Showing posts with label Reportable Transactions. Show all posts
Showing posts with label Reportable Transactions. Show all posts
Reportable Transactions .com: Help with Common IRS Problems
Reportable Transactions .com: Help with Common IRS Problems: Help with Common IRS Problems
Captive Insurance Buyer Beware
By Lance Wallach,
Abusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness
Is a captive insurance cell the way to go? - Accounting Today - Captive Insurance: Achieve large tax and cost reductions by renting a “CAPTIVE”. Most accountants and small business owners are unfamiliar with a great way to reduce taxes and expenses. By either creating or sharing “a captive insurance company”, substantial tax and cost savings will benefit the small business owner.
Over 80% of Fortune 500 companies take advantage of some kind of captive insurance company arrangement. They set up their own insurance companies to provide coverage when they think outside insurers are charging too much, or coverage is simply unavailable. The parent company creates a captive so that it has a self-financing option for buying insurance. The captive then either retains the risk of providing insurance or pays reinsurers (companies that reinsure insurers) to take the risk.
If you buy insurance from a standard insurance company, your money buys a service, but the money is spent and gone forever. When you utilize or “rent a captive”, your money buys a service but it is invested with a good possibility of a return.
In the event of a claim, the company pays claims from its captive or from its reinsurer. To keep costs down, captives are often based in places where there is favorable tax treatment and less onerous regulation (i.e. Vermont, South Carolina, and Bermuda).
Optimum utilization of a captive by a small business, medical practice, or professional.
The best way for a small business, medical practice, etc., to take advantage of captive benefits is to share or rent a large captive. You can significantly decrease your costs of insurance and obtain tax deductions at the same time. There are, as well, significant tax advantages to renting a large captive as opposed to owning a captive.
The advantages of “renting a captive” become apparent when you consider that the single parent captive may be forced to use less than adequate standards or marginal service so they can meet the financial requirements associated with the initial general licensing and administrative costs of establishment. Additionally, when renting a large captive, the captive bears the burden of initial capital commitment and protects reinsurers from runaway claims and unnecessary losses through their underwriting protocols and claims management practices, all at significant savings to the small business owner.
Other advantages include low policy fees and no capital responsibilities to meet solvency requirements or annual management and maintenance costs. By renting a large captive, you only pay a pro rata fee to cover all administrative expenses for the captive insurance company. Another significant advantage of renting a large captive is the ability to take a loan. It is illegal for an individual captive to make loans to subscribers. When renting a large captive, however, the individual subscriber has no ownership interest, and this difference makes it legal for a rented captive to make loans to individual subscribers. So you can make a tax deductible contribution, and then take back money tax free. Operation of an individual stand alone captive insurance company may not achieve the type of cost savings that a small business could obtain by renting a large captive. To rent a large captive, your company simply fills out some forms. Renting a captive requires no significant financial commitment beyond the payment of premiums.
Buyer Beware
As with many strategies to enjoy tax savings and advantages, you must to do this correctly. IRS and other problems have happened, in the past, to those that have done this improperly or abusively. You probably want to work with a large captive that already has over fifty million in assets and is being rented by at least 200 different companies. Also, you’ll not want to own or control any part of the captive. As an unrelated party, you can more likely significantly decrease your cost of insurance, eliminate capital requirements, and minimize maintenance costs.
You want to deal with a large captive that meets the risk shifting requirements of IRS Revenue Ruling 2005-40. Be cautious about setting up your own small captive. In addition to all the costs, a small captive may find that the expense of defending itself from regulatory oversight is much greater than any benefits received.
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 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.” As an expert witness Lance's Side has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or visit www.taxadvisorexpert.com.
If you buy insurance from a standard insurance company, your money buys a service, but the money is spent and gone forever. When you utilize or “rent a captive”, your money buys a service but it is invested with a good possibility of a return.
In the event of a claim, the company pays claims from its captive or from its reinsurer. To keep costs down, captives are often based in places where there is favorable tax treatment and less onerous regulation (i.e. Vermont, South Carolina, and Bermuda).
Optimum utilization of a captive by a small business, medical practice, or professional.
The best way for a small business, medical practice, etc., to take advantage of captive benefits is to share or rent a large captive. You can significantly decrease your costs of insurance and obtain tax deductions at the same time. There are, as well, significant tax advantages to renting a large captive as opposed to owning a captive.
The advantages of “renting a captive” become apparent when you consider that the single parent captive may be forced to use less than adequate standards or marginal service so they can meet the financial requirements associated with the initial general licensing and administrative costs of establishment. Additionally, when renting a large captive, the captive bears the burden of initial capital commitment and protects reinsurers from runaway claims and unnecessary losses through their underwriting protocols and claims management practices, all at significant savings to the small business owner.
