Some of you may remember the bad old days of using 419 welfare benefit
plans to help business owners (and doctors specifically) take massive deductions where the money ultimately went into cash value life insurance. These
plans were sold as a benefit plans, but they were really discriminatory deferred
compensation plans in sheep’s clothing. For a while, there was a legitimate use
of 419 plans with life insurance, but it didn’t take long for the industry to
come crashing down due to the abuses that took place.
Unfortunately, for many, the fallout from those who used 419 plans is still happening today. In the Jerald W. White v. Commissioner (April 2012) case, a doctor who took large deductions for 419 plan contributions lost his audit and ended up not only paying back taxes but also interest and penalties.
What’s interesting about this case besides the reminder that bad tax structures can be financially devastating for clients is the discussion about back taxes and penalties. The defendant tried to get out of back taxes and penalties by stating that the deduction was based on reasonable cause and reliance on substantial authority for such deductions. The court pointed out that at no time did the doctor seek out independent counsel on the authority, and that the doctor relied on the promises of interested parties even though it was clear that the promises seemed too good to be true.
Unfortunately, for many, the fallout from those who used 419 plans is still happening today. In the Jerald W. White v. Commissioner (April 2012) case, a doctor who took large deductions for 419 plan contributions lost his audit and ended up not only paying back taxes but also interest and penalties.
What’s interesting about this case besides the reminder that bad tax structures can be financially devastating for clients is the discussion about back taxes and penalties. The defendant tried to get out of back taxes and penalties by stating that the deduction was based on reasonable cause and reliance on substantial authority for such deductions. The court pointed out that at no time did the doctor seek out independent counsel on the authority, and that the doctor relied on the promises of interested parties even though it was clear that the promises seemed too good to be true.
As an expert witness Lance Wallachs side has never lost a case. He has won
for both plaintiffs and defendants, but not on the same case, that is a joke.
That is not a joke to most people that went into the bad 419 or 412i plans. They
were audited, and then many tried to sue. When they used a lawyer who was
learning on the job they would lose the lawsuit.
Reporting by U.S. Persons Holding Foreign Financia
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Lance Wallach. www.taxaudit419.com. www.vebaplan.org. IRS Form 8938. FATCA requires any U.S. person holding foreign financial assets with an aggregate ...
Reporting by U.S. Persons Holding Foreign Financi
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Lance Wallach. www.TaxAudit419.com. www.Vebaplan.org. IRS Form 8938. FATCA requires any U.S. person holding foreign financial assets with an aggregate ...
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Speaker of the year and member of the AICPA faculty of teaching professionals · Frequent speaker on retirement plans, financial and estate planning, and
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412I 419E Tax Advisor Expert www.lancewallach.co · Speaker of the year and member of the AICPA faculty of teaching professionals · Frequent speaker on
FinanceExpertsForum - FinanceExperts.org
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Mar 13, 2014 3:59pm. by lance wallach. Not allowed to join financeexperts.org. c. 6165. 588. Mar 13, 2014 3:50pm. by Bernice. Pension Plans. Matt Tuttle. 2370.
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Apr 23, 2012 ... By Lance Wallach. Government officials now expect 401(k) plan sponsors to conduct periodic due diligence reviews. With respect to their 401k ...
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July 27, 2007 More Problems for 419 Plans By Lance Wallach, CLU, ChFC, CIMC and Ronald H. Snyder, JD, MAAA, EA For years, life insurance companies and ...
e
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learned from!
If you want to sleep soundly at night, don't go to the students for your
financial answers, go to the one who teaches them, Lance Wallach!
For the past 25 years, successful businesses and individuals have
turned to Lance Wallach and his team for assistance, and they are
glad they did!
Life Insurance & Financial Planning
When you choose the
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Copyright (C) 2009 Lance Wallach
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Lance Wallach, Managing Director, is the nation's
leading expert on life insurance, annuities,
retirement & financial planning for business
executives, sports figures, entertainers, affluent
families and successful entrepreneurs.
Mr. Wallach is a member of the AICPA faculty of
teaching professionals, a frequent keynote speaker
at business conventions, a best selling financial
author, and a renowned national financial expert in
many court cases.
Some of Mr. Wallach best selling financial & law
books are:
* "Wealth Preservation Planning" by the National
Society of Accountants
* "The CPA's Guide to Federal & Estate Gift
Taxation" published by Bisk
* The AICPA's "The team approach to Tax,
Financial & Estate planning."
