The expert on IRS audits of 419e and 412i plans, 6707A, listed and reportable transactions,Section 79, captive insurance and abusive tax shelters Categories
The expert on IRS audits of 419e and 412i plans, 6707A, listed and reportable transactions,Section 79, captive insurance and abusive tax shelters Categories
Subscribe Archive Editorial Calendar Advertise with Us July 15, 2007 The Newspaper of the NYSSCPA Vol. 10, No.13 IRS Clarifies Legality of 419(e) Plans By Lance Wallach, CLU, ChFC, CIMC, and Ron Snyder, JD, EA
Following the U.S. Congress’ lead, on April 10 the IRS issued final regulations under Section 409A of the Internal Revenue Code. If the rules seemed unclear before, they are crystal clear now: Most of the so-called “419(e)” plans as well as the remaining 419A(f)(6) plans are in violation of the law and subject to hefty penalties.
A 419(e) plan is a benefit plan that generally seeks to make the purchase of life insurance tax-deductible to employers. While the concept is appealing, most of the existing arrangements have permitted the plans to transfer the insurance policies to the participants upon retirement.
The Purpose of 409A
Code Section 409A was enacted into law on Oct. 10, 2004, to provide some uniformity and to impose several requirements upon nonqualified deferred compensation plans and similar arrangements. The new rules imposed include a required written plan agreement; a limit of payments to death, disability or retirement; a substantial risk of forfeiture to avoid immediate taxation to the employee; and timing limitations on benefit distributions.
Congress drafted Section 409A broadly to include any payment to an employee after the year for which it was paid or after termination of employment, unless the payment falls under one of the named exceptions. Exceptions include payments within 75 days, COBRA benefits, de minimis cash-outs paid in the year of termination of employment, etc.
409A Applicability to Welfare Benefits
Section 409A does not apply to welfare benefits. In fact, several forms of welfare benefits are specifically excluded under 409A. However, such excluded arrangements do not permit transfer of property to the participant except for death, disability and payments made upon retirement in accordance with the 409A rules.
Most of the existing 419(e) and 419A(f)(6) welfare benefit plans do not comply with the 409A rules relative to transfers of insurance policies or cash payments other than upon death.
Compliance and Effective Dates
Significant penalties apply for noncompliance with Section 409A. In addition to having compensation included in income, tax penalties equal to the IRS underpayment rate plus 1 percent from the time the compensation should have been included in income, plus 20 percent of the compensation amount, apply. Additional penalties may apply for failure to report the arrangement appropriately.
When Section 409A was added, employers and consultants scrambled to comply because the rules were effective for years beginning after 2004 for all arrangements entered into after Oct. 3, 2004. Existing arrangements were given until the end of 2005 to comply. However, the IRS granted an extension for compliance for employers who made a “good-faith” effort to comply with the rules. Under the Final Regulations, plans have until Dec. 31, 2007, to be in full compliance.
Effect on CPAs, Plan Sponsors and Others
Under Circular 230 standards a CPA or attorney who advises his or her client about participating in a noncompliant welfare benefit plan may be liable for fines and other sanctions. The authors expect that opinion letters relative to such welfare benefit plans have either been withdrawn or will be shortly, and we admonish professionals to review carefully all communications with clients relative to such plans. The IRS has recently been successful in imposing huge fines on several law firms for blessing questio
Subscribe Archive Editorial Calendar Advertise with Us July 15, 2007 The Newspaper of the NYSSCPA Vol. 10, No.13 IRS Clarifies Legality of 419(e) Plans By Lance Wallach, CLU, ChFC, CIMC, and Ron Snyder, JD, EA
Following the U.S. Congress’ lead, on April 10 the IRS issued final regulations under Section 409A of the Internal Revenue Code. If the rules seemed unclear before, they are crystal clear now: Most of the so-called “419(e)” plans as well as the remaining 419A(f)(6) plans are in violation of the law and subject to hefty penalties.