Other advantages include low policy fees and no capital responsibilities to meet solvency requirements or annual management and maintenance costs. By renting a large captive, you only pay a pro rata fee to cover all administrative expenses for the captive insurance company. Another significant advantage of renting a large captive is the ability to take a loan. It is illegal for an individual captive to make loans to subscribers. When renting a large captive, however, the individual subscriber has no ownership interest, and this difference makes it legal for a rented captive to make loans to individual subscribers. So you can make a tax deductible contribution, and then take back money tax free. Operation of an individual stand alone captive insurance company may not achieve the type of cost savings that a small business could obtain by renting a large captive. To rent a large captive, your company simply fills out some forms. Renting a captive requires no significant financial commitment beyond the payment of premiums.
Buyer Beware
As with many strategies to enjoy tax savings and advantages, you must to do this correctly. IRS and other problems have happened, in the past, to those that have done this improperly or abusively. You probably want to work with a large captive that already has over fifty million in assets and is being rented by at least 200 different companies. Also, you’ll not want to own or control any part of the captive. As an unrelated party, you can more likely significantly decrease your cost of insurance, eliminate capital requirements, and minimize maintenance costs.
You want to deal with a large captive that meets the risk shifting requirements of IRS Revenue Ruling 2005-40. Be cautious about setting up your own small captive. In addition to all the costs, a small captive may find that the expense of defending itself from regulatory oversight is much greater than any benefits received.
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 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.” As an expert witness Lance's Side has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.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.
While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
Reportable Transactions
The IRS might be ready to levy a $50,000 tax penalty on your business for not properly reporting
certain transactions to the IRS :
Congress has recently passed new tax laws governing both Reportable & Listed transactions. And the IRS has established a complex, detailed set of rules governing these reportable transactions. Our team is comprised of Tax Attorneys, CPAs, Ex IRS agents and the leading expert witnesses in this area of the tax law.
Taxpayers who fail to disclose a reportable transaction to the IRS are subject to a $10,000 penalty. Other non-reporting taxpayers are subject to a $50,000 penalty. The penalties are increased to $100,000 and $200,000, respectively, for other taxpayers who fail to disclose a reportable transaction that is a listed transaction.
What is a Reportable Transaction?
Taxpayers who fail to disclose a reportable transaction to the IRS are subject to a $10,000 penalty. Other non-reporting taxpayers are subject to a $50,000 penalty. The penalties are increased to $100,000 and $200,000, respectively, for other taxpayers who fail to disclose a reportable transaction that is a listed transaction.
What is a Reportable Transaction?
Reportable transactions are defined by Treasury Regulation Section 1.6011-4 and generally include the following categories of transactions:
1. Confidential Transactions with investment promoters or tax professionals.
2.Transactions with contractual protection. These are transactions with the right to a refund of fees or investment if the transaction’s intended tax consequences do not occur. They also include most contingent fee transactions.
3. Loss Transactions.These are transactions resulting in a loss under Internal Revenue Code 165 (wagering, theft, capital, worthless securities, casualty, disaster, insolvent financial institution and certain other losses) of at least:
The IRS requires disclosure apparently because some of the tax shelters it deems abusive were set up to manufacture large losses of these types.
4. Transactions of interest: These are transactions that the IRS believes have potential for tax avoidance or evasion, but for which it lacks enough information to determine whether they should be identified specifically as tax avoidance transactions (i.e., listed transactions). These include certain trusts and partnerships. Call our office to see if yours is one of these.
5. Listed transactions: These transactions (and those substantially similar) are identified by the IRS as potentially abusive and are required to be disclosed. These transactions are complex, and the IRS guidance is technical. A partial list of these transactions include:
ASA Invester Partnerships
Short-term Charitable Remainder Trusts.
"BOSS" (Bond-and-Option Sales Strategy)
Fast-pay Stock Arrangements.
Bull & Bear Note Transactions.
Improper Use of a Subsidiary to Satisfy Parent's Stock-based Compensation Obligations
Guam Trusts
Intermediary Transactions.
Foreign Leverage Investment Portfolio (FLIP) & Offshore Portfolio Investment Strategy (OPIS)
Abusive Basis-shifting Devices Using Loan Assumption Agreements (CARDs)
Abusive Straddles
Abusive ESOP/S Corporation Arrangements.
Abusive Collectively Bargained Welfare Benefit Funds.
Abusive Option Sales to Family Limited Partnerships (FLPs)/Related Parties.