* "The CPA's Guide to Life Insurance" by Bisk
CPEasy
* Avoiding Circular 230 Malpr
Protecting Clients from Fraud, Incompetence and Scams
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Lance Wallach - 2010 - Business & Economics
from Fraud, Incompetence and Scams Lance Wallach Protecting Clients from Fraud, Incompetence, and Scams LANCE WALLACH John. ProtectingClients.
[PDF]
Defined Contribution Health Plans: Let the Buyer Beware Opinion by ...
www.blaisdellinsurance.com/pdfs/Group/DEFINE~1.PDF
Defined Contribution Health Plans: Let the Buyer Beware. Opinion by Lance Wallach, CLU, ChFC, CIMC and Ronald H. Snyder, JD, MAAA, EA. Health care ...
200K Report Update- Lance Wallach 419,
Protecting Clients from Fraud, Incompetence and Scams
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Lance Wallach - 2010 - Business & Economics
from Fraud, Incompetence and Scams Lance Wallach Protecting Clients from Fraud, Incompetence, and Scams LANCE WALLACH John. ProtectingClients.
[PDF]
Defined Contribution Health Plans: Let the Buyer Beware Opinion by ...
www.blaisdellinsurance.com/pdfs/Group/DEFINE~1.PDF
Defined Contribution Health Plans: Let the Buyer Beware. Opinion by Lance Wallach, CLU, ChFC, CIMC and Ronald H. Snyder, JD, MAAA, EA. Health care ...
200K Report Update- Lance Wallach 419,
ributions to the 412(i) plan would
ReplyDeletehave been allowable if they had initially adopted a traditional defined benefit plan. Based on
negotiations with the IRS agent, the audit of the plan resulted in no income and minimal excise
taxes due. This is because as a traditional defined benefit plan, the taxpayers could have
contributed and deducted the same amount as a 412(i) plan.
Towards the end of the audit the business owner received a notice from the IRS. The IRS
assessed the client penalties under the §6707A of the Code in the amount of $900,000.00. This
penalty was assessed because the client allegedly participated in a listed transaction and allegedly
failed to file the form 8886 in a timely manner.
The IRS may call you a material advisor and fine you $200,000.00. The IRS may fine your clients
over a million dollars for being in a retirement plan, 419 plan, etc. As you read thi
SearchMain menums begin to regulate alternative investments, we expect to see an increase in selling away stockbroker fraud cases.
ReplyDeleteOur advice? Alternative investments can be a great way to make above market rate returns and capital appreciation. If approached by a stockbroker offering such an investment, inquire as to his or her commission, make sure you understand the fine print, make sure your broker fully understands the fine print and determine whether an employee of the brokerage firm has conducted extensive due diligence on the product. In other words, make sure that the investments has been well vetted and isn’t simply being offered because it carries a huge commission.
Also make sure that your adviser is working through a legitimate broker dealer and not “selling away.”
Stockbroker fraud occurs daily across the United States. Sometimes the broker is solely to blame and at other times its both the broker and a dishonest promoter. Either way, its the customers that ultimately suffer.
If you believe you are the victim of stockbroker fraud, contact us immediately
As an expert witness Lance Wallachs side has never lost a case.
Lance Wallach
68 Keswick Lane
Plainview, NY 11803
Ph.: (516)938-5007
Fax: (516)938-6330 www.vebaplan.com
National Society of Accountants Speaker of The Year
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 advic
Veba Health Care
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Captive Insurance but Be Careful. Lance Wallach, expert witness.
Most business owners want to: build wealth and maximize the value of what is left behind for heirs; protect their wealth to insure that what they have spent a lifetime building isn’t eaten away by taxes, inflation and/or the cost of medical care; distribute their wealth so that their loved ones may be taken care of, and see to it that their assets and possessions go where they want them to go in the time frame they want this to happen. This is the essence of estate planning.
Eventually the business owner leaves the business. If a family member or employee can buy the established business, planning needs to be done years in advance for the best possible results.
If an outside buyer is desired, the company should be positioned so that, if a favorable opportunity arises or an unfortunate event occurs, the company is completely ready for transition. In other words, the business should be ready for sale versus up for sale.