A 419(e) plan is a benefit plan that generally seeks to make the purchase of life insurance tax-deductible to employers. While the concept is appealing, most of the existing arrangements have permitted the plans to transfer the insurance policies to the participants upon retirement.
The Purpose of 409A
Code Section 409A was enacted into law on Oct. 10, 2004, to provide some uniformity and to impose several requirements upon nonqualified deferred compensation plans and similar arrangements. The new rules imposed include a required written plan agreement; a limit of payments to death, disability or retirement; a substantial risk of forfeiture to avoid immediate taxation to the employee; and timing limitations on benefit distributions.
Congress drafted Section 409A broadly to include any payment to an employee after the year for which it was paid or after termination of employment, unless the payment falls under one of the named exceptions. Exceptions include payments within 75 days, COBRA benefits, de minimis cash-outs paid in the year of termination of employment, etc.
409A Applicability to Welfare Benefits
Section 409A does not apply to welfare benefits. In fact, several forms of welfare benefits are specifically excluded under 409A. However, such excluded arrangements do not permit transfer of property to the participant except for death, disability and payments made upon retirement in accordance with the 409A rules.
Most of the existing 419(e) and 419A(f)(6) welfare benefit plans do not comply with the 409A rules relative to transfers of insurance policies or cash payments other than upon death.
Compliance and Effective Dates
Significant penalties apply for noncompliance with Section 409A. In addition to having compensation included in income, tax penalties equal to the IRS underpayment rate plus 1 percent from the time the compensation should have been included in income, plus 20 percent of the compensation amount, apply. Additional penalties may apply for failure to report the arrangement appropriately.
When Section 409A was added, employers and consultants scrambled to comply because the rules were effective for years beginning after 2004 for all arrangements entered into after Oct. 3, 2004. Existing arrangements were given until the end of 2005 to comply. However, the IRS granted an extension for compliance for employers who made a “good-faith” effort to comply with the rules. Under the Final Regulations, plans have until Dec. 31, 2007, to be in full compliance.
Effect on CPAs, Plan Sponsors and Others
Under Circular 230 standards a CPA or attorney who advises his or her client about participating in a noncompliant welfare benefit plan may be liable for fines and other sanctions. The authors expect that opinion letters relative to such welfare benefit plans have either been withdrawn or will be shortly, and we admonish professionals to review carefully all communications with clients relative to such plans. The IRS has recently been successful in imposing huge fines on several law firms for blessing questio
The Offices of Lance Wallach : "America's leading Financial Services firm "(TM) Lance Wallach, Managing Director
Financial Planning Divison
Call us today: 516-938-5007
Email us at: LanWalla@aol.com The Lance Wallach advantage is credibility, experience & trust !!
Many advisory firms offer financial planning and investment services, but the difference is that Lance Wallach wrote the books on Life Insurance, Financial & Estate planning that the other consultants learned from!
If you want to sleep soundly at night, don't go to the students for your financial answers, go to the one who teaches them, Lance Wallach!
For the past 25 years, successful businesses and individuals have turned to Lance Wallach and his team for assistance, and they are glad they did! Life Insurance & Financial Planning
When you choose the Lance Wallach team, you are on the winning team ! Copyright (C) 2009 Lance Wallach All rights reserved
Lance Wallach, Managing Director, is the nation's leading expert on life insurance, annuities, retirement & financial planning for business executives, sports figures, entertainers, affluent families and successful entrepreneurs.
Mr. Wallach is a member of the AICPA faculty of teaching professionals, a frequent keynote speaker at business conventions, a best selling financial author, and a renowned national financial expert in many court cases.
Some of Mr. Wallach best selling financial & law books are:
* "Wealth Preservation Planning" by the 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 In today's volatile and unpredictable economic climate, it is essential that you protect your family, your business and yourself by mapping out the proper financial course that will leave you and your loved ones in a sound and secure position in your retirement years and beyond.