Abusive Roth IRA Transactions
Abusive Use of ESOP/S Corporation Ownership.
Abusive Section 412(i) Plans with Excessive Life Insurance.
Abusive S Corporation Income Shifting Arrangements (SC2)
Abusive Trust Arrangements Utilizing Cash Cash Value Life Insurance Policies Purportedly to Provide Welfare Benefits.
Sale-in/Lease-out Arrangements.
Abusive Partnership Intercompany Financings
If You have already received an IRS audit notice or tax assessment, let our team represent you so you can Get your Life Back & Sleep at Night.
At our firm we are very selective about the cases we accept. We simply don’t take every case like other tax resolution firms just looking to make a quick buck at your expense! If we determine our expert team can help you resolve your IRS nightmare, then we will defend you from the IRS attack.
I Promise, If I take your case,
I will solve your problem.
For a free 30 minute consultation
to determine if you qualify
to have us take your case, please
call (516) 9357346 today or
e-mail us at wallachinc@gmail.com.
1. We promise to advise you how best to resolve your tax problem.
2. If you qualify, we promise to negotiate the LOWEST possible settlement or payment allowed by the IRS.
3. FEE GUARANTEE: The fee quoted covers our complete service. This fee will not increase no matter how many hours we have to work on your case.
- You will discuss your case in depth with the expert who will be responsible for solving your tax problem.
- You will learn the options available to deal with your IRS problem.
- You will learn if you qualify to have us take your case.
- You will learn the fixed fee to have us represent you. There are no hourly open-ended fees.
- If you are not comfortable with the plan we propose or your chances of success, you are under no obligation to proceed. You are in control. It’s your decision.
Never Talk to the IRS Again.
Let the experts at Reportable-Transactions.com
speak for You.
The Lance Wallach tax team
"National Society of Accountants Speaker of The Year"
68 Keswick Lane
Plainview, NY 11803
Ph.: (516)938-5007
Fax: (516)938-6330
"National Society of Accountants Speaker of The Year"
68 Keswick Lane
Plainview, NY 11803
Ph.: (516)938-5007
Fax: (516)938-6330
Get Sued
June 2011
The IRS is 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, I am always approached by many people who have questions about tax reduction plans that they have heard about. Below are the most common 419 tax reduction insurance plans.
These come in various versions, and most of them have or will get the participant audited and the salesman sued. They purportedly allow the business owner to make a large tax-deductible contribution, and some or all of the contribution pays for a life insurance product. The IRS has been disallowing most versions of these plans for years, yet they continue to be sold. After everyone gets into trouble and the insurance agents get sued, the promoters of the abusive versions sometimes change the name of their company and call the plan something else. The insurance companies whose policies are sold are legitimate companies. What usually is not legitimate is the way that most of the plans are operated. There can also be a $200,000 IRS fine facing the insurance agent who sold the plan if Form 8918 has not been properly filed. I've reviewed hundreds of these forms for agents and have yet to see one that was filled out correctly.
The IRS is 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, I am always approached by many people who have questions about tax reduction plans that they have heard about. Below are the most common 419 tax reduction insurance plans.
These come in various versions, and most of them have or will get the participant audited and the salesman sued. They purportedly allow the business owner to make a large tax-deductible contribution, and some or all of the contribution pays for a life insurance product. The IRS has been disallowing most versions of these plans for years, yet they continue to be sold. After everyone gets into trouble and the insurance agents get sued, the promoters of the abusive versions sometimes change the name of their company and call the plan something else. The insurance companies whose policies are sold are legitimate companies. What usually is not legitimate is the way that most of the plans are operated. There can also be a $200,000 IRS fine facing the insurance agent who sold the plan if Form 8918 has not been properly filed. I've reviewed hundreds of these forms for agents and have yet to see one that was filled out correctly.
When the IRS audits a participant in one of these plans, the tax deductions are lost. There is also the interest and large penalties to consider. The business owner can also be facing a $200,000-a-year fine if he did not properly file Form 8886. Most of these forms have been filled out improperly. In my talks with the IRS, I was told that the IRS considers not filling out Form 8886 properly almost the same as not filing at all.
412(i) retirement plans
The IRS has been auditing participants in these types of retirement plans. While there is generally nothing wrong with many of the newer plans, the IRS considered most of the older abusive plans. Forms 8918 and 8886 are also required for abusive 412(i) plans.
I have been an expert witness in a lot of these 419 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. Don't let them learn on the job, with your career and money at stake.
