Notice 2007-83 identified as listed transactions certain trust arrangements involving cash-value life insurance policies. Revenue Ruling 2007-65, issued simultaneously, addressed situations where the tax deduction has been disallowed, in part or in whole, for premiums paid on such cash-value life insurance policies. Also simultaneously issued was Notice 2007-84, which disallows tax deductions and imposes severe penalties for welfare benefit plans that primarily and impermissibly benefit shareholders and highly compensated employees. Taxpayers participating in these listed transactions must disclose such participation to the Service by January 15. Failure to disclose can result in severe penalties--- up to $100,000 for individuals and $200,000 for corporations. Ruling 2007-65 aims at situations where cash-value life insurance is purchased on owner/employees and other key employees, while only term insurance is offered to the rank and file. These are sold as 419(e), 419(f) (6), and 419 plans. Other arrangements described by the ruling may also be listed transactions. A business in such an arrangement cannot deduct premiums paid for cash-value life insurance. A CPA who is approached by a client about one of these arrangements must exercise the utmost degree of caution, and not only on behalf of the client. The severe penalties noted above could also be applied to the preparers of returns that fail to properly disclose listed transactions. The IRS may challenge the claimed tax benefits of these arrangements for various reasons:<br />· Some or all of the benefits or distributions provided to or for the benefit of owner-employees or key employees may be disqualified benefits for purposes of the 100-percent excise tax under IRC §4976.<br />· Whenever the property distributed from a trust has not been properly valued by the taxpayer, the IRS intends to challenge the value of the distributed property, including life insurance policies.<br />· Under the tax benefit rule, some or all of an employer's deductions in an earlier year may have to be included in income in a later year if an event occurs that is fundamentally inconsistent with the premise on which the deduction was based.<br />· An employer's deductions for contributions to an arrangement that is properly characterized as a welfare benefit fund are subject to the limitations and requirements of the rules in IRC §§419 and<a class="" href="http://www.blogger.com/blogger.g?blogID=4462792519972887259" style="color: #009999; text-decoration: initial;" target="_self">419A</a>, including the use of reasonable actuarial assumptions and the satisfaction of nondiscrimination requirements. Further, a taxpayer cannot obtain a deduction for reserves for post-retirement medical or life benefits unless the employer actually intends to use the contributions for that purpose.<br />· The arrangement may be subject to the rules for split-dollar arrangements, depending on the facts and circumstances.<br />· Contributions on behalf of an owner-employee may be characterized as dividends or as nonqualified deferred compensation subject to IRC §404(a)(5) or IRC §409A or both, depending on the facts and circumstances.<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "verdana"; font-size: 10pt; line-height: 12pt;">Lance Wallach speaks and writes about benefit plans, and has authored numerous books for the AICPA, Bisk Total tape, and others. He can be reached at (516) 938-5007. Lance Wallach, the National Society of Accountants Speaker of the Year, speaks and writes extensively about retirement plans, Circular 230 problems and tax reduction strategies. He speaks at more than 40 conventions annually, writes for over 50 publications, is quoted regularly in the press, and has written numerous best-selling AICPA books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker. Contact him at 516.938.5007,</span><span class="apple-converted-space" style="color: #222222; font-family: "verdana"; font-size: 10pt; line-height: 12pt;"> </span><a href="http://www.blogger.com/blogger.g?blogID=4462792519972887259" style="color: #009999; text-decoration: initial;" target="_self">wallachinc@gmail.com</a><span class="apple-converted-space" style="color: #222222; font-family: "verdana"; font-size: 10pt; line-height: 12pt;"> </span><span style="color: #222222; font-family: "verdana"; font-size: 10pt; line-height: 12pt;">or visit</span><a href="http://www.blogger.com/blogger.g?blogID=4462792519972887259" style="color: #009999; text-decoration: initial;" target="_self">http://www.taxaudit419.com</a><span style="color: #222222; font-family: "verdana"; font-size: 10pt; line-height: 12pt;">.</span></div>
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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.</div>
</div>
irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-73667507687694921312017-05-16T14:07:00.000-04:002017-05-16T14:07:08.772-04:00419 Welfare Benefit PlansHG EXPERTS<br />
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<span style="font-size: 18pt;">Legal Experts
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May 9, 2012 By Sam Susser</h3>
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A view from a former IRS Agent, CPA, College Professor</h3>
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Welfare Benefit Plans (WBP), also known as Welfare Benefit
Trusts and Welfare Benefit Funds are vehicles by which employers may offer
their employees and retirees with certain types of insurance coverage (e.g.,
life insurance, health insurance, disability insurance, and long-term care), as
well as other benefits such as severance payments and educational funding. If
properly designed and in compliance with IRC sections 419 and 419A, WBPs offer
employers with a valid tax deduction. However, as is the case with many plans
that offer opportunities for deductibility, some WBPs fail to comply with Code
standards, invite abuse, and otherwise are used inappropriately as a basis to
reduce taxable income.<br />
It is, therefore, not surprising that the Internal Revenue Service (IRS) has
targeted WBP, designating many such plans as “listed transactions.” The IRS’
attack arsenal includes, but is not limited to: Notice 2007-83 (where the IRS
intends to challenge claimed tax benefits meeting the definition of a “listed
transaction”); Notice 2007-84 (where the IRS may challenge trust arrangements
purporting to provide non-discriminatory medical and life insurance benefits,
if such plans are, in substance, discriminatory); Revenue Ruling 2007-65 (where
the IRS will not disallow deductions for such arrangements for prior year tax
years, except to the extent that deductions have exceeded the amount of
insurance included on the participant’s Form W-2 for a particular year), and
IR-2007-170 (the IRS’ guidance position on WBPs). Accordingly, taxpayers who
have claimed deductions pursuant to Internal Revenue Code (Code) Section 419 are
receiving letters from the IRS inviting them to an audit.<br />
THE GOOD: <br />
Let’s start off with a proposition that may surprise many of you – the IRS is
generally good. No, that’s not an oxymoron. The rest of this article is in the
words of Sam Susser:<br />
<br />
For over 35 years, I have had the privilege of representing the IRS and the US
taxpayers on tax audits. Our goal was to always determine the correct tax
–whether the outcome was a deficiency or a refund. The bottom line, which the
IRS supported, was to “do the right thing.” Over these years, I have met and
befriended many competent and exemplary agents. As with all industries, there
are a few who simply go through the motions, and there are a few who are simply
incompetent. Fortunately, the latter two groups are in the minority. Now that I
represent clients who are being audited by IRS, my objectives have not changed.
