Life Insurance

Life Insurance

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? 

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:

Backdated Retirement Plan Contributions.

Purported Multiple Employer Welfare Benefit Funds.

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

  www.vebaplan.com
 

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. 

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.

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.

The Team Approach to Tax, Financial and Estate Planning

by Lance Wallach


CPAs are the best and most qualified professionals when it comes to serving their clients needs, but they need to know when and how to coordinate with other experts.

Over the last twenty years we have worked with thousands of practitioners who have decided to add financial services to their practices. They do it for a variety of reasons, but the most common are as follows:


*They don’t want to refer their client elsewhere when they request financial services.

* They want to remain competitive.

*They want to diversify and increase their revenue as opposed to depending solely on tax and accounting revenue.

While helping these professionals add planning and investment services to their core offerings, we have found that they achieve four main benefits after doing so:

1. They are more satisfied with their work.

2. Their clients are more satisfied because they can work with someone they trust to meet financial goals.

3. Their clients give them more referrals.

4. Their incomes increase.

We believe that CPAs are the most appropriate--and perhaps the only--professionals who can provide comprehensive financial services to clients because they understand their clients' tax and financial situations. Their clients trust these practitioners to provide professional advice that is in their best interest. In fact, we believe that tax professionals have an obligation and responsibility to advise their clients, and clients expect their professionals to advise them in these important areas.

With a combination of never-ending tax reform, the Tax Code's significant and complex changes, and the market volatility we've experienced over the past few years, clients need guidance more than ever. Practitioners who provide financial planning and investment advisory services are in a position to advise and assist their clients with these issues.

Practitioners just starting out in this arena may not possess the myriad skill sets and substantive knowledge required to embark on new business ventures.

 CPAs who don't have all of the necessary talent in-house may find it easier to associate themselves with strategic "partners" who can provide the proper skill sets, training, technology, support and turnkey solutions in their specialized disciplines and niches, to help identify and meet their clients' financial goals.

Adapted from "The Team Approach to Tax, Financial & Estate Planning," edited by Lance Wallach, with chapters by Katharine Gratwick Baker, Fredda Herz Brown, Dr. Stanly J. Feldman, Ira Kaplan, Joseph W. Maczuga, Roger E. Nauheimer, Roger C. Ochs, Matthew J. O'Connor, Richard Preston, Steve Riley, Carl Lloyd Sheeler, Peter Spero, Paul J. Williams, and Roger M. Winsby. Product 017235.



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.

IRS attacks 412i scams.

Lance Wallach

I spoke at the American Society of Pension Actuaries national convention in Washington in Oct, 2002 about plans, as did the IRS chief actuary. People were warned of IRS attention to these abusive plans. After I spoke I was invited to the IRS headquarters where I addressed IRS senior officials. Treasury dept officials were also listening on speakerphones. We discussed problems, and the IRS future action against abusive plans. Within a few years IRS developed task forces that started to audit abusive plans.

Below is an article published in 2003 that I did not author about the 2003 ASPA convention.

Pending Guidance on 412(i) Plans Discussed at ASPA Convention - November 3, 2003

The IRS discussed pending guidance on fully insured defined benefit pension plans under §412(i) at its "Aggressive Practices" session last week at the annual American Society of Pension Actuaries (ASPA) conference in Washington, D.C. 

The Treasury/IRS reiterated its concerns relative to the aggressive marketing of policies to fund 412(i) plans with "springing" cash value schemes (as previously addressed in IRS Notice 89-25) and atypically high death benefits that exceed the incidental life insurance limits.  These issues were discussed in detail in our March 28, 2003 article: 412(i) Plan: A "Dream" or "Nightmare" for the Small Business Owner? Which was referenced in the Tax Exempt and Government Entities Division (TE/GE) Advisory Committee Report on Abusive Tax Shelters released on May 20, 2003 (also view IRS Recognizes Milberg Consulting as Pension Compliance Advocate).

The pending guidance is expected to identify abusive, or potentially abusive 412(i) plan designs.  These abusive arrangements will likely be designated as "listed transactions" under tax shelter rules.  The IRS representatives at the conference made it clear that the pending guidance is not intended to affect those properly designed 412(i) plans that are funded with conventional life insurance contracts (absent "springing" cash values and atypically high death benefits).

The really bad news for those who have adopted a plan funded with policies that fall under this scrutiny is that the pending guidance is expected to be retroactive.

Commentary

  Let's face the facts... all of the schemes involving the sale of life insurance products that attempt to take advantage of the "loopholes" in the laws governing qualified retirement or welfare benefit plans were created to make the cost of life insurance more palatable to the consumer, typically the owners of small businesses.  Each and every one of these imprudent schemes in the past 20 years involving VEBAs (§501(c)9), the so-called "pension rescue or pension crush plans," §419 plans, life insurance sub trusts and most recently, §412(i) plans are eventually shut down by the IRS.

We are mindful that our view is biased in that we earn our living by providing plan design and compliance services associated with traditional defined benefit and defined contribution plans on a fee for service basis.  We also believe that most business owners have legitimate needs for life insurance, and that a life insurance contract created by reputable company and sold by a reputable agent can serve as an invaluable planning tool for the small business owner.

