| Lance Wallach, Managing Director, is the nation's leading expert on employee benefit plans, tax problem resolution and IRS audit defense. Mr. Wallach is a member of the AICPA faculty of teaching professionals & a renowned national expert in many court cases. He is the author of many best selling financial & law books, including:
National Society of Accountants * "The CPA's Guide to Federal & Estate Gift Taxation" published by Bisk * The AICPA's "The team approach to Tax, Financial & Estate planning." * "The CPA's Guide to Life Insurance" by Bisk CPEasy * Avoiding Circular 230 Malpractice Traps and Common Abusive Small Businesss Hot spots by the AICPA, author/moderator Lance Wallach |
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| The Offices of Lance Wallach |
| Serving clients nationwide Call us today: 516-938-5007 Email us at: LanWalla@aol.com Fax #: 516-938-6330 |
| Every one of our consulting attorneys, CPAs & ex IRS Agents has over 25 years of professional experience! We believe that no firm has more experienced professionals to assist our clients than we do!! |
| Lance Wallach Managing Director |
Retirement Today Sept 2011
Lance Wallach
Did you get a letter from the IRS threatening to impose this fine? If
you haven’t already, you still may. Consider yourself lucky if you have
not because this means that you have more time to straighten this
situation out. Do not wait for this letter to come from the IRS before
you call an expert to help you. Even if you have been audited already,
you could still get the letter and/or fine. One has nothing to do with
the other, and once the fine has been imposed, it is not able to be
appealed.
Many businesses that participated in a 412i retirement plan or the
IRS is auditing a 419-welfare benefit plan. Many of these plans were
not in compliance with the law and are considered abusive tax
shelters. Many business owners are not even aware that the welfare
benefit plan or retirement plan that they are participating in may be
an abusive tax shelter and that they are in serious jeopardy of huge
IRS penalties for each year that they have been in this type of plan.
Insurance companies, CPAs, sellers of these 419 welfare benefit
plans or 412i retirement plans, as well as anyone that gave tax
advice or recommended participation in one or more of these plans,
also known as a material advisor, is in danger of being sued, fined
by the IRS, or both.
There is help available if you think you may be involved with one of
these 419 welfare benefit plans, 412i retirement plans, or any
abusive tax shelter. IRS penalty abatement is an option if you act
now. Feel free to contact me for more information.
www.lancewallach.com
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@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.
Lance Wallach
Did you get a letter from the IRS threatening to impose this fine? If
you haven’t already, you still may. Consider yourself lucky if you have
not because this means that you have more time to straighten this
situation out. Do not wait for this letter to come from the IRS before
you call an expert to help you. Even if you have been audited already,
you could still get the letter and/or fine. One has nothing to do with
the other, and once the fine has been imposed, it is not able to be
appealed.
Many businesses that participated in a 412i retirement plan or the
IRS is auditing a 419-welfare benefit plan. Many of these plans were
not in compliance with the law and are considered abusive tax
shelters. Many business owners are not even aware that the welfare
benefit plan or retirement plan that they are participating in may be
an abusive tax shelter and that they are in serious jeopardy of huge
IRS penalties for each year that they have been in this type of plan.
Insurance companies, CPAs, sellers of these 419 welfare benefit
plans or 412i retirement plans, as well as anyone that gave tax
advice or recommended participation in one or more of these plans,
also known as a material advisor, is in danger of being sued, fined
by the IRS, or both.
There is help available if you think you may be involved with one of
these 419 welfare benefit plans, 412i retirement plans, or any
abusive tax shelter. IRS penalty abatement is an option if you act
now. Feel free to contact me for more information.
www.lancewallach.com
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@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.
Small Business Retirement Plans Fuel
Litigation
Maryland Trial Lawyer
Dolan Media Newswires January
Small businesses facing audits and potentially huge tax penalties over
certain types of retirement plans are filing lawsuits against those who
marketed, designed and sold the plans. The 412(i) and 419(e) plans were
marketed in the past several years as a way for small business owners to
set up retirement or welfare benefits plans while leveraging huge tax
savings, but the IRS put them on a list of abusive tax shelters and has
more recently focused audits on them.
The penalties for such transactions are extremely high and can pile up
quickly.
There are business owners who owe taxes but have been assessed 2
million in penalties. The existing cases involve many types of businesses,
including doctors’ offices, dental practices, grocery store owners,
mortgage companies and restaurant owners. Some are trying to negotiate
with the IRS. Others are not waiting. A class action has been filed and
cases in several states are ongoing. The business owners claim that they
were targeted by insurance companies; and their agents to purchase the
plans without any disclosure that the IRS viewed the plans as abusive tax
shelters. Other defendants include financial advisors who recommended
the plans, accountants who failed to fill out required tax forms and law
firms that drafted opinion letters legitimizing the plans, which were used as
marketing tools.