The right thing must still be done. I only hope to get a well-versed agent who
knows the law and can make a determination based on facts and circumstances,
and not by preconceived notions.<br />
I have been resolving the WBP issue mostly at the Revenue Agent (RA) level.
Most RAs are knowledgeable in the area of WBP, and it it a pleasure dealing
with them. My clients became involved with both abusive plans as well as what I
determined to be non-abusive plan. Because most clients have sought the
opinions of an independent professional tax attorney, CPA, Enrolled Agent , or
other independent professionals who the IRS deems to be knowledgeable and
capable of rendering an opinion on a Plan, Prior to 2007 I had a good case for
abating the penalty and any interest thereon due to the reasonable cause
exception. The RAs accepted my briefs for penalty relief and I usually resolved
the case agreed at the agent’s level. The right thing was being done by both
sides. Since 2007 the bar has been raised in meeting the reasonable cause
exception. Simply put, if taxpayers failed to file Forms 8886 with their tax
returns, the penalty could no longer be abated due to reasonable cause. If we
do not come to an agreement, the case would, at taxpayer’s additional expense,
proceed to the Appeals Division. This would normally be a good strategy in
nebulous circumstances. With rare exceptions this is not a good strategy under
these circumstances as explained later.<br />
Just as there are good and bad IRS agents, there are good and bad WBPs. The
abusive plans that have been sold should not affect those plans that adhere to
the spirit of the tax laws. Thus, of the many plans sold to taxpayers, some can
be considered “good.” The “bad” WBPs should not taint the “good” ones. <br />
IR-2007-170, Oct. 17, 2007, recognizes that “[t]here are many legitimate
welfare benefit funds that provide benefits, such as health insurance and life
insurance, to employees and retirees. However, the arrangements the IRS is
cautioning employers about is primarily benefits the owner or other key
employees of businesses, sometimes in the form of distributions of cash, loans,
or life insurance policies.” <br />
THE BAD:<br />
A persistent pattern that I see with WBPs is that the IRS appears to
presumptively hold such plans as improper contrary to the statement in
IR-2007-170. From what I have indirectly encountered, it appears that the IRS
may interview the plan administrator, with the primary objective of securing
the plan’s participants (and audit targets) rather than determining whether the
limitations of a Code Section 419 deduction were satisfied. No determination is
made as to whether the plan meets or fails to meet Code requirements. The plan
participants then receive audit letters: one to the entity claiming the
deduction, and the other to the owner(s) of such entity. These audit letters
are generally accompanied by a lengthy “canned” Information Document Request
(IDR) ostensibly written by IRS attorneys. <br />
During my decades with the IRS, IDRs are usually focused documents seeking very
specific documents and information to determine whether further action is
required. However, my review of IDRs on the subject of WBPs shows them to be
akin to document production demands in a civil litigation. The IRS basically
wants everything associated with the WBP – there is no specific focus.
Moreover, they have a very expansive definition of documents, and seek them
whether they are in the taxpayer’s possession, or in the possession of the
taxpayer’s “attorneys, accountants, affiliates, advisers, representatives, or
other persons directly or indirectly employed by you, hired by you, or
connected with you, or your representatives, and anyone else subject to your
control.”<br />
What was most disturbing about these IDRs that I have seen is the fact that the
RAs also have, on a number of occasions, requested copies of the tax returns
for the tax year(s) under audit. This indicated to me, especially since the
name of the WBP is repeatedly mentioned in the IDR, that my client was selected
from the list provided by the plan administrator to the IRS. This in itself is
not necessarily bad since this is a useful tool for the IRS in obtaining names
of participants of plans that might not meet the muster of the Code and IRS
pronouncements. However, I would think that the “give me everything from
everybody” approach should not be the first step in an IRS inquiry into the
validity of a WBP. <br />
Other clients received audit letters with a similar IDR requesting information
including copies of the returns under examination. These clients, however, had
stopped participating in the plan many years prior to the audit years.
Nonetheless, since the client's name was still on the Plan’s list of
participants, the client was going to be audited. The IRS takes the position
that the cash surrender value of any life insurance policy in the plan is
available to the client and is therefore income to that client for the year the
IRS has decided to audit Accordingly, the RAs are proposing adjustments in
years in which no deduction to the WBP have been taken. <br />
THE … ?<br />
To rub salt into the wound, the RA has enclosed an explanation as to why the
deduction is disallowed, and has proposed a statutory underpayment penalty. The
tax law provides for a penalty to be imposed where a taxpayer makes a
substantial understatement of their tax liability. For individual taxpayers, a
substantial underpayment exists when the understatement for the year exceeds
the greater of ten percent of the tax required to be shown on the return, or
$5,000. This is a relatively low threshold and is easily met by most taxpayers.