As to those §412(i) plans which in theory fit within the pending IRS guidance, we simply do not believe that most life insurance agents and their home offices have the expertise to determine if a defined benefit pension plan in any form or fashion is the appropriate plan type for their small business clients.   We routinely receive calls from referring professionals inquiring relative to the applicability of a defined benefit plan for their small business clients.  In the vast majority of instances, a defined benefit pension plan is simply not the proper solution. 

The one thing for certain about the future is that it brings change.  Therefore, the potential for change in the owner's desire for tax-sheltered benefits is a reality that must be considered during the planning process.  In the context of a traditional defined benefit plan, a change of this nature could lead to a cutback in benefits to mitigate plan costs.  It might even necessitate the termination of the plan resulting in a distribution of the owner's accrued benefit into an IRA.  In the context of a fully insured defined benefit pension plan under §412(i), changes in the plan's benefit structure or plan termination could leave the small business owner with the continued expense to maintain a superfluous life insurance policy or an unanticipated taxable event.

Using a §412(i) plan in the context of an owner only business with a legitimate need for the death benefit protection provided by life insurance may be an appropriate place for this plan type.  However, we believe that until such time that the uniform estate tax credit is unlimited (which is currently subject to change), a traditional defined benefit plan along with a conventional life insurance policy held within an irrevocable life insurance trust (ILIT) is a more prudent choice for the small business owner.  While this plan design may cost more than a 412(i), it provides the small business owner with a significantly higher probability for a positive outcome and the flexibility to address change in the future.

Bottom Line:  In theory the §412(i) plan provides a small business owner with a retirement plan that provides significant benefits on a tax deductible basis absent the complications typically associated with a traditional defined benefit pension plan.  In reality, this plan type is rarely appropriate for owners of small businesses.

 Lance Wallach, CLU, ChFC, CIMC, speaks and writes extensively about financial planning, retirement plans, and tax reduction strategies.  He is an American Institute of CPA’s course developer and instructor and has authored numerous best selling books about abusive tax shelters, IRS crackdowns and attacks and other tax matters. He speaks at more than 20 national conventions annually and writes for more than 50 national publications.  For more information and additional articles on these subjects, visit www.vebaplan.com, www.taxlibrary.us, lawyer4audits.com or call 516-938-5007.

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.

Avoid IRS FINES, 8886 Forms Listed Reportable Transactions Lawline.com C...

Tax and Finance Articles - 419, 412i, tax shelters

Tax and Finance Articles - 419, 412i, tax shelters

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.

Offshore Money, FBAR International Tax and the IRS - HGExperts.com

http://www.hgexperts.com/article.asp?id=26481

The IRS looks at captives and often audits them. Below are a few ideas about captives.

Lance Wallach

Successful captive programs have some or most of the following attributes. Some can be planned for at inception, while others need to be managed and realized over time. Success factors include:

1. Spread of risk with predictable losses – Successful captive owners focus on the risks they understand best – their own – and avoid the temptation to compete against commercial insurers. Successful captives also can enjoy a favorable risk spread either by having a sizeable exposure base or by incorporating a number of lines of coverage with limited correlation.

2. Good loss experience and control -- The success of a captive program can only be as good as its underlying loss experience. The best way to manage underwriting results is via targeted and rigid loss control and safety programs. Poorly managed risk programs are probably better insured by the commercial markets, no matter how over-priced the market might appear.

3. Fronting and reinsurance support -- Some captive programs cannot operate or grow without adequate fronting and/or reinsurance support. Accordingly, captive owners should look to identify fronting insurers or reinsurers with whom they can partner even if the affiliation might mean paying slightly more in any given year. It is important that the front or reinsurer be there through both good and bad years.

4. Financially stable parent(s) -- Most successful captive programs have financially sound parent(s) or insured’s that are able to pay the premium for the risk insured each year and provide additional capital for growth or to weather bad years. A captive should not be viewed as a piggy bank that can be plundered whenever a new pet project comes along or to subsidize other divisions when they experience difficulties.

5. Credible non-tax business purpose -- Successful captives are formed for true and identified risk management reasons. Those formed solely for tax reasons rarely survive over time. Tax benefits, if any, should be viewed as a bonus.

6. Strong business partners -- Since captive owners are seldom proficient in the business of insurance, very few captives are self-managed. It is crucial that a prospective captive owner retain strong business partners who possess both industry knowledge of the captive’s parent as well as a good understanding of the captive industry and how it is evolving. Business partners should be innovative and focused solely on the success of the captive itself.

7. Long-term commitment – The captive should be managed and viewed as an ongoing entity. Depending upon the lines of coverage insured, the success of a captive may not be quantifiable for five or ten years – perhaps longer. The long-term view can be difficult to master given the often-narrow business focus that demands meeting next quarter’s budget targets.

8. Positive financial return -- While many captive programs are primarily cost centers, they should be evaluated constantly against the benefits they provide to the organization as a whole. Only captive programs with positive financial returns will achieve full upper-management support and be allocated the resources needed to reach their full potential.

9. Continuous evaluation -- The captive should be evaluated regularly to ensure efficient management of retained risk across the enterprise. Often, risks originally retained by the captive may be more economically insured by commercial markets. Alternatively, risks previously deemed non-existent or minor may be ideal for the captive.

10. Be prepared for an IRS audit. Check the history of the people that want to help you with the captive. If they have sold other programs, like 412i, 419 or other abusive tax shelters do not use them.

Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning.  He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Public Radio’s All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education’s CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or visit http://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.