Lance Wallach

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Logo HomeNewsAnalysisServicesRegional titlesEventsLinksDirectoryPublicationsNewsletter Signup IRS will not stop the assault on micro-captives 08-07-2021 IRS will not stop the assault on micro-captives Shutterstock/Paul Brady Photography More on this story IRS interpretation of Anti-Injunction Act “tyrannically unconstitutional”: CIC Services 18-05-2021 Other related IRS warns micro captive owners to get out of them as soon as possible 12-04-2021 Micro-captives makes IRS "Dirty Dozen" list for 3rd year running 22-02-2017 Advisers to small captives must declare certain transactions to IRS 21-11-2016 This article was written by Lance Wallach, who offers consultancy services to captive insurers. The captive industry must brace itself for the Internal Revenue Service (IRS) to continue its attacks on the micro-captive, or 831(b) captives industry.

The US needs to raise money and the IRS will be given a lot more resources to audit abusive tax shelters like captives, as well as some conservation easements and cryptocurrencies, as a way of raising it. Hundreds of captive participants have called me for help in recent years, with a variety of different problems and concerns. I served for a period as an expert witness in a case against CIC Services. CIC then went on to beat the IRS in the US Supreme court.

The IRS has every incentive to keep going after micro-captives: in my experience, most disclosure forms are not done properly and the fines are large; and while I like captives, not all small captives follow the law. Last year I met the IRS Commish and some of his assistants, before they stepped up their attacks on small captives. Since then the IRS has increased the number of people on hand to audit small captives. It has also increased the amount of money and training available for captive audits.

The IRS has long viewed micro-captive insurance transactions as potentially abusive tax transactions. Micro-captives first appeared on the IRS “Dirty Dozen” list of tax schemes in 2014 and have been a priority enforcement issue for the IRS ever since. Captives that make an election under section 831(b) are taxed on their investment income and not on their underwriting income or losses. Although many related parties use section 831(b) captive insurance companies for non-tax risk-management purposes, the IRS has a longstanding concern regarding section 831(b) captives, and issued Notice 2016-66 identifying many section 831(b) captives as “transactions of interest.” On April 9, 2021, the IRS issued IR-2021-82, which urged participants in abusive micro-captive insurance arrangements to exit these transactions as soon as possible.

At the time of the release, the IRS noted it has increased examinations of micro-captive arrangements and that it recently won another US Tax Court Case with the March 10, 2021 ruling in Caylor Land & Development versus Commissioner, TC Memo 2021-30 (Caylor).

Do not expect these attacks to stop just because of its setback in the high court with CIC Services. Lance Wallach, Internal Revenue Service, IRS

https://lancewallachexpertwitness.wordpress.com/contact-us/

516236**** fight is

golddigger

Rose tricked Ken the well know QB and got married to Ken and then took all his money. Where I live they call people like her a golddigger.

Ken was a great guy till he met Rose and anyone who deals with her is sorry.

If this guy did anything to hurt her it is good for her cause she hurt Ken and made him a drug addict etc. Rose will be punished for her bad deeds Look it up what she did to ken

that old bitter lady married Ken the great qb for his money and then divorced google lance wallach and google rose who do u believe wallach is all over the net for helping people rose divorces people for money and said her husband was a drug user etc she only out for money and I do not believe her

Wallach helped me and sent me to a guy who beat the *** IRS and they tried to get me to pay over 200k I paid 3000 that's it but the guy charged me 5000 o k caused I saved a lot and got those *** off my back

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Let Us Help You Announced February 8, 2011, the IRS 2011 Offshore Voluntary Disclosure Initiative (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. 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. Because of this late date it is recommended that you properly file FBARs 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. Under the OVDI, 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. These account balance penalties are in lieu of all other penalties that may apply, including FBAR 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. 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 IRS for a number of years.

The IRS has published a separate guide detailing the rules and procedures for opting out.

that the IRS issued guidance on 412(i) plans in 2004, and has reviewed many of those plans to see if they exceed rules on maximum total benefits, maximum deductions on tax returns and the percentage of a pension plan's assets that can be in life insurance.

ERISA Pension Plans advises businesses on establishing and maintaining pension plans and also advises pension funds.

google lance wallach and this lady who do u believe

this mr wallace helped me fight IRS and did well

Lance Wallach (LanceWallach) on Twitter

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The latest from Lance Wallach (@LanceWallach). Defending businesses & financial professionals from IRS audits, insurance & brokerage firms.

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Mr Lance helped me fight IRS and get out of problems. He was very good and the lady on the top must be a fool. :grin :eek :upset

Workforce Management Magazine

October 26, 2007

UAW/GM Deal Based On Unrealistic Cost

Forecasts

The recently ratified contract between General Motors

and the United Auto Workers, details of which were disclosed to the Securities and Exchange Commission, underscores the precariousness of future retiree health care benefits. On one hand, analysts say, the deal to transfer $35 billion to an independent trust to manage retiree health care is the best deal the union could have made given the dire financial straits of General Motors.