The penalty is twenty percent of the tax underpayment.<br />
Following the RA’s review, the taxpayer can expect to receive a 20 – 40 page
“boiler-plated” or “canned” write-up, which will wind up as the Revenue Agent
Report (RAR). The RARs that I’ve seen appear obviously drafted by IRS
attorneys. Sometimes the RAR is shortened as a result of “cut and paste” procedures
assembled by the RA. The RARs also contain alternative positions for these
proposed disallowances. Taxpayers and representatives can take little comfort
when all indications lead to the conclusion that the IRS has made a
determination prior to assessing all the facts and circumstances of any given
case standing on its own merits. My concern is that the WBP that meet IRS
requirements are swept together with those that do not, and are unjustly
branded as “bad.” The participants of these “good” plans must now overcome the
preconceived notions of the RA. This becomes a difficult task as RAs won't
deviate from the “boiler-plated” positions, forcing the taxpayer to expend
funds in seeking further relief . The Appeals Division has similarly received a
directive to sustain the RA RAR thus effectively eliminating the appeals right
the taxpayers normally have. The only "appeals" route a taxpayer can
take is to petition the Courts for a hearing. The time, expense, and outcome in
defending a WBP under this scenario are enigmatic (hence the “…?”), and well,
simply put, can really become downright UGLY! <br />
CONCLUSION:<br />
The IRS needs to examine WBPs on a plan by plan basis, and make a determination
based on the facts and circumstances of each plan. Specifically, they should be
charged with independently evaluating whether a particular WBP generally
adheres to the Code and the IRS’s issued pronouncements. The RA and those in
charge of this project should be cognizant of the statement issued by Donald L.
Korb (Chief Counsel for the IRS): “The guidance targets specific abuses
involving a limited group of arrangements that claim to be welfare benefit
funds.” (emphasis provided). He continues to state that: “[T]oday’s action
sends a strong signal that these abusive schemes must stop.” (emphasis
provided). For those plans that the IRS deems to be abusive, the IRS can
concentrate its resources in auditing the plan participants. The IRS hierarchy
needs to eliminate the UGLY, recognize the GOOD, and pursue the BAD. <br />
<br />
<b>ABOUT THE AUTHOR: </b>Sam Susser<br />
Sam Susser began his IRS career on 2/1/71, and spent most the succeeding years
as an international examiner with brief stints in the Review Section and the
Appeals Division. He closed out his IRS tenure spending four years as
International Team Manager for South Florida. Currently Sam is in private
practice and can be reached at 561-742-1005</div>
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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.<br />
<br />
<br />
Copyright <a href="http://www.taxaudit419.com%2Cwww.lancewallach.com/" target="_new">Lance Wallach, CLU, CHFC</a> </div>
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irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-1894867046405263432017-05-16T14:06:00.006-04:002017-05-16T14:06:59.332-04:00If you purchased a 412(i) defined-benefit plan in the past as a tax deduction, you could be in a world of trouble.Why 412(i) Plans Are being audited by the IRS and insurance agents are
being sued<br />
by Lance Wallach<br />
<br />
<span style="font-family: "arial"; font-size: 10pt;">The older 412i
plans were abusive tax shelter. Below is one of the abusive. There were many
others but this is one example. If a physician- investor puts $250,000
into a 412(i) plan every year for 5 years as a tax-deductible expense, they'll
eventually fund $1.25 million over that period. The cash surrender value (CSV)
of the policy at the end of the 5th year will be $250,000. The
physician-investor will then purchase the life policy from the 412(i) plan for
that $250,000 CSV and think they got a great deal since the cash account value
(CAV) of the policy is really $1.1 million. After waiting for surrender charges
in the life policy to evaporate, they will take income tax–free loans from the
policy. <o:p></o:p></span><br />
<span style="font-family: "arial"; font-size: 10pt;">Buying a policy
with a low CSV and a high CAV seems like a steal of a deal since the investor
only pays 20% of the value of the asset when they purchase it out of the <a href="http://lancewallach.com/" target="_blank">412(i)plan</a>. This was supposed to save the investor 80% of the tax on that money. If
this sounds too good to be true, it didn't to many physician-investors who
allowed insurance agents to sell them 412(i) plans. After looking at the plan,
the IRS eventually shut it down. Ironically, the beginning of the end of 412(i)
plans started on Friday, Feb. 13, 2004. <o:p></o:p></span><br />
<span style="font-family: "arial"; font-size: 10pt;">IRS Revenue
Procedure 2004-16 basically states that the fair market value of a life
insurance policy that comes out of a 412(i) defined-benefit plan should be
based on the premiums paid and not on the CSV or internal reserve value of the
insurance company. How will this affect a recently implemented 412(i) plan? The
investor will not be able to purchase the life policy from the 412(i) plan for
the CSV, which is 80% lower than the premiums paid. Instead, they will have to
use the premiums paid as the value (minus minor term costs), which basically
destroys the tax-favorable nature of a 412(i) plan. <o:p></o:p></span><br />
<span style="font-family: "arial"; font-size: 10pt;">In addition,
Revenue Procedure 2004-20 states that the IRS doesn't want excess life
insurance purchased inside a 412(i) plan. In this case, the IRS is referring to
insurance contracts where the death benefits exceed the death benefits provided
to the employee's beneficiaries under the terms of the plan, whereby the
balance of the proceeds revert to the plan as a return on investment. IRS
Revenue Procedure 2004-20 also states that if excess death benefits are
purchased, those deductions will be disallowed in the current tax year and will
be spread out, if allowable, over future years. Furthermore, any nondeductible
premiums will be subject to a 10% excise tax. <o:p></o:p></span><br />
<span style="font-family: "arial"; font-size: 10pt;">Finally,
Revenue Ruling 2004-21 says that a qualified plan cannot discriminate in favor
of highly compensated employees by buying life policies for non-highly
compensated employees that aren't inherently equal. <i>Note:</i> The word
inherently seems to indicate that the <a href="http://lawyer4audits.com/" target="_blank">IRS</a> has no idea how to define certain
standards or rules in their attempt to give final guidance to taxpayers. As is
the case with a lot of revenue rulings and regulations on advanced tax topics,
the IRS doesn't always know how to give guidance on what should be done.