Determining the value of a business is an art. There are no fixed rules, just general guidelines. All characteristics of the business must be considered. The value, however, is ultimately what a buyer will pay considering all relevant circumstances and bargaining at arms length. This is refer
Wednesday, May 7, 2014
ReplyDeleteHelp with Common IRS Problems: KENNETH ELLIOT: Sea Nine VEBA Important
Help with Common IRS Problems: KENNETH ELLIOT: Sea Nine VEBA Important: KENNETH ELLIOT: Sea Nine VEBA Important : As of August 23,2013, the IRS has closed audits of 12 Sea Nine VEBA plan-participating taxpayers w...
Physicians unfortunately often become unwitting targets of some very egregious investment advice. Usually it involves an investment product with an imbedded fat commission just waiting to be deposited in a “financial advisor’s” bank account.
In the “Hall of Fame” of egregious investment advice is the Welfare Benefit Trust. About 10 years ago, while I was working for a top five national brokerage firm (this was before my fee-only days when I was still on the “dark side”) our internal Insurance Products Department at the brokerage firm’s head office presented an amazing investment product. This “Welfare Benefit Trust” we were told should be shown to our profitable small business owners as a cure for their every ill caused by paying too much taxes. A Welfare Benefit Trust essentially works like this:
The business provides a fringe benefit for their employees, such as health insurance and life insurance.
The benefit is established in the name of a trust and funded with a cash value life insurance policy
Here is the gravy: the entire amount deposited into the trust (insurance policy) is tax deductible to the company, and
The owners of the company can withdraw the cash value from the policy in later years tax-free.
Yes, the holy grail of tax avoidance has been achieved: tax deductible up front and tax-free when you withdraw. By the way, if you are not familiar with such investments there is a reason. They are not legal by the tax code. Physician practices, as well as other small and mid-sized businesses, became buyers into these welfare benefit trusts as they were sold as a way for the practice to “protect” a large profit in a certain year from being taxed. We were told it was not uncommon for a single transaction i
Participated in a Sea Nine VEBA plan_Contact Lance Wallach
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IRS to Audit Sea Nine VEBA Participating Employers
http://www.hgexperts.com/
By Lance Wallach, CLU, CHFC Abusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness
PhoneCall Lance Wallach at (516) 938-5007
The IRS may be auditing many more participating employers in the coming months.
In recent months, I have received phone calls from participants in the Sea Nine VEBA
and have learned that the IRS may be auditing many more participating employers in the
coming months. To better assist current Sea Nine clients and those that are now or may
be under audit in the future, my associates who are CPAs, tax atty
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TAX / EMPLOYEE BENEFITS
Abusive Insurance and Retirement Plans
Single–employer section 419 welfare benefit plans are the latest incarnation in insurance deductions the IRS deems abusive
BY LANCE WALLACH
SEPTEMBER 2008
EXECUTIVE SUMMARY
Some of the listed transactions CPA tax practitioners are most likely to encounter are employee benefit insurance plans that the IRS has deemed abusive. Many of these plans have been sold by promoters in conjunction with life insurance companies.
As long ago as 1984, with the addition of IRC §§ 419 and 419A, Congress and the IRS took aim at unduly accelerated deductions and other perceived abuses. More recently, with guidance and a ruling issued in fall 2007, the Service declared as abusive certain trust arrangements involving cash-value life insurance and providing post-retirement medical and life insurance benefits.
The new "more likely than not" penalty standard for tax preparers under IRC § 6694 raises the stakes for CPAs whose clients may have maintained or participated in such a plan. Failure to disclose a listed transaction carries particularly severe potential penalties.
Lance Wallach, CLU, ChFC, CIMC, is the author of the AICPA’s The Team Approach to Tax, Financial and Estate Planning. He can be reached at lawallach@aol.com or on the Web at, www.vebaplan.com or 516-938-5007. The information in this article is not intended as accounting, legal, financial or any other type of advice for any specific individual or other entity. You should consult an appropriate professional for such advice.
Lance Wallach Life Insurance
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Why You Should Stay Away from Section 79 Life Insurance Plans
I’ve had several calls lately from doctors who are being pitched Section 79 plans and are wondering if these plans are any good. The doctors are being told that Section 79 plans are the best wealth-building tool they can use to reduce their income taxes and create a tax-free retirement income
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Friday, March 28, 2014
Life Insurance
In many of Lance Wallachs CPE books he discusses 412i or 412e3 and listed transactions.