More than ever before in our country's history it is so vitally important to plan ahead now to be rea
419_412i Plan Plan Abuses 412i, 419e plans litigation and IRS Audit Experts for abusive insurance based plans deemed reportable or listed transactions by the IRS.419 Plan, 412i Plan
Wednesday, January 7, 2015 Insurance Agents: Help for those who sold 419 and 412i plans. Insurance Agents: Help for those who sold 419 and 412i plans. Posted by Lance Wallach at 11:30 AM Labels: 412, 412(i), 412i Benefit Plan, 419 Plans, Lance Wallach Expert Witness, Lance Wallach Expert Witness
419_412i Plan Plan Abuses 412i, 419e plans litigation and IRS Audit Experts for abusive insurance based plans deemed reportable or listed transactions by the IRS.419 Plan, 412i Plan
Wednesday, January 7, 2015 Insurance Agents: Help for those who sold 419 and 412i plans. Insurance Agents: Help for those who sold 419 and 412i plans. Posted by Lance Wallach at 11:30 AM Labels: 412, 412(i), 412i Benefit Plan, 419 Plans, Lance Wallach Expert Witness, Lance Wallach Expert Witness
The Offices of Lance Wallach : "America's leading Financial Services firm "(TM) Lance Wallach, Managing Director
Financial Planning Divison
Call us today: 516-938-5007
Email us at: LanWalla@aol.com The Lance Wallach advantage is credibility, experience & trust !!
Many advisory firms offer financial planning and investment services, but the difference is that Lance Wallach wrote the books on Life Insurance, Financial & Estate planning that the other consultants learned from!
If you want to sleep soundly at night, don't go to the students for your financial answers, go to the one who teaches them, Lance Wallach!
For the past 25 years, successful businesses and individuals have turned to Lance Wallach and his team for assistance, and they are glad they did! Life Insurance & Financial Planning
When you choose the Lance Wallach team, you are on the winning team ! Copyright (C) 2009 Lance Wallach All rights reserved
Lance Wallach, Managing Director, is the nation's leading expert on life insurance, annuities, retirement & financial planning for business executives, sports figures, entertainers, affluent families and successful entrepreneurs.
Mr. Wallach is a member of the AICPA faculty of teaching professionals, a frequent keynote speaker at business conventions, a best selling financial author, and a renowned national financial expert in many court cases.
Some of Mr. Wallach best selling financial & law books are:
* "Wealth Preservation Planning" by the 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 In today's volatile and unpredictable economic climate, it is essential that you protect your family, your business and yourself by mapping out the proper financial course that will leave you and your loved ones in a sound and secure position in your retirement years and beyond.
More than ever before in our country's history it is so vitally important to plan ahead now to be rea
The expert on IRS audits of 419e and 412i plans, 6707A, listed and reportable transactions,Section 79, captive insurance and abusive tax shelters
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Editorial Calendar
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July 15, 2007
The Newspaper of the NYSSCPA
Vol. 10, No.13
IRS Clarifies Legality of 419(e) Plans
By Lance Wallach, CLU, ChFC, CIMC, and Ron Snyder, JD, EA
Following the U.S. Congress’ lead, on April 10 the IRS issued final regulations under Section 409A of the Internal Revenue Code. If the rules seemed unclear before, they are crystal clear now: Most of the so-called “419(e)” plans as well as the remaining 419A(f)(6) plans are in violation of the law and subject to hefty penalties.
A 419(e) plan is a benefit plan that generally seeks to make the purchase of life insurance tax-deductible to employers. While the concept is appealing, most of the existing arrangements have permitted the plans to transfer the insurance policies to the participants upon retirement.
The Purpose of 409A
Code Section 409A was enacted into law on Oct. 10, 2004, to provide some uniformity and to impose several requirements upon nonqualified deferred compensation plans and similar arrangements. The new rules imposed include a required written plan agreement; a limit of payments to death, disability or retirement; a substantial risk of forfeiture to avoid immediate taxation to the employee; and timing limitations on benefit distributions.