Instead, it tries to muddy the waters and scare investors so that certain tax plans
aren't used due to uncertainty about the law. <o:p></o:p></span><br />
<span style="font-family: "arial"; font-size: 10pt;">In Oct. 2002 I
spoke at the annual National Society of Pension Actuaries convention about
plans. The IRS chief actuary also warned about 412i plans. This was not the
first warning about these plans. Most in the industry knew that IRS would be
coming after the participants in these plans long before that convention. In
spite of that insurance company's promoters and agents continued to sell the
scams to unsuspecting business owners. The insurance company's had the
purchasers sign fraudulent disclaimers saying that they would get their own tax
advice. The insurance companies had a duty to disclose the fact that there were
potential IRS problems with these 412i scams, but they did not, thereby making
the disclaimers fraudulent. The reason for the disclaims was to try to protect
the insurance company's from potential lawsuits when the buyers were audited by
the IRS.<o:p></o:p></span><br />
<span style="font-family: "arial"; font-size: 10pt;">We have helped
may fight the IRS audits. As an expert witness my side has never lost a case.
Most lawsuits however against insurance company's and agents are lost. The
inexperienced attorneys lose based on the disclaimers that the clients signed.
The attorneys fail to prove that those disclaimers were fraudulent.<o:p></o:p></span><br />
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Another issue was the failure of the participants in the
412i scams failure to properly file under <a href="http://irs6707apenalty.com/" target="_blank">6707a </a>to avoid horrendous fines for
being in listed transactions and not telling the IRS. You can still avoid the fine by
filing properly.</div>
irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-46424914117416165412017-05-16T14:06:00.005-04:002017-05-16T14:06:49.938-04:00Re-entering The Tax System<h1 style="margin-bottom: 5.0pt; margin-left: .1in; margin-right: .1in; margin-top: 5.0pt;">
<span style="font-size: 12pt; font-weight: normal;">Taxlanta.org July 2011</span></h1>
<span style="font-size: 12pt;">by Lance Wallach</span><br />
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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).</h1>
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<b><span style="font-weight: normal;">Rule No. 1:</span></b></div>
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Under no circumstances should you attempt to re-enter the tax system on your own. <a href="http://taxadvisorexpert.com/" target="_blank">Tax evasion,</a> 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.</div>
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<b><span style="font-weight: normal;">Rule No. 2</span></b></div>
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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.</div>
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<span class="apple-style-span"><span style="color: red; font-size: 18pt;">Call our office today for a free 3-5 minute consultation with Lance Wallach, the nation’s foremost tax expert, or visit</span></span><span class="apple-style-span"><span style="font-size: 18pt;"> <a href="http://www.experttaxadvisors.org/">www.experttaxadvisors.org</a>. </span></span> </div>
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<b><span style="font-weight: normal;">Rule No. 3</span></b></div>
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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.</div>
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<span style="font-size: 12pt; font-weight: normal;"> 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. </span></div>
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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. </div>
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<i style="mso-bidi-font-style: normal;">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 Public 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.</i></div>
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<b>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.</b></div>
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</script>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-32625931997827021932017-05-16T14:06:00.003-04:002017-05-16T14:06:29.794-04:00412i Tax Shelter Fraud Litigation - How It Works<!--[if gte mso 9]><xml> <w:WordDocument> <w:View>Normal</w:View> <w:Zoom>0</w:Zoom> <w:DoNotOptimizeForBrowser/> </w:WordDocument> </xml><![endif]--> <br />
<h3>
<i><span style="color: black; font-family: "arial"; font-size: 10pt;">Lance Wallach</span></i></h3>
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<b><i><u><span style="color: black; font-family: "arial";">PARTIES:</span></u></i></b></h3>
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<b><i><span style="color: black; font-family: "arial";">Typically, these transactions will include an Insurance company, accountant, tax attorney, and a promoter (someone with an insurance background, perhaps an actuary, who knows how to structure the policy itself). These groups will use insurance brokerages and sub-agents (licensed in the various states) to sell the policies themselves. </span></i></b></div>
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<b><i><u><span style="color: black; font-family: "arial";">INSURANCE COMPANIES</span></u></i></b></div>
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<b><i><span style="color: black; font-family: "arial";">AMERICAN GENERAL LIFE INSURANCE COMPANY® INDIANAPOLIS LIFE INSURANCE COMPANY®</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial";">HARTFORD LIFE AND ANNUITY INSURANCE COMPANY® PACIFIC LIFE INSURANCE COMPANY®</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial";"> BANKERS LIFE and OTHERS®? </span></i></b></div>
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<b><i><u><span style="color: black; font-family: "arial";">4121iHOW THESE PLANS WORK:</span></u></i></b></div>
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<b><i><span style="color: black; font-family: "arial"; font-size: 10pt;">In the late 1990’s, the individuals and groups above devised a scheme to sell abusive tax shelters under the auspices of Section 412(i) of the tax code. A 412(i) is a defined benefit pension plan. It provides specific retirement benefits to participants once they reach retirement and must contain assets sufficient to pay those benefits. A <a href="http://419-litigation.com/" target="_blank">412(i)</a> plan differs from other defined benefit pension plans in that it must be funded exclusively by the purchase of individual life insurance products. To create a <a href="http://taxaudit419.com/" target="_blank">412(i) </a>plan, there must be a trust to hold the assets. The employer funds the plan by making cash contributions to the trust, and the Code allows the employer to take a tax deduction in the amount of the contributions, i.e. the entire amount.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial";">The trust uses the contributed funds to purchase some combination of life insurance products (insurance or annuities) for the plan. As the plan participants retire, the trust will usually sell the policies for their present cash value and purchase annuities with the proceeds. The revenue stream from the annuities pays the specified retirement benefit to plan participants.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial";">These defendants (with the aid and knowledge of the insurance companies) used the traditional structure and sold life insurance policies with excessively high premiums. The trust then uses the large cash contributions to pay high insurance premiums and the employer takes a deduction for the sum of those large contributions. As you might expect, these policies were designed with excessively high fees or “loads” which provided exorbitant commissions to the insurance companies and the agents who sold the products.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial";">The policies that were sold were termed Springing Cash Value Policies. They had no cash value for the first 5-7 years, after which they had significant cash value. Under this scheme, after 5-7 years, and just before the cash value sprung, the participant purchases the policy from the trust for the policy’s surrender value. In theory, you have a tax free transaction.</span></i></b></div>