The union will receive 70 cents for every dollar owed to it-allowing GM to offload about $47 billion in liabilities. At the same time, the deal is based on assumptions that greatly underestimate the cost of health care. The contract, which remains subject to court and regulatory approval, is based on the assumption that health care costs will grow 5 percent annually-a growth rate significantly slower than in the past 25 years. From 1970 to 2004, Medicare costs increased an average of 9.1 percent annually.

For private sector payers, health care costs increased an average 10.1 percent annually. Gerard Anderson, director of the Center for Hospital Finance and Management at the Johns Hopkins Bloomberg School of Public Health, says such an assumption leaves in doubt the UAW's ability to pay for retiree health care for the next 80 years, as union leaders have promised. "The economic trends would suggest it's not viable in the long run," Anderson says of the union's health care trust, known as a voluntary employees beneficiary association. To make the fund financially sustainable, the union must put its faith in the financial markets, where it will look for returns on par with some of the best-performing institutional investors.

According to GM's filings, the current health trust is funded based on an expected 9 percent return on investment of the funds assets. That rate of return equals the 10-year return of 9.1 percent for CalPERS, the California state employee pension fund. Another variable complicating the union's funding of future retiree health care benefits is that 75 percent of GM's 74,500 union workers could retire by the end of the four-year contract, significantly adding to the rolls of health care beneficiaries, which today total more than 500,000 people. The 5 percent estimate is a common accounting technique used by many employers to calculate future health care costs, a GM spokeswoman says, since actual long-term projections yield numbers that are unsustainable for the economy.

In 2005, health care costs totaled 15 percent of the U.S. gross domestic product. That number is expected to grow to 20 percent of GDP by 2015. But VEBA consultant, Lance Wallach, says the 5 percent increase in health care costs is deceptive, even if it is a necessary target.

For most people, especially blue-collar retirees, health care cost increases are significantly higher.

"That's not even ridiculous, it's preposterous," he says of the 5 percent projection. "I'm not just talking for these people, but for anybody."

CPAs Facing Large fines and lawsuits for clients in 419, 412i and other potentially abusive life insurance plans including section 79 and captive insurance plans.

Popular so-called “419 Insurance Welfare Benefit Plans”, which used to be sold by most insurance professionals, are getting accountants and their clients into more and more trouble. Some 412i section 79 and captive insurance plans are problematic.

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 disclose listed transactions, including those discussed herein.

In recent years, the IRS has identified many of these arrangements as abusive devices to funnel tax deductible dollars to shareholders and classified these arrangements as listed transactions." These plans were sold by insurance agents, financial planners, accountants and attorneys seeking large life insurance commissions. In general, taxpayers who engage in a “listed transaction” must report such transaction to the IRS on Form 8886 every year that they “participate” in the transaction, and you do not necessarily have to make a contribution or claim a tax deduction to participate. Section 6707A 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.

“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."

On October 17, 2007, the IRS 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.

Notice 95-34 discusses tax problems raised by certain trust arrangements seeking to qualify for exemption from IRC section 419. This transaction involves the claiming of deductions under IRC sections 419 and 419A for contributions to multiple employer welfare benefit funds.

In general, an employer may deduct contributions to a welfare benefit fund when paid, but only if the contributions qualify as ordinary and necessary business expenses of the employer and only to the extent allowable under IRC sections 419 and 419A. There are strict limits on the amount of tax-deductible pre-funding permitted for contributions to a welfare benefit fund. IRC section 419A(f)(6) provides an exemption from IRC sections 419 and 419A for a welfare benefit fund that is part of a 10 or more employer plan. In general, for this exemption to apply, an employer normally cannot contribute more than 10 percent of the total contributions contributed under the plan by all employers, and the plan must not be experience rated with respect to individual employers.

Promoters have offered trust arrangements that are used to provide life insurance, disability, and severance pay benefits. The promoters enroll at least 10 employers in their multiple employer trusts and claim that all employer contributions are tax deductible when paid, relying on the 10-or-more-employer exemption from the limitations under IRC sections 419 and 419A. Often the trusts maintain separate accounting of the assets attributable to each subscribing employer’s contributions. Notice 95-34 put taxpayers on notice that deductions for contributions to these arrangements were disallowable for any one of several reasons (e.g., the arrangements may provide deferred compensation, the arrangements may be separate plans for each employer, the arrangements may be experience rated in form or operation, or the contributions may be nondeductible prepaid expenses).