One day when you were complaining about what you pay the government, your cousin Tilly suggested that she knew a life insurance agent who could help you with your taxes. You met with him, you listened to his pitch about a deferred benefit plan, and you
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Specializing in the following services:
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Offshore tax shelter issues
IRS listed transactions" assistance
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ReplyDeleteHome > September 2008 > Abusive Insurance and Retirement Plans
ShareThis | Print Article Print
TAX / EMPLOYEE BENEFITS
Abusive Insurance and Retirement Plans
Single–employer section 419 welfare benefit plans are the latest incarnation in insurance deductions the IRS deems abusive
BY LANCE WALLACH
SEPTEMBER 2008
EXECUTIVE SUMMARY
Some of the listed transactions CPA tax practitioners are most likely to encounter are employee benefit insurance plans that the IRS has deemed abusive. Many of these plans have been sold by promoters in conjunction with life insurance companies.
As long ago as 1984, with the addition of IRC §§ 419 and 419A, Congress and the IRS took aim at unduly accelerated deductions and other perceived abuses. More recently, with guidance and a ruling issued in fall 2007, the Service declared as abusive certain trust arrangements involving cash-value life insurance and providing post-retirement medical and life insurance benefits.
The new "more likely than not" penalty standard for tax preparers under IRC § 6694 raises the stakes for CPAs whose clients may have maintained or participated in such a plan. Failure to disclose a listed transaction carries particularly severe potential penalties.
Lance Wallach, CLU, ChFC, CIMC, is the author of the AICPA’s The Team Approach to Tax, Financial and Estate Planning. He can be reached at lawallach@aol.com or on the Web at, www.vebaplan.com or 516-938-5007. The information in this article is not intended as accounting, legal, financial or any other type of advice for any specific individual or other entity. You should consult an appropriate professional for such advice.
Many of the listed transactions that can get your clients into trouble with the IRS are exotic shelters that relatively few practitioners ever encounter. When was the last time you saw someone file a return as a Guamanian trust (Notice 2000-61)? On the other hand, a few listed transactions concern relatively common employee benefit plans the IRS has deemed tax-avoidance schemes or otherwise abusive. Perhaps some of the most likely to crop up, especially in small business returns, are arrangements purporting to allow deductibility of premiums paid for life insurance under a welfare benefit plan.
Some of these abusive employee benefit plans are represented as satisfying section 419 of the Code, which sets limits on purposes and balances of “qualified asset accounts” for such benefits, but purport to offer deductibility of contributions without any corresponding income. Others attempt to take advantage of exceptions to qualified asset account limits, such as sham union plans that try to exploit the exception for separate welfare benefit funds under collective-bargaining agreements provided by IRC § 419A(f)(5). Others try to take advantage of exceptions for plans serving 10 or more employers, once popular under section 419A(f)(6). More recently, one may encounter plans relying on section 419(e) and, perhaps, defined-benefit pension plans established pursuant to the former section 412(i) (still so-called, even though the subsection has since been redesignated section
Captive Insurance and Other Tax Reduction Strategies รข€“ The Good, Bad, and Ugly
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Captive Insurance and Other Tax Reduction Strategies - The Good, Bad, and Ugly
By Lance Wallach May 14, 2008
Every accountant knows that increased cash flow and cost savings are critical for businesses in 2008. What is uncertain is the best path to recommend to garner these benefits.
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.
Some strategies, such as IRS section 419 and 412(i) 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.
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.
Recently, there has been an explosion in the marketing of a financial product called Captive Insurance. These so called "Captives" are typically small insurance companies designed to insure the risks of an individual business under IRS 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.
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.
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.
IRS audits more small captives, 4599 views, 21 likes
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Stacey Arenas
Help! My Captive Insurance Company is Under IRS Audit.
We have learned from discussions with IRS Representatives that the IRS is now opening a large number of captive audits.
If you are a taxpayer who has come under audit by the IRS with respect to a captive insurance company, here are some things you should know.
Type of Audit. For this purpose, we can divide the IRS audits into two types. The first is a random audit on an individual or business, and the second is a targeted audit. A random audit normally involves a local IRS Agent and considers on some level the totality of a return filed. In a targeted audit, the IRS obtained a customer list from the captive Promoter and is auditing you because you are one of the customers. In a random audit, the Agent has a checklist to review various items of your return and may spend little or no time scrutinizing the captive. In a targeted audit, the Agent is normally well trained in the captive area. Further, in a targeted audit, the Agent may already have been directed on an IRS position for all of the captives that relate to that Promoter. Accordingly, the method of dealing with the Agent is very different in random audits than in targeted audits.