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<b><i><span style="color: black; font-family: "arial";">The IRS does not recognize the tax benefit of such a plan and has repeatedly issued announcements indicating that such plans are contrary to federal tax laws and regulations.</span></i></b></div>
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<i><span style="color: black; font-family: "arial"; font-size: 10pt;"> </span></i></div>
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<b>I am not an attorney but I learned some of the above information from attorney’s Mr. Ford’s website.</b></div>
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<b><i>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 <a href="http://taxaudit419.com/" target="_blank">412(i)</a>, 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 Public 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<span style="color: red;"> 516.938.5007</span>, <a href="mailto:wallachinc@gmail.com">wallachinc@gmail.com</a> or visit <a href="http://www.taxaudit419.com/">www.taxaudit419.com</a> and <a href="http://www.taxlibrary.us/">www.taxlibrary.us</a></i></b></div>
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<b><span style="color: black; font-family: "arial"; font-size: 10pt;"><br />
<i>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.</i></span></b></div>
irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-59100177972947986732017-05-16T14:06:00.001-04:002017-05-16T14:06:10.617-04:00Small Business Retirement Plans Fuel Litigation<h1>
<span style="color: black; font-family: "arial"; font-size: 10pt;">Maryland Trial Lawyer</span></h1>
<b><span style="color: black; font-family: "arial"; font-size: 10pt;">Dolan Media Newswires</span></b><span style="color: black; font-family: "arial"; font-size: 10pt;"> <b>January</b> </span><br />
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<span style="font-family: "arial"; font-size: 10pt;">Small businesses facing audits and potentially huge </span><a href="http://taxadvisorexpert.com/" style="font-family: Arial; font-size: 10pt;" target="_blank">tax penalties</a><span style="font-family: "arial"; font-size: 10pt;"> over certain types of retirement plans are filing lawsuits against those who marketed, designed and sold the plans. The </span><a href="http://www.419-litigation.com/" style="font-family: Arial; font-size: 10pt;" target="_blank">412(i)</a><span style="font-family: "arial"; font-size: 10pt;"> and 419(e) plans were marketed in the past several years as a way for small business owners to set up retirement or welfare benefits plans while leveraging huge tax savings, but the IRS put them on a list of </span><a href="http://www.taxadvisorexperts.org/" style="font-family: Arial; font-size: 10pt;" target="_blank">abusive tax shelters</a><span style="font-family: "arial"; font-size: 10pt;"> and has more recently focused audits on them.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">The penalties for such transactions are extremely high and can pile up quickly.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;"> There are business owners who owe taxes but have been assessed 2 million in penalties. The existing cases involve many types of businesses, including doctors’ offices, dental practices, grocery store owners, mortgage companies and restaurant owners. Some are trying to negotiate with the IRS. Others are not waiting. A class action has been filed and cases in several states are ongoing. The business owners claim that they were targeted by insurance companies; and their agents to purchase the plans without any disclosure that the IRS viewed the plans as abusive tax shelters. Other defendants include financial advisors who recommended the plans, accountants who failed to fill out required tax forms and law firms that drafted opinion letters legitimizing the plans, which were used as marketing tools.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">A 412(i) plan is a form of defined benefit pension plan. A 419(e) plan is a similar type of health and benefits plan. Typically, these were sold to small, privately held businesses with fewer than 20 employees and several million dollars in gross revenues. What distinguished a legitimate plan from the plans at issue were the life insurance policies used to fund them. The employer would make large cash contributions in the form of insurance premiums, deducting the entire amounts. The insurance policy was designed to have a “springing cash value,” meaning that for the first 5-7 years it would have a near-zero cash value, and then spring up in value.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">Just before it sprung, the owner would purchase the policy from the trust at the low cash value, thus making a tax-free transaction. After the cash value shot up, the owner could take tax-free loans against it. Meanwhile, the insurance agents collected exorbitant commissions on the premiums – 80 to 110 percent of the first year’s premium, which could exceed million.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">Technically, the <a href="http://www.lawyer4audits.com/" target="_blank">IRS’s</a> problems with the plans were that the “springing cash” structure disqualified them from being 412(i) plans and that the premiums, which dwarfed any payout to a beneficiary, violated incidental death benefit rules.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">Under <a href="http://www.irs6707apenalty.com/" target="_blank">§6707A </a>of the Internal Revenue Code, once the IRS flags something as an abusive tax shelter, or “listed transaction,” penalties are imposed per year for each failure to disclose it. Another allegation is that businesses weren’t told that they had to file Form 8886, which discloses a listed transaction.</span><br />