On July 17, 2003, final regulations relating to whether a welfare benefit fund is part of a 10 or more employer plan (as defined in section 419A(f)(6) of the Internal Revenue Code) were published in the Federal Register (68 FR 42254). In addition, in a case decided by the Third Circuit Court of Appeals, the contributions to the plan were taxable to the owners of the corporate employers as constructive dividends. In a recent tax court case, Curcio v. Commissioner (TC Memo 201*-***), the tax court ruled that an investment in an employee welfare benefit plan marketed under the name “Benistar” was a listed transaction in that the transaction in question was substantially similar to the transaction described in IRS Notice 95-34.

A subsequent case, McGehee Family Clinic, largely followed Curcio, though it was technically decided on other grounds. The parties stipulated to be bound by Curcio on the issue of whether the amounts paid by McGehee in connection with the Benistar 419 Plan and Trust were deductible. Curcio did not appear to have been decided yet at the time McGehee was argued. The McGehee opinion (Case No.

10-102, United States Tax Court, September 15, 2010) does contain an exhaustive analysis and discussion of virtually all of the relevant issues. Recently IRS raided Benistar, which is also known as the Grist Mill Trust, the promoter and operator of one of the better known and more heavily scrutinized of the Section 419 life insurance plans. IRS attacked the Benistar 419 plan, and one of its tactics was to demand the names of all the clients Benistar worked with — so they could be audited by the IRS, Benistar refused to give the names and actually appealed the decision to turn over the names. The appeal was unsuccessful, but Benistar officials still refused to give up the names.

Then , the IRS raided the Benistar office and took hundreds of boxes of information, which included information on clients who were in their 419 plan. In documents filed by Benistar itself, they stated that 35 to 50 armed IRS agents descended upon their office to seize documents. IRS has visited, and is still visiting most of the other plans and obtaining names of participants, selling insurance agents, accountants, etc. They have a whole task force devoted to auditing 419,412i and other abusive plans.

It’s important to understand what could happen to unsuspecting business owners if they get involved in plans that are not above board. Their names could be turned over to the IRS, where audits could ensue, and where the outcome could be the payment of back taxes and significant penalties. Then they would be fined another time under Section 6707A for not properly reporting on themselves. If the form is not properly filed there is no statue of limitations.

Most 419 life insurance and 412i defined benefit pension plans were sold to successful business owners as plans with large tax deductions where money would grow tax free until needed in retirement. I would speak at national accounting and other conventions talking about the problems with most of these plans. I would be attacked by some attendees who where making large insurance commissions selling the plans. I would try to warn insurance company home office executives, but they too had their heads in the sand because of all the money these plans brought in.

Then the IRS got tough and started fining the unsuspecting business owners hundreds of thousands a year for not reporting on themselves for being in the plan. The agents and insurance companies advise against filing. “This is a good plan. We have approval.” Not only were the business owners fined under IRS Code 6707A, but the insurance agents and accountants were also fined $100,000 for not reporting on themselves.

Accountants who signed tax returns and got paid more than $10000 are even being fined 100,000 by IRS as material advisors. Then the business owners sue the accountants, insurance agents, etc. I have been following these scenarios for a long time. In fact, I have been an expert witness in many of these cases, and my side has never lost.

Most promoters of 419, 412i and other similar plans told clients that their plans complied with the laws and, therefore, were not listed tax transactions. Unfortunately, the IRS doesn’t care what a promoter of a tax-avoidance plan says; it makes its own determination and punishes those who don’t comply. A few years ago the Treasury Department and the Internal Revenue Service issued guidance to shut down abusive transactions involving specially designed life insurance policies in retirement plans, section “412(i) plans.” The guidance designates certain arrangements as “listed transactions” for tax-shelter reporting purposes. A “section 412(i) plan” is a tax-qualified retirement plan that is funded entirely by a life insurance contract or an annuity.

The employer claims tax deductions for contributions that are used by the plan to pay premiums on an insurance contract covering an employee. The plan may hold the contract until the employee dies, or it may distribute or sell the contract to the employee at a specific point, such as when the employee retires. “The guidance targets specific abuses occurring with section 412(i) plans,” stated Assistant Secretary for Tax Policy Pam Olson. “There are many legitimate section 412(i) plans, but some push the envelope, claiming tax results for employees and employers that do not reflect the underlying economics of the arrangements.” The guidance covers three specific issues.

First, a set of new regulations states that any life insurance contract transferred from an employer or a tax-qualified plan to an employee must be taxed at its full fair market value. Some firms have promoted an arrangement where an employer establishes a section 412(i) plan under which the contributions made to the plan, which are deducted by the employer, are used to purchase a specially designed life insurance contract. Generally, these special policies are made available only to highly compensated employees. The insurance contract is designed so that the cash surrender value is temporarily depressed, so that it is significantly below the premiums paid.

