412i, 419e plans litigation and IRS Audit Experts for abusive insurance based plans deemed reportable or listed transactions by the IRS
412i, 419e plans litigation and IRS Audit Experts for abusive insurance based plans deemed reportable or listed transactions by the IRS
The Truth About Section 79 Permanent Insurance Plans
ReplyDeleteSection 79 plans are a part of the employee benefit section of the Internal Revenue Service code (IRC). This code (IRC code Section 1.79) has been a part of the IRC since it was initially adopted in 1953. The President of the United States at that time was Dwight D. Eisenhower.
Section 79 permanent insurance plans are sold within the United States by large national life insurance companies, all of whom have internal legal and compliance departments whose role is to ensure that the products sold by those companies are legal and comply with the rules and spirit of the law. Section 79 permanent insurance plans are sold legally in all 50 states of these United States of America. For the protection of consumers, each state has an insurance department that reviews and approves all company and agent licensing and products sold within that state. (see National Association of Insurance Commissioners at this link).
So, here’s the truth about Section 79 Permanent Insurance Plans:
• This is a legal insurance product, covered in the IRS Code number 1.79.
• All group life insurance is covered under this IRS Code. Most governmental agencies, non-profit organizations and large Fortune 1,000 companies have section 79 as an employee benefit.
• This is not a new code. The IRC 1.79 has been in the code since 1953.
• All Section 79 products are fully vetted by major national insurance companies, their lawyers and compliance staffs, for sale in all 50 states. These are companies with long and successful histories of selling insurance products in the United States since the mid-1800’s.
• Every state insurance department has fully vetted these Section 79 products and approved them for sales in their states. These products are legal for sale in all 50 states.
• Section 79 plans are not “listed transactions.” Here is a list of all listed transactions according to the IRS – http://www.irs.gov/Businesses/Corporations/Listed-Transactions---LB&I-Tier-I-Issues
No need to be fearful due to the innuendo of an internet spammer; for REAL information about Section 79 plans, contact Business Planning Group at (888)545-2205 or visit our website at BusinessPlanningGroup.com/truth .
Accountantexpert.orgit, agreeing or disagreeing with your view of penalties, and listing how extensive an audit he or she recommends.
ReplyDelete2. 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. See taxadvisorexpert.com for the latest information in this area or to contact one of our professionals today.
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, international tax, and other subjects. He writes about FBAR, OVDI, international taxation, captive insurance plans and other topics. 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.” He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, lawallach@aol.com,lanwalla@aol.com or visit www.taxadvisorexpert.com.
Advisers Staring at a New ‘Slew’ of Litigation From Small-Business Clients
ReplyDeleteFive-year old change in tax has left some small businesses and certain benefit plans subject to IRS fines; the advisers who sold these plans may pay the price.
Financial advisers who have sold certain types of retirement and other benefit plans to small businesses might soon be facing a wave of lawsuits — unless Congress decides to take action soon.
For years, advisers and insurance brokers have sold the 412(i) plan, a type of defined-benefit pension plan, and the 419 plan, a health and welfare plan, to small businesses as a way of providing such benefits to their employees, while also receiving a tax break.
However, in 2004, Congress changed the law to require that companies file with the Internal Revenue Service if they had these plans in place. The law change was intended to address tax shelters, particularly those set up by large companies.
Many companies and financial advisers didn’t realize that this was a cause for concern, however, and now employers are receiving a great deal of scrutiny from the federal government, according to experts.
The IRS has been aggressive in auditing these plans. The fines for failing to notify the agency about them are $200,000 per business per year the plan has been in place and $100,000 per individual.
So advisers who sold these plans to small business are now slowly starting to become the target of litigation from employers who are subject to these fines.
“There is a slew of litigation already against advisers that sold these plans,” said Lance Wallach, an expert on 412(i) and 419 plans. “I get calls from lawyers every week asking me to be an expert witness on these cases.”
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