<b><span style="color: black; font-family: "arial"; font-size: 10pt;">According to Lance Wallach of Plainview, N.Y. (516-938-5007), who testifies as an expert in cases involving the plans, the vast majority of accountants either did not file the forms for their clients or did not fill them out correctly.</span></b><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">Because the IRS did not begin to focus audits on these types of plans until some years after they became listed transactions, the penalties have already stacked up by the time of the audits.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">Another reason plaintiffs are going to court is that there are few alternatives – the penalties are not appeasable and must be paid before filing an administrative claim for a refund.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">The suits allege misrepresentation, fraud and other consumer claims. “In street language, they lied,” said Peter Losavio, a plaintiffs’ attorney in Baton Rouge, La., who is investigating several cases. So far they have had mixed results. Losavio said that the strength of an individual case would depend on the disclosures made and what the sellers knew or should have known about the risks.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">In 2004, the IRS issued notices and revenue rulings indicating that the plans were listed transactions. But plaintiffs’ lawyers allege that there were earlier signs that the plans ran afoul of the tax laws, evidenced by the fact that the IRS is auditing plans that existed before 2004.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">“Insurance companies were aware this was dancing a tightrope,” said William Noll, a tax attorney in Malvern, Pa. “These plans were being scrutinized by the IRS at the same time they were being promoted, but there wasn’t any disclosure of the scrutiny to unwitting customers.”</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">A defense attorney, who represents benefits professionals in pending lawsuits, said the main defense is that the plans complied with the regulations at the time and that “nobody can predict the future.”</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">An employee benefits attorney who has settled several cases against insurance companies, said that although the lost tax benefit is not recoverable, other damages include the hefty commissions – which in one of his cases amounted to 400,000 the first year – as well as the costs of handling the audit and filing amended tax returns.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">Defying the individualized approach an attorney filed a class action in federal court against four insurance companies claiming that they were aware that since the 1980s the IRS had been calling the policies potentially abusive and that in 2002 the IRS gave lectures calling the plans not just abusive but “criminal.” A judge dismissed the case against one of the insurers that sold 412(i) plans.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">The court said that the plaintiffs failed to show the statements made by the insurance companies were fraudulent at the time they were made, because IRS statements prior to the revenue rulings indicated that the agency may or may not take the position that the plans were abusive. The attorney, whose suit also names law firm for its opinion letters approving the plans, will appeal the dismissal to the 5th Circuit.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">In a case that survived a similar motion to dismiss, a small business owner is suing Hartford Insurance to recover a “seven-figure” sum in penalties and fees paid to the IRS. A trial is expected in August.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">But tax experts say the audits and penalties continue. “There’s a bit of a disconnect between what members of Congress thought they meant by suspending collection and what is happening in practice. Clients are still getting bills and threats of liens,” Wallach said.<b> “Thousands of business owners are being hit with million-dollar-plus fines. … The audits are continuing and escalating. I just got four calls today,”</b> he said. A bill has been introduced in Congress to make the penalties less draconian, but nobody is expecting a magic bullet.</span><br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">“From what we know, Congress is looking to make the penalties more proportionate to the tax benefit received instead of a fixed amount.”</span><br />
<br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">Lance Wallach can be reached at: <a href="mailto:WallachInc@gmail.com">WallachInc@gmail.com</a> </span><br />
<br />
<span style="color: black; font-family: "arial"; font-size: 10pt;">For more information, please visit <a href="http://www.taxadvisorexperts.org/" target="_blank">www.taxadvisorexperts.org</a></span> 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, abusive tax shelters, financial, international tax, and estate planning. He writes about 412(i), 419, Section79, FBAR, 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 Public 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 the 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.taxadvisorexperts.com.<br />
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<span style="color: black; font-family: "arial"; font-size: 10pt;">Lance Wallach<br />
Plainview, NY 11803<br />
Ph.: (516)938-5007<br />
Fax: (516)938-6330</span><span style="color: blue; font-family: "arial";"><a href="http://www.vebaplan.com/" target="_blank"> www.vebaplan.com</a><b><i><br />
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National Society of Accountants Speaker of The Year</i></b></span><b><i><span style="color: black; font-family: "arial"; font-size: 10pt;"><br /><br />
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.</span></i></b></div>
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</script>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-45710455533213957692017-05-16T14:06:00.000-04:002017-05-16T14:06:00.488-04:00IRS Auditing 412(i) Plans<span style="background-color: white;"><span style="font-family: "times new roman"; font-size: medium; white-space: nowrap;"><span style="font-size: 18px; line-height: 22px;">The Internal Revenue Service has <br soft="" />recently been auditing 412(i) <br soft="" />defined-benefit pension plans. </span></span><span style="font-family: "times new roman"; font-size: x-small; white-space: nowrap;"><span style="font-size: 14px; line-height: 17px;">They are seeking substantial taxes and <br soft="" />penalties from what they characterize as <br soft="" />“abusive plans,” but they do not regard all 412<br soft="" />(i) plans as necessarily abusive. A properly <br soft="" />structured and administered 412(i) plan can <br soft="" />be an invaluable tax reduction tool for a <br soft="" />business, but care must be taken.</span></span>
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<span style="font-family: "times new roman"; font-size: x-small; white-space: nowrap;"><span style="background-color: white; font-size: 14px; line-height: 17px;">To Read More:</span></span><br />
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<a href="http://taxaudit419.com/Article-16-IRS_Auditing_412i_Plans.html">http://taxaudit419.com/Article-16-IRS_Auditing_412i_Plans.html</a>
irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com1tag:blogger.com,1999:blog-4462792519972887259.post-34711176386623098612017-05-16T14:05:00.005-04:002017-05-16T14:05:49.284-04:00IRS Hiring Agents in Abusive Transactions Group<!--[if gte mso 9]><xml> <w:WordDocument> <w:View>Normal</w:View> <w:Zoom>0</w:Zoom> <w:DoNotOptimizeForBrowser/> </w:WordDocument> </xml><![endif]--><!--[if gte mso 9]><xml> <w:WordDocument> <w:View>Normal</w:View> <w:Zoom>0</w:Zoom> <w:DoNotOptimizeForBrowser/> </w:WordDocument> </xml><![endif]--> <br />
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<span style="font-size: 10pt; font-weight: normal;"> </span><span style="color: #993366; font-family: "arial"; font-size: 20pt;">FAST PITCH NETWORKING</span></h1>
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<span style="font-size: 12pt; font-weight: normal;"> Posted: Dec. 10</span></h1>