The contract is distributed or sold to the employee for the amount of the current cash surrender value during the period the cash surrender value is depressed; however the contract is structured so that the cash surrender value increases significantly after it is transferred to the employee. Use of this springing cash value life insurance gives employers tax deductions for amounts far in excess of what the employee recognizes in income. These regulations will prevent taxpayers from using artificial devices to understate the value of the contract. Second, a new revenue ruling states that an employer cannot buy excessive life insurance (i.e., insurance contracts where the death benefits exceed the death benefits provided to the employee’s beneficiaries under the terms of the plan, with the balance of the proceeds reverting to the plan as a return on investment) in order to claim large tax deductions.

These arrangements generally will be listed transactions for tax-shelter reporting purposes. Third, another new revenue ruling states that a section 412(I) plan cannot use differences in life insurance contracts to discriminate in favor of highly paid employees. Legislation passed a few years ago slightly reducing those $200,000 fines, but you still have to properly file to start the Statute of Limitations running to avoid the fines. IRS is fining people who report on themselves, but make a mistake on the forms.

Now that the moratorium on the fines has passed, IRS has aggressively moved to fine unsuspecting business owners hundreds of thousands. This is usually after they get audited, and sometimes reach agreement with IRS. Then another division or department of the IRS imposes a fine under 6707A. I am receiving a lot of phone calls from business owners who this is happening to.

Unfortunately, some of these people already had called me. I warned them to properly file under 6707A.

Either they did not believe me - it is unbelievable - or their accountant or tax attorney filed incorrectly. Then they called again after being fined.

CPAs Facing Large fines and lawsuits for clients in 419, 412i and other potentially abusive life insurance plans including section 79 and captive insurance plans.

Popular so-called “419 Insurance Welfare Benefit Plans”, which used to be sold by most insurance professionals, are getting accountants and their clients into more and more trouble. Some 412i section 79 and captive insurance plans are problematic.

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 disclose listed transactions, including those discussed herein.

In recent years, the IRS has identified many of these arrangements as abusive devices to funnel tax deductible dollars to shareholders and classified these arrangements as listed transactions." These plans were sold by insurance agents, financial planners, accountants and attorneys seeking large life insurance commissions. In general, taxpayers who engage in a “listed transaction” must report such transaction to the IRS on Form 8886 every year that they “participate” in the transaction, and you do not necessarily have to make a contribution or claim a tax deduction to participate. Section 6707A 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.

“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."

On October 17, 2007, the IRS 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.

Notice 95-34 discusses tax problems raised by certain trust arrangements seeking to qualify for exemption from IRC section 419. This transaction involves the claiming of deductions under IRC sections 419 and 419A for contributions to multiple employer welfare benefit funds.

In general, an employer may deduct contributions to a welfare benefit fund when paid, but only if the contributions qualify as ordinary and necessary business expenses of the employer and only to the extent allowable under IRC sections 419 and 419A. There are strict limits on the amount of tax-deductible pre-funding permitted for contributions to a welfare benefit fund. IRC section 419A(f)(6) provides an exemption from IRC sections 419 and 419A for a welfare benefit fund that is part of a 10 or more employer plan. In general, for this exemption to apply, an employer normally cannot contribute more than 10 percent of the total contributions contributed under the plan by all employers, and the plan must not be experience rated with respect to individual employers.

Promoters have offered trust arrangements that are used to provide life insurance, disability, and severance pay benefits. The promoters enroll at least 10 employers in their multiple employer trusts and claim that all employer contributions are tax deductible when paid, relying on the 10-or-more-employer exemption from the limitations under IRC sections 419 and 419A. Often the trusts maintain separate accounting of the assets attributable to each subscribing employer’s contributions. Notice 95-34 put taxpayers on notice that deductions for contributions to these arrangements were disallowable for any one of several reasons (e.g., the arrangements may provide deferred compensation, the arrangements may be separate plans for each employer, the arrangements may be experience rated in form or operation, or the contributions may be nondeductible prepaid expenses).

On July 17, 2003, final regulations relating to whether a welfare benefit fund is part of a 10 or more employer plan (as defined in section 419A(f)(6) of the Internal Revenue Code) were published in the Federal Register (68 FR 42254). In addition, in a case decided by the Third Circuit Court of Appeals, the contributions to the plan were taxable to the owners of the corporate employers as constructive dividends. In a recent tax court case, Curcio v. Commissioner (TC Memo 201*-***), the tax court ruled that an investment in an employee welfare benefit plan marketed under the name “Benistar” was a listed transaction in that the transaction in question was substantially similar to the transaction described in IRS Notice 95-34.

A subsequent case, McGehee Family Clinic, largely followed Curcio, though it was technically decided on other grounds. The parties stipulated to be bound by Curcio on the issue of whether the amounts paid by McGehee in connection with the Benistar 419 Plan and Trust were deductible. Curcio did not appear to have been decided yet at the time McGehee was argued. The McGehee opinion (Case No.