412(i) retirement plans
The IRS has been auditing participants in these types of retirement plans. While there is generally nothing wrong with many of the newer plans, the IRS considered most of the older abusive plans. Forms 8918 and 8886 are also required for abusive 412(i) plans.
I have been an expert witness in a lot of these 419 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. Don't let them learn on the job, with your career and money at stake.
Do not wait for IRS to come and get you, or for your client to sue you. Time is of the essence. Most insurance professionals need help to correct their improperly completed Form 8918 or to fill it out properly in the first place. If you have not previously filled out the form it is late, and therefore you should immediately seek assistance. There are plenty of legitimate tax reduction insurance plans out there. Just make sure that you know the history of the people with whom you conduct business.
Remember, if something looks too good to be true, it usually is. Be careful.
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.
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.
Remember, if something looks too good to be true, it usually is. Be careful.
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.
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.
Reportable Transactions .com: How to Beat the IRS -Helpful Article
Reportable Transactions .com: How to Beat the IRS -Helpful Article: How to Beat the IRS -Helpful Article
Unreported Bank Leumi or Mizrahi Tefahot Bank Account?
By Brian M
You are new to this blog; you already know that we write many articles about offshore tax compliance and in particular, the need to disclose foreign bank and financial accounts. Generally, the IRS operates on a first contact policy meaning if you contact them before they find you, it’s possible to avoid audit, criminal prosecution and the harshest of penalties. (Unreported foreign accounts can carry a penalty as high as $100,000 per account or 50% of the highest account balance for each year the account was not properly disclosed.)
There are exceptions to that policy and they include situations where the IRS had already obtained your name from a cooperating bank – even if the IRS had not first contacted you. Many taxpayers were stunned this week when the IRS elected to rescind participation to many folks already accepted into the offshore amnesty program. From what we can piece together, these folks all had accounts at Bank Leumi and possibly Mizrahi Tefahot Bank.
What happened?
That’s something being asked by many tax lawyers and CPAs. Officially, the IRS can’t answer those questions because of taxpayer confidentiality laws. It appears, however, that the IRS dusted off the amnesty rule that says participation can be denied to folks whose names had already been disclosed.
At first, that sounds reasonable, however, in this case the IRS had already sent acceptance letters to these folks. The IRS’ stated mission is to promote voluntary compliance. That mission is seriously jeopardized when the IRS pulls the rug out from folks who in good faith came forward and tried to do the right thing.
The problem may lie within the IRS computer systems. The organization is so big that the folks running the amnesty program don’t know what is happening in other places within the IRS. Your name could be sitting on an auditor’s desk for months yet the people issuing the acceptance letters have no idea that your account has already been identified. Mistakes happen but taxpayers shouldn’t be punished for the IRS’ own errors.
Already the IRS’ own taxpayer advocate has publicly reported the agency’s failure in communicating the need to disclose offshore accounts. Kicking folks out who have already been accepted will only further hurt the agency’s credibility.
Foreign bank and financial accounts (that includes hedge funds, some insurance vehicles, CDs and brokerage accounts) must be reported annually on a Report of Foreign Bank and Financial Accounts or FBAR form. Failure to report could be a felony and also subject you to huge civil penalties. The IRS has been running an amnesty program to encourage people with unreported accounts to come forward, avoid audit and prosecution and receive a break on penalties. Thousands came forward and were accepted into the program.
This week we learned that some folks with Bank Leumi and Mizrahi Tefahot accounts in Israel were later tossed from the amnesty program even after they had previously been sent acceptance letters. This suggests that the IRS already had their names and account information from these banks. If so, those account holders are not eligible for amnesty but may still be able to avoid prosecution and receive a break on penalties if they can demonstrate that their failure to file an FBAR was because of mere negligence or ignorance.
Getting tossed from the program isn’t necessarily the end of the world for most taxpayers but it means more stress, an audit, higher legal fees and the possibility of much higher penalties. For some, it also means the possibility of prison. If the IRS already had their names, attempting to hide wouldn’t have worked anyway.
The take away from all this is that time is running out. Soon foreign banks will be required to identify and report U.S. account holders and many are doing so already pursuant to John Doe subpoenas and existing tax exchange treaties. The message from the IRS is clear. Get to us before we get to you (or get your name).
Because the IRS does not publicize the names of banks that are under investigation or cooperating, it’s impossible to know what banks have turned over names and when. The sooner one comes forward, however, the better the chances of avoiding the worst penalties.
This is a very good article. I do not agree with all of it. I think if you file and opt out you will get much better results with the IRS and with the IRS fines. Make sure that you use someone who knows what he is doing. Do not pay a CPA or attorney to learn on the job. For more on this Google Lance Wallach or contact him.
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