Congress drafted Section 409A broadly to include any payment to an employee after the year for which it was paid or after termination of employment, unless the payment falls under one of the named exceptions. Exceptions include payments within 75 days, COBRA benefits, de minimis cash-outs paid in the year of termination of employment, etc.
409A Applicability to Welfare Benefits
Section 409A does not apply to welfare benefits. In fact, several forms of welfare benefits are specifically excluded under 409A. However, such excluded arrangements do not permit transfer of property to the participant except for death, disability and payments made upon retirement in accordance with the 409A rules.
Most of the existing 419(e) and 419A(f)(6) welfare benefit plans do not comply with the 409A rules relative to transfers of insurance policies or cash payments other than upon death.
Compliance and Effective Dates
Significant penalties apply for noncompliance with Section 409A. In addition to having compensation included in income, tax penalties equal to the IRS underpayment rate plus 1 percent from the time the compensation should have been included in income, plus 20 percent of the compensation amount, apply. Additional penalties may apply for failure to report the arrangement appropriately.
When Section 409A was added, employers and consultants scrambled to comply because the rules were effective for years beginning after 2004 for all arrangements entered into after Oct. 3, 2004. Existing arrangements were given until the end of 2005 to comply. However, the IRS granted an extension for compliance for employers who made a “good-faith” effort to comply with the rules. Under the Final Regulations, plans have until Dec. 31, 2007, to be in full compliance.
Effect on CPAs, Plan Sponsors and Others
Under Circular 230 standards a CPA or attorney who advises his or her client about participating in a noncompliant welfare benefit plan may be liable for fines and other sanctions. The authors expect that opinion letters relative to such welfare benefit plans have either been withdrawn or will be shortly, and we admonish professionals to review carefully all communications with clients relative to such plans. The IRS has recently been successful in imposing huge fines on several law firms for blessing questio
DeleteSubscribe
Archive
Editorial Calendar
Advertise with Us
July 15, 2007
The Newspaper of the NYSSCPA
Vol. 10, No.13
IRS Clarifies Legality of 419(e) Plans
By Lance Wallach, CLU, ChFC, CIMC, and Ron Snyder, JD, EA
Following the U.S. Congress’ lead, on April 10 the IRS issued final regulations under Section 409A of the Internal Revenue Code. If the rules seemed unclear before, they are crystal clear now: Most of the so-called “419(e)” plans as well as the remaining 419A(f)(6) plans are in violation of the law and subject to hefty penalties.
A 419(e) plan is a benefit plan that generally seeks to make the purchase of life insurance tax-deductible to employers. While the concept is appealing, most of the existing arrangements have permitted the plans to transfer the insurance policies to the participants upon retirement.
The Purpose of 409A
Code Section 409A was enacted into law on Oct. 10, 2004, to provide some uniformity and to impose several requirements upon nonqualified deferred compensation plans and similar arrangements. The new rules imposed include a required written plan agreement; a limit of payments to death, disability or retirement; a substantial risk of forfeiture to avoid immediate taxation to the employee; and timing limitations on benefit distributions.
Congress drafted Section 409A broadly to include any payment to an employee after the year for which it was paid or after termination of employment, unless the payment falls under one of the named exceptions. Exceptions include payments within 75 days, COBRA benefits, de minimis cash-outs paid in the year of termination of employment, etc.
409A Applicability to Welfare Benefits
Section 409A does not apply to welfare benefits. In fact, several forms of welfare benefits are specifically excluded under 409A. However, such excluded arrangements do not permit transfer of property to the participant except for death, disability and payments made upon retirement in accordance with the 409A rules.
Most of the existing 419(e) and 419A(f)(6) welfare benefit plans do not comply with the 409A rules relative to transfers of insurance policies or cash payments other than upon death.
Compliance and Effective Dates
Significant penalties apply for noncompliance with Section 409A. In addition to having compensation included in income, tax penalties equal to the IRS underpayment rate plus 1 percent from the time the compensation should have been included in income, plus 20 percent of the compensation amount, apply. Additional penalties may apply for failure to report the arrangement appropriately.