10-102, United States Tax Court, September 15, 2010) does contain an exhaustive analysis and discussion of virtually all of the relevant issues. Recently IRS raided Benistar, which is also known as the Grist Mill Trust, the promoter and operator of one of the better known and more heavily scrutinized of the Section 419 life insurance plans. IRS attacked the Benistar 419 plan, and one of its tactics was to demand the names of all the clients Benistar worked with — so they could be audited by the IRS, Benistar refused to give the names and actually appealed the decision to turn over the names. The appeal was unsuccessful, but Benistar officials still refused to give up the names.

Then , the IRS raided the Benistar office and took hundreds of boxes of information, which included information on clients who were in their 419 plan. In documents filed by Benistar itself, they stated that 35 to 50 armed IRS agents descended upon their office to seize documents. IRS has visited, and is still visiting most of the other plans and obtaining names of participants, selling insurance agents, accountants, etc. They have a whole task force devoted to auditing 419,412i and other abusive plans.

It’s important to understand what could happen to unsuspecting business owners if they get involved in plans that are not above board. Their names could be turned over to the IRS, where audits could ensue, and where the outcome could be the payment of back taxes and significant penalties. Then they would be fined another time under Section 6707A for not properly reporting on themselves. If the form is not properly filed there is no statue of limitations.

Most 419 life insurance and 412i defined benefit pension plans were sold to successful business owners as plans with large tax deductions where money would grow tax free until needed in retirement. I would speak at national accounting and other conventions talking about the problems with most of these plans. I would be attacked by some attendees who where making large insurance commissions selling the plans. I would try to warn insurance company home office executives, but they too had their heads in the sand because of all the money these plans brought in.

Then the IRS got tough and started fining the unsuspecting business owners hundreds of thousands a year for not reporting on themselves for being in the plan. The agents and insurance companies advise against filing. “This is a good plan. We have approval.” Not only were the business owners fined under IRS Code 6707A, but the insurance agents and accountants were also fined $100,000 for not reporting on themselves.

Accountants who signed tax returns and got paid more than $10000 are even being fined 100,000 by IRS as material advisors. Then the business owners sue the accountants, insurance agents, etc. I have been following these scenarios for a long time. In fact, I have been an expert witness in many of these cases, and my side has never lost.

Most promoters of 419, 412i and other similar plans told clients that their plans complied with the laws and, therefore, were not listed tax transactions. Unfortunately, the IRS doesn’t care what a promoter of a tax-avoidance plan says; it makes its own determination and punishes those who don’t comply. A few years ago the Treasury Department and the Internal Revenue Service issued guidance to shut down abusive transactions involving specially designed life insurance policies in retirement plans, section “412(i) plans.” The guidance designates certain arrangements as “listed transactions” for tax-shelter reporting purposes. A “section 412(i) plan” is a tax-qualified retirement plan that is funded entirely by a life insurance contract or an annuity.

The employer claims tax deductions for contributions that are used by the plan to pay premiums on an insurance contract covering an employee. The plan may hold the contract until the employee dies, or it may distribute or sell the contract to the employee at a specific point, such as when the employee retires. “The guidance targets specific abuses occurring with section 412(i) plans,” stated Assistant Secretary for Tax Policy Pam Olson. “There are many legitimate section 412(i) plans, but some push the envelope, claiming tax results for employees and employers that do not reflect the underlying economics of the arrangements.” The guidance covers three specific issues.

First, a set of new regulations states that any life insurance contract transferred from an employer or a tax-qualified plan to an employee must be taxed at its full fair market value. Some firms have promoted an arrangement where an employer establishes a section 412(i) plan under which the contributions made to the plan, which are deducted by the employer, are used to purchase a specially designed life insurance contract. Generally, these special policies are made available only to highly compensated employees. The insurance contract is designed so that the cash surrender value is temporarily depressed, so that it is significantly below the premiums paid.

The contract is distributed or sold to the employee for the amount of the current cash surrender value during the period the cash surrender value is depressed; however the contract is structured so that the cash surrender value increases significantly after it is transferred to the employee. Use of this springing cash value life insurance gives employers tax deductions for amounts far in excess of what the employee recognizes in income. These regulations will prevent taxpayers from using artificial devices to understate the value of the contract. Second, a new revenue ruling states that an employer cannot buy excessive life insurance (i.e., insurance contracts where the death benefits exceed the death benefits provided to the employee’s beneficiaries under the terms of the plan, with the balance of the proceeds reverting to the plan as a return on investment) in order to claim large tax deductions.

These arrangements generally will be listed transactions for tax-shelter reporting purposes. Third, another new revenue ruling states that a section 412(I) plan cannot use differences in life insurance contracts to discriminate in favor of highly paid employees. Legislation passed a few years ago slightly reducing those $200,000 fines, but you still have to properly file to start the Statute of Limitations running to avoid the fines. IRS is fining people who report on themselves, but make a mistake on the forms.