A 412(i) plan is a form of defined benefit pension plan. A 419(e) plan is a
similar type of health and benefits plan. Typically, these were sold to small,
privately held businesses with fewer than 20 employees and several
million dollars in gross revenues. What distinguished a legitimate plan
from the plans at issue were the life insurance policies used to fund them.
The employer would make large cash contributions in the form of insurance
premiums, deducting the entire amounts. The insurance policy was
designed to have a “springing cash value,” meaning that for the first 5-7
years it would have a near-zero cash value, and then spring up in value.
Just before it sprung, the owner would purchase the policy from the trust at
the low cash value, thus making a tax-free transaction. After the cash
value shot up, the owner could take tax-free loans against it. Meanwhile,
the insurance agents collected exorbitant commissions on the premiums –
80 to 110 percent of the first year’s premium, which could exceed million.
Technically, the IRS’s problems with the plans were that the “springing
cash” structure disqualified them from being 412(i) plans and that the
premiums, which dwarfed any payout to a beneficiary, violated incidental
death benefit rules.
Under §6707A of the Internal Revenue Code, once the IRS flags something
as an abusive tax shelter, or “listed transaction,” penalties are imposed
per year for each failure to disclose it. Another allegation is that
businesses weren’t told that they had to file Form 8886, which discloses a
listed transaction.
According to Lance Wallach of Plainview, N.Y. (516-938-5007), who
testifies as an expert in cases involving the plans, the vast majority of
accountants either did not file the forms for their clients or did not fill them
out correctly.
Because the IRS did not begin to focus audits on these types of plans until
some years after they became listed transactions, the penalties have
already stacked up by the time of the audits.
Another reason plaintiffs are going to court is that there are few
alternatives – the penalties are not appeasable and must be paid before
filing an administrative claim for a refund.
The suits allege misrepresentation, fraud and other consumer claims. “In
street language, they lied,” said Peter Losavio, a plaintiffs’ attorney in
Baton Rouge, La., who is investigating several cases. So far they have
had mixed results. Losavio said that the strength of an individual case
would depend on the disclosures made and what the sellers knew or
should have known about the risks.
In 2004, the IRS issued notices and revenue rulings indicating that the
plans were listed transactions. But plaintiffs’ lawyers allege that there
were earlier signs that the plans ran afoul of the tax laws, evidenced by
the fact that the IRS is auditing plans that existed before 2004.
“Insurance companies were aware this was dancing a tightrope,” said
William Noll, a tax attorney in Malvern, Pa. “These plans were being
scrutinized by the IRS at the same time they were being promoted, but there
wasn’t any disclosure of the scrutiny to unwitting customers.”
A defense attorney, who represents benefits professionals in pending
lawsuits, said the main defense is that the plans complied with the
regulations at the time and that “nobody can predict the future.”
An employee benefits attorney who has settled several cases against
insurance companies, said that although the lost tax benefit is not
recoverable, other damages include the hefty commissions – which in one
of his cases amounted to 400,000 the first year – as well as the costs of
handling the audit and filing amended tax returns.
Defying the individualized approach an attorney filed a class action in
federal court against four insurance companies claiming that they were
aware that since the 1980s the IRS had been calling the policies potentially
abusive and that in 2002 the IRS gave lectures calling the plans not just
abusive but “criminal.” A judge dismissed the case against one of the
insurers that sold 412(i) plans.
The court said that the plaintiffs failed to show the statements made by the
insurance companies were fraudulent at the time they were made, because
IRS statements prior to the revenue rulings indicated that the agency may
or may not take the position that the plans were abusive. The attorney,
whose suit also names law firm for its opinion letters approving the plans,
will appeal the dismissal to the 5th Circuit.
In a case that survived a similar motion to dismiss, a small business
owner is suing Hartford Insurance to recover a “seven-figure” sum in
penalties and fees paid to the IRS. A trial is expected in August.
But tax experts say the audits and penalties continue. “There’s a bit of a
disconnect between what members of Congress thought they meant by
suspending collection and what is happening in practice. Clients are still
getting bills and threats of liens,” Wallach said. “Thousands of business
owners are being hit with million-dollar-plus fines. … The audits are
continuing and escalating. I just got four calls today,” he said. A bill has
been introduced in Congress to make the penalties less draconian, but
nobody is expecting a magic bullet.
“From what we know, Congress is looking to make the penalties more
proportionate to the tax benefit received instead of a fixed amount.”
Lance Wallach can be reached at: WallachInc@gmail.com
For more information, please visit www.taxadvisorexperts.org 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@gmail.com or visit www.
taxadvisorexperts.com.
Lance Wallach
68 Keswick Lane
Plainview, NY 11803
Ph.: (516)938-5007
Fax: (516)938-6330 www.vebaplan.com
National Society of Accountants Speaker of The Year
The information provided herein is not intended as legal, accounting,
financial or any type of advice for any specific individual or other entity.
You should contact an appropriate professional for any such advice.