When Section 409A was added, employers and consultants scrambled to comply because the rules were effective for years beginning after 2004 for all arrangements entered into after Oct. 3, 2004. Existing arrangements were given until the end of 2005 to comply. However, the IRS granted an extension for compliance for employers who made a “good-faith” effort to comply with the rules. Under the Final Regulations, plans have until Dec. 31, 2007, to be in full compliance.
Effect on CPAs, Plan Sponsors and Others
Under Circular 230 standards a CPA or attorney who advises his or her client about participating in a noncompliant welfare benefit plan may be liable for fines and other sanctions. The authors expect that opinion letters relative to such welfare benefit plans have either been withdrawn or will be shortly, and we admonish professionals to review carefully all communications with clients relative to such plans. The IRS has recently been successful in imposing huge fines on several law firms for blessing questio
ReplyDeleteThe Offices of Lance Wallach :
"America's leading Financial
Services firm "(TM)
Lance Wallach,
Managing Director
Financial Planning
Divison
Call us today:
516-938-5007
Email us at:
LanWalla@aol.com
The Lance Wallach advantage is credibility, experience & trust !!
Many advisory firms offer financial planning and investment services,
but the difference is that Lance Wallach wrote the books on Life
Insurance, Financial & Estate planning that the other consultants
learned from!
If you want to sleep soundly at night, don't go to the students for your
financial answers, go to the one who teaches them, Lance Wallach!
For the past 25 years, successful businesses and individuals have
turned to Lance Wallach and his team for assistance, and they are
glad they did!
Life Insurance & Financial Planning
When you choose the
Lance Wallach team, you
are on the winning team !
Copyright (C) 2009 Lance Wallach
All rights reserved
Lance Wallach, Managing Director, is the nation's
leading expert on life insurance, annuities,
retirement & financial planning for business
executives, sports figures, entertainers, affluent
families and successful entrepreneurs.
Mr. Wallach is a member of the AICPA faculty of
teaching professionals, a frequent keynote speaker
at business conventions, a best selling financial
author, and a renowned national financial expert in
many court cases.
Some of Mr. Wallach best selling financial & law
books are:
* "Wealth Preservation Planning" by the 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
In today's volatile and
unpredictable economic
climate, it is essential
that you protect your
family, your business and
yourself by mapping out
the proper financial
course that will leave you
and your loved ones in a
sound and secure
position in your
retirement years and
beyond.
More than ever before in
our country's history it is
so vitally important to
plan ahead now to be
rea
419_412i Plan Plan Abuses
Delete412i, 419e plans litigation and IRS Audit Experts for abusive insurance based plans deemed reportable or listed transactions by the IRS.419 Plan, 412i Plan
Wednesday, January 7, 2015
Insurance Agents: Help for those who sold 419 and 412i plans.
Insurance Agents: Help for those who sold 419 and 412i plans.
Posted by Lance Wallach at 11:30 AM
Labels: 412, 412(i), 412i Benefit Plan, 419 Plans, Lance Wallach Expert Witness, Lance Wallach Expert Witness
419_412i Plan Plan Abuses
Delete412i, 419e plans litigation and IRS Audit Experts for abusive insurance based plans deemed reportable or listed transactions by the IRS.419 Plan, 412i Plan
Wednesday, January 7, 2015
Insurance Agents: Help for those who sold 419 and 412i plans.
Insurance Agents: Help for those who sold 419 and 412i plans.
Posted by Lance Wallach at 11:30 AM
Labels: 412, 412(i), 412i Benefit Plan, 419 Plans, Lance Wallach Expert Witness, Lance Wallach Expert Witness
ReplyDeleteThe Offices of Lance Wallach :
"America's leading Financial
Services firm "(TM)
Lance Wallach,
Managing Director
Financial Planning
Divison
Call us today:
516-938-5007
Email us at:
LanWalla@aol.com
The Lance Wallach advantage is credibility, experience & trust !!