Now that the moratorium on the fines has passed, IRS has aggressively moved to fine unsuspecting business owners hundreds of thousands. This is usually after they get audited, and sometimes reach agreement with IRS. Then another division or department of the IRS imposes a fine under 6707A. I am receiving a lot of phone calls from business owners who this is happening to.

Unfortunately, some of these people already had called me. I warned them to properly file under 6707A.

Either they did not believe me - it is unbelievable - or their accountant or tax attorney filed incorrectly. Then they called again after being fined.

CPAs Facing Large fines and lawsuits for clients in 419, 412i and other potentially abusive life insurance plans including section 79 and captive insurance plans.

Popular so-called “419 Insurance Welfare Benefit Plans”, which used to be sold by most insurance professionals, are getting accountants and their clients into more and more trouble. Some 412i section 79 and captive insurance plans are problematic.

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 disclose listed transactions, including those discussed herein.

In recent years, the IRS has identified many of these arrangements as abusive devices to funnel tax deductible dollars to shareholders and classified these arrangements as listed transactions." These plans were sold by insurance agents, financial planners, accountants and attorneys seeking large life insurance commissions. In general, taxpayers who engage in a “listed transaction” must report such transaction to the IRS on Form 8886 every year that they “participate” in the transaction, and you do not necessarily have to make a contribution or claim a tax deduction to participate. Section 6707A 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.

“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."

On October 17, 2007, the IRS 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.

Notice 95-34 discusses tax problems raised by certain trust arrangements seeking to qualify for exemption from IRC section 419. This transaction involves the claiming of deductions under IRC sections 419 and 419A for contributions to multiple employer welfare benefit funds.

In general, an employer may deduct contributions to a welfare benefit fund when paid, but only if the contributions qualify as ordinary and necessary business expenses of the employer and only to the extent allowable under IRC sections 419 and 419A. There are strict limits on the amount of tax-deductible pre-funding permitted for contributions to a welfare benefit fund. IRC section 419A(f)(6) provides an exemption from IRC sections 419 and 419A for a welfare benefit fund that is part of a 10 or more employer plan. In general, for this exemption to apply, an employer normally cannot contribute more than 10 percent of the total contributions contributed under the plan by all employers, and the plan must not be experience rated with respect to individual employers.

Promoters have offered trust arrangements that are used to provide life insurance, disability, and severance pay benefits. The promoters enroll at least 10 employers in their multiple employer trusts and claim that all employer contributions are tax deductible when paid, relying on the 10-or-more-employer exemption from the limitations under IRC sections 419 and 419A. Often the trusts maintain separate accounting of the assets attributable to each subscribing employer’s contributions. Notice 95-34 put taxpayers on notice that deductions for contributions to these arrangements were disallowable for any one of several reasons (e.g., the arrangements may provide deferred compensation, the arrangements may be separate plans for each employer, the arrangements may be experience rated in form or operation, or the contributions may be nondeductible prepaid expenses).

On July 17, 2003, final regulations relating to whether a welfare benefit fund is part of a 10 or more employer plan (as defined in section 419A(f)(6) of the Internal Revenue Code) were published in the Federal Register (68 FR 42254). In addition, in a case decided by the Third Circuit Court of Appeals, the contributions to the plan were taxable to the owners of the corporate employers as constructive dividends. In a recent tax court case, Curcio v. Commissioner (TC Memo 201*-***), the tax court ruled that an investment in an employee welfare benefit plan marketed under the name “Benistar” was a listed transaction in that the transaction in question was substantially similar to the transaction described in IRS Notice 95-34.

A subsequent case, McGehee Family Clinic, largely followed Curcio, though it was technically decided on other grounds. The parties stipulated to be bound by Curcio on the issue of whether the amounts paid by McGehee in connection with the Benistar 419 Plan and Trust were deductible. Curcio did not appear to have been decided yet at the time McGehee was argued. The McGehee opinion (Case No.

10-102, United States Tax Court, September 15, 2010) does contain an exhaustive analysis and discussion of virtually all of the relevant issues. Recently IRS raided Benistar, which is also known as the Grist Mill Trust, the promoter and operator of one of the better known and more heavily scrutinized of the Section 419 life insurance plans. IRS attacked the Benistar 419 plan, and one of its tactics was to demand the names of all the clients Benistar worked with — so they could be audited by the IRS, Benistar refused to give the names and actually appealed the decision to turn over the names. The appeal was unsuccessful, but Benistar officials still refused to give up the names.