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<i><span style="font-size: 12pt; font-weight: normal;"> By Lance Wallach</span></i></h1>
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<span style="font-size: 12pt; font-weight: normal;">Here it is. Here is your proof of my predictions. Perhaps you didn’t believe me when I told you the IRS was coming after what it has deemed “abusive transactions,” but here it is, right from the IRS’s own job posting. If you were involved with a <a href="http://www.taxaudit419.com/" target="_blank">419e</a>, 412i, <a href="http://www.listedtransactions.com/" target="_blank">listed transaction</a>, abusive tax shelter, Section 79, or <a href="http://www.section79plan.org/" target="_blank">captive</a>, and you haven’t yet approached an expert for help with your situation, you had better do it now, before the notices start piling up on your desk.</span></h1>
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<u><span style="font-size: 12pt;">A portion of the exact announcement from the Department of the Treasury</span></u><span style="font-size: 12pt; font-weight: normal;">: </span></h2>
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<span style="font-size: 12pt; font-weight: normal;">Job Title: <span style="color: black;">INTERNAL REVENUE AGENT (</span></span><a href="http://www.419-litigation.com/" target="_blank"><span style="color: black; font-size: 12pt;">ABUSIVE TRANSACTIONS GROUP</span></a><span style="color: black; font-size: 12pt; font-weight: normal;">)</span><span style="font-size: 12pt; font-weight: normal;"> </span></h2>
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<span style="font-size: 12pt; font-weight: normal;">Agency: Internal Revenue Service </span></h2>
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<span style="font-size: 12pt; font-weight: normal;">Open Period: Monday, October 18, 2010 to Monday, November 01, 2010</span></h2>
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<span style="font-size: 12pt; font-weight: normal;">Sub Agency: Internal Revenue Service </span></h2>
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<span style="font-size: 12pt; font-weight: normal;">Job Announcement Number: 11PH1-SBB0058-0512-12/13 </span></h2>
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<span style="font-size: 12pt;">Who May Be Considered:</span></h2>
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<span style="font-family: "symbol"; font-size: 12pt; font-weight: normal;">·</span><span style="font-size: 7pt; font-weight: normal;"> </span><span style="font-size: 12pt; font-weight: normal;">IRS employees on Career or Career Conditional Appointments in the competitive service</span></h2>
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<span style="font-family: "symbol"; font-size: 12pt; font-weight: normal;">·</span><span style="font-size: 7pt; font-weight: normal;"> </span><span style="font-size: 12pt; font-weight: normal;">Treasury Office of Chief Counsel employees on Career or Career Conditional Appointments or with prior competitive status</span></h2>
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<span style="font-family: "symbol"; font-size: 12pt; font-weight: normal;">·</span><span style="font-size: 7pt; font-weight: normal;"> </span><span style="font-size: 12pt; font-weight: normal;">IRS employees on Term Appointments with potential conversion to a Career or Career Conditional Appointment in the same line of work</span></h2>
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<span style="font-size: 12pt; font-weight: normal;">According to the job description, the agents of the Abusive Transactions Group will be conducting examinations of individuals, sole proprietorships, small corporations, partnerships and fiduciaries. They will be examining tax returns and will “determine the correct tax liability, and identify situations with potential for understated taxes.”</span></h2>
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<span style="font-size: 12pt; font-weight: normal;">These agents will work in the Small Business/Self Employed Business Division (SB/SE) which provides examinations for about 7 million small businesses and upwards of 33 million self-employed and supplemental income taxpayers. This group specifically goes after taxpayers who generally have higher incomes than most taxpayers, need to file more tax forms, and generally need to rely more on paid tax preparers.” Their examinations can contain “special audit features or anticipated accounting, tax law, or investigative issues,” and look to make sure that, for example, specialty returns are filed properly. </span></h2>
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<span style="font-size: 12pt; font-weight: normal;">The fines are severe. <span style="color: black;">Under IRC 6707A,</span> fines are up to <span style="color: black;">$200,000 annually for not properly disclosing participation in a listed transaction. There was a moratorium on those fines until June 2010, pending new legislation to reduce them, but the new law virtually guarantees you will be fined. The fines had been $200,000 per year on the corporate level and $100,000 per year on the personal level. You got the fine even if you made no contributions for the year. All you had to do was to be in the plan and fail to properly disclose your participation. </span></span></h2>
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<span style="font-size: 12pt; font-weight: normal;">You can possibly still avoid all this by properly filing form <a href="http://www.irsform8886.com/" target="_blank">8886</a> IMMEDIATELY with the IRS. Time is especially of the essence now. You MUST file before you are assessed the penalty. For months the Service has been holding off on actually collecting from people that they assessed because they did not know what Congress was going to do. But now they do know, so they are going to move aggressively to collection with people they have already assessed. There is no reason not to now. This is especially true because the new legislation still does not provide for a right of appeal or judicial review. The Service is still judge, jury, and executioner. Its word is absolute as far as determining what is a listed transaction. </span></h2>
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<span style="font-size: 12pt; font-weight: normal;">So you have to file form 8886 fast, but you also have to file it properly. The Service treats forms that are incorrectly filed as if they were never filed. You get fined for filing incorrectly, or for not filing at all. The Statute of Limitations does not begin unless you properly file. That means IRS can come back to get you any time in the future unless you file properly.</span></h2>
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<span style="font-size: 12pt; font-weight: normal;">If you don’t want these new IRS Agents, or any other IRS agents for that matter, to be earning their paychecks by coming after you, make sure you have done all you can to ensure that you have filed properly by reaching out for expert help today.</span></h2>
<i><span style="color: black;">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 gives expert witness testimony and his side has never lost a case. Contact him at 516.938.5007, <a href="mailto:wallachinc@gmail.com">wallachinc@gmail.com</a> or visit <a href="http://www.taxadvisorexperts.org/" target="_blank">www.taxadvisorexperts.org</a> or <a href="http://www.taxaudit419.com/" target="_blank">www.taxaudit419.com</a>.<br />
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<i>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</i></span>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-62466984158811026432017-05-16T14:05:00.004-04:002017-05-16T14:05:39.280-04:00Taxpayers Who Previously Adopted 419, 412i, Captive Insurance or Section 79 Plans are in Big Trouble<br />
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June 15, 2011 By <b>Lance Wallach, CLU, CHFC</b><br />
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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." Insurance agents, financial planners, accountants and attorneys seeking large life insurance commissions sold these plans.</div>
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<span style="line-height: 1.4em;">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. </span><a href="http://irs6707apenalty.com/" style="line-height: 1.4em;" target="_blank">Section 6707A</a><span style="line-height: 1.4em;"> of the Code imposes severe penalties for failure to file Form 8886 with respect to a listed transaction. But you are also in trouble if you file incorrectly. I have received numerous phone calls from business owners who filed and still got fined. Not only do you have to file Form 8886, but it also has to be prepared correctly. I only know of two people in the U.S. who have filed these forms properly for clients. They tell me that was after hundreds of hours of research and over 50 phones calls to various IRS personnel. The filing instructions for Form 8886 presume a timely filling. Most people file late and follow the directions for currently preparing the forms. Then the IRS fines the business owner. The tax court does not have jurisdiction to abate or lower such penalties imposed by the IRS.</span><br />
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"Many taxpayers who are no longer taking current tax deductions for these plans continue to enjoy the benefit of previous tax deductions by continuing the deferral of income from contributions and deductions taken in prior years."<br />
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Many business owners adopted 412i, 419, captive insurance and <a href="http://section79plan.org/" target="_blank">Section 79</a> plans based upon representations provided by insurance professionals that the plans were legitimate plans and were not informed that they were engaging in a listed transaction. Upon audit, these taxpayers were shocked when the IRS asserted penalties under Section 6707A of the Code in the hundreds of thousands of dollars. Numerous complaints from these taxpayers caused Congress to impose a moratorium on assessment of Section 6707A penalties.<br />
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To Read More Click Link below:<br />
<a href="http://www.hg.org/article.asp?preview=1&id=22195">http://www.hg.org/article.asp?preview=1&id=22195</a></div>
irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0tag:blogger.com,1999:blog-4462792519972887259.post-55846378419811964662017-05-16T14:05:00.003-04:002017-05-16T14:05:30.235-04:00The Team Approach to Tax, Financial and Estate Planningby Lance Wallach
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CPAs are the best and most qualified professionals when it comes to serving their clients needs, but they need to know when and how to coordinate with other experts.
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Over the last twenty years we have worked with thousands of practitioners who have decided to add financial services to their practices. They do it for a variety of reasons, but the most common are as follows:
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*They don’t want to refer their client elsewhere when they request financial services.<br />
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* They want to remain competitive.
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*They want to diversify and increase their revenue as opposed to depending solely on tax and accounting revenue.
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While helping these professionals add planning and investment services to their core offerings, we have found that they achieve four main benefits after doing so:
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1. They are more satisfied with their work.
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2. Their clients are more satisfied because they can work with someone they trust to meet financial goals.
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3. Their clients give them more referrals.
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4. Their incomes increase.
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We believe that CPAs are the most appropriate--and perhaps the only--professionals who can provide comprehensive financial services to clients because they understand their clients' tax and financial situations. Their clients trust these practitioners to provide professional advice that is in their best interest. In fact, we believe that tax professionals have an obligation and responsibility to advise their clients, and clients expect their professionals to advise them in these important areas.
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With a combination of never-ending tax reform, the Tax Code's significant and complex changes, and the market volatility we've experienced over the past few years, clients need guidance more than ever. Practitioners who provide financial planning and investment advisory services are in a position to advise and assist their clients with these issues.
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Practitioners just starting out in this arena may not possess the myriad skill sets and substantive knowledge required to embark on new business ventures.
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CPAs who don't have all of the necessary talent in-house may find it easier to associate themselves with strategic "partners" who can provide the proper skill sets, training, technology, support and turnkey solutions in their specialized disciplines and niches, to help identify and meet their clients' financial goals.
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<span style="font-style: italic;">Adapted from "The Team Approach to Tax, Financial & Estate Planning," edited by Lance Wallach, with chapters by Katharine Gratwick Baker, Fredda Herz Brown, Dr. Stanly J. Feldman, Ira Kaplan, Joseph W. Maczuga, Roger E. Nauheimer, Roger C. Ochs, Matthew J. O'Connor, Richard Preston, Steve Riley, Carl Lloyd Sheeler, Peter Spero, Paul J. Williams, and Roger M. Winsby. Product 017235.</span>
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<span style="font-style: italic;">Lance Wallach, the National Society of Accountants Speaker of the Year, speaks and writes extensively about retirement plans, Circular 230 problems and tax reduction strategies. He speaks at more than 40 conventions annually, writes for over 50 publications, is quoted regularly in the press, and has written numerous best-selling AICPA books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Business Hot Spots. Contact him at 516.938.5007 or visit www.vebaplan.com.
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<br />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.</span>irsdoghttp://www.blogger.com/profile/09151038267411467771noreply@blogger.com0