Then , the IRS raided the Benistar office and took hundreds of boxes of information, which included information on clients who were in their 419 plan. In documents filed by Benistar itself, they stated that 35 to 50 armed IRS agents descended upon their office to seize documents. IRS has visited, and is still visiting most of the other plans and obtaining names of participants, selling insurance agents, accountants, etc. They have a whole task force devoted to auditing 419,412i and other abusive plans.

It’s important to understand what could happen to unsuspecting business owners if they get involved in plans that are not above board. Their names could be turned over to the IRS, where audits could ensue, and where the outcome could be the payment of back taxes and significant penalties. Then they would be fined another time under Section 6707A for not properly reporting on themselves. If the form is not properly filed there is no statue of limitations.

Most 419 life insurance and 412i defined benefit pension plans were sold to successful business owners as plans with large tax deductions where money would grow tax free until needed in retirement. I would speak at national accounting and other conventions talking about the problems with most of these plans. I would be attacked by some attendees who where making large insurance commissions selling the plans. I would try to warn insurance company home office executives, but they too had their heads in the sand because of all the money these plans brought in.

Then the IRS got tough and started fining the unsuspecting business owners hundreds of thousands a year for not reporting on themselves for being in the plan. The agents and insurance companies advise against filing. “This is a good plan. We have approval.” Not only were the business owners fined under IRS Code 6707A, but the insurance agents and accountants were also fined $100,000 for not reporting on themselves.

Accountants who signed tax returns and got paid more than $10000 are even being fined 100,000 by IRS as material advisors. Then the business owners sue the accountants, insurance agents, etc. I have been following these scenarios for a long time. In fact, I have been an expert witness in many of these cases, and my side has never lost.

Most promoters of 419, 412i and other similar plans told clients that their plans complied with the laws and, therefore, were not listed tax transactions. Unfortunately, the IRS doesn’t care what a promoter of a tax-avoidance plan says; it makes its own determination and punishes those who don’t comply. A few years ago the Treasury Department and the Internal Revenue Service issued guidance to shut down abusive transactions involving specially designed life insurance policies in retirement plans, section “412(i) plans.” The guidance designates certain arrangements as “listed transactions” for tax-shelter reporting purposes. A “section 412(i) plan” is a tax-qualified retirement plan that is funded entirely by a life insurance contract or an annuity.

The employer claims tax deductions for contributions that are used by the plan to pay premiums on an insurance contract covering an employee. The plan may hold the contract until the employee dies, or it may distribute or sell the contract to the employee at a specific point, such as when the employee retires. “The guidance targets specific abuses occurring with section 412(i) plans,” stated Assistant Secretary for Tax Policy Pam Olson. “There are many legitimate section 412(i) plans, but some push the envelope, claiming tax results for employees and employers that do not reflect the underlying economics of the arrangements.” The guidance covers three specific issues.

First, a set of new regulations states that any life insurance contract transferred from an employer or a tax-qualified plan to an employee must be taxed at its full fair market value. Some firms have promoted an arrangement where an employer establishes a section 412(i) plan under which the contributions made to the plan, which are deducted by the employer, are used to purchase a specially designed life insurance contract. Generally, these special policies are made available only to highly compensated employees. The insurance contract is designed so that the cash surrender value is temporarily depressed, so that it is significantly below the premiums paid.

The contract is distributed or sold to the employee for the amount of the current cash surrender value during the period the cash surrender value is depressed; however the contract is structured so that the cash surrender value increases significantly after it is transferred to the employee. Use of this springing cash value life insurance gives employers tax deductions for amounts far in excess of what the employee recognizes in income. These regulations will prevent taxpayers from using artificial devices to understate the value of the contract. Second, a new revenue ruling states that an employer cannot buy excessive life insurance (i.e., insurance contracts where the death benefits exceed the death benefits provided to the employee’s beneficiaries under the terms of the plan, with the balance of the proceeds reverting to the plan as a return on investment) in order to claim large tax deductions.

These arrangements generally will be listed transactions for tax-shelter reporting purposes. Third, another new revenue ruling states that a section 412(I) plan cannot use differences in life insurance contracts to discriminate in favor of highly paid employees. Legislation passed a few years ago slightly reducing those $200,000 fines, but you still have to properly file to start the Statute of Limitations running to avoid the fines. IRS is fining people who report on themselves, but make a mistake on the forms.

Now that the moratorium on the fines has passed, IRS has aggressively moved to fine unsuspecting business owners hundreds of thousands. This is usually after they get audited, and sometimes reach agreement with IRS. Then another division or department of the IRS imposes a fine under 6707A. I am receiving a lot of phone calls from business owners who this is happening to.

Unfortunately, some of these people already had called me. I warned them to properly file under 6707A.

Either they did not believe me - it is unbelievable - or their accountant or tax attorney filed incorrectly. Then they called again after being fined.

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hay I know that guy did not help me with work but introduced me to my future husband wow great stuff thanks Lance

sour grapes from a one date lady

this is from a woman that lance dated once and would not go out with again

Wallach helped me with IRS they wanted to get me for a lot of money wallach gave me the names of some former IRS agents and one helped me beat IRS and I only paid 5k instead of 295k what a difference I think these guys were great and really helped. I dont live in his state he helped on the phone

Lance Wallach Life Insurance

Wednesday, February 5, 2014

Life Insurance Claims Denial Information - Lawyers Handling Life Insurance Benefits Lawsuits Offer No-Cost, No-Obligation Denial of Death Benefits Case Review

Life Insurance Benefits Lawsuit

Major news sources throughout the United States report that insurance providers are issuing life insurance benefits denials more than ever before. Learning that a life insurance policy is null and void or being denied death benefits after the death of a loved one compounds the emotional trauma of losing a spouse or family member in an already trying time.

Unexpected news of a life insurance claim denial leaves many individuals in a state of economic distress. Spouses and family members who received a letter denying a life insurance claim learn all too late that they lack the financial security their loved one had intended. While the economy struggles in the United States and around the world, many insurance companies report record profits.

When buying into a life insurance policy, Americans believe they are making a prudent choice to provide for loved ones after their own death. In the application process, candidates for life insurance are warned that inaccurate or incomplete answers can negate their life insurance policy.

Major news stories have reported on a trend of life insurance benefits denials that are invalid. “Since 2008, federal judges have concluded that some insurers cheated survivors by twisting facts, fabricating excuses and ignoring autopsy findings in withholding death benefits,” notes an article inBloomberg Markets Magazine.

Increasingly, the article says, insurance companies are citing controversial or even false reasons to deny death benefits claims. The article describes cases of people who were denied life insurance benefits by MetLife and Prudential based on unsubstantiated claims of suicide or failure to report nonexistent details of their past

that the IRS issued guidance on 412(i) plans in 2004, and has reviewed many of those plans to see if they exceed rules on maximum total benefits, maximum deductions on tax returns and the percentage of a pension plan's assets that can be in life insurance.

ERISA Pension Plans advises businesses on establishing and maintaining pension plans and also advises pension funds.

lance wallachis the best go on the net and see for yourself he can help in many matters and writes books for the aicpa and others and teaches for lawline

google lance and goole the other person lol

Sept 2011

By Lance Wallach

Announced February 8, 2011, the IRS 2011 Offshore Voluntary Disclosure Initiative (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 ran through Sept. 9, 2011.

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. Because of this late date it was recommended that you properly file FBARs 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.Under the OVDI, 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.

These account balance penalties are in lieu of all other penalties that may apply, including FBAR 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.

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 IRS for a number of years. The IRS has published a separate guide detailing the rules and procedures for opting out.

Here are some of the rules:

1. IRS Summary. 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.

2. Program Status Report. 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.

3. Taxpayer Submission. Within 20 days, the taxpayer opts out in writing and makes a written case what penalties should apply and why.

4. Central Committee. A Committee of IRS Managers reviews the summary and decides how extensive an audit to conduct. The IRS says “the taxpayer is not to be punished (or rewarded) for opting out.” The Committee also decides whether to assign your case for a normal civil audit or to assign it for a criminal exam.

5. Written Warning. 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.

6. Interview? Some audits will include taxpayer interviews.

Bottom Line? 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.

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 Pubic Radio’s All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education’s CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as 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@***.com or visit www.taxadvisorexpert.com.

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

TAX MATTERS

TAX BRIEFS

ABUSIVE INSURANCE PLANS GET RED FLAG

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 can also be applied to the preparers of returns that fail to properly disclose listed transactions.

Prepared by Lance Wallach, CLU, ChFC, CIMC, of Plainview, N.Y.,

516-938-****, a writer and speaker on voluntary employee’s beneficiary associations and other employee benefits.

Journal of Accountancy January 2008

TAX MATTERSTAX BRIEFSABUSIVE INSURANCE PLANS GET RED FLAGThe 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 can also be applied to the preparers of returns that fail to properly disclose listed transactions.Prepared by Lance Wallach, CLU, ChFC, CIMC, of Plainview, N.Y., 516-938-****, a writer and speaker on voluntary employee’s beneficiary associations and other employee benefits.Journal of Accountancy January 2008

Have you purchased an IRC 419 Employee Welfare Benefit Plan after being told the contributions were fully deductible from federal and state income taxes, only to find out that this was not the case?

Did you purchase a trust you may not have needed, funded with substantial amounts of life insurance because you were told you could build up cash value tax-free and then have use of the funds tax-free?

If you have been misled about information regarding your employee welfare benefits, you may have been the victim of 419 and 412 plan fraud.

When consumers are misled and given false information by insurance brokers, they have the right to sue the fraudulent agents and insurance company that sold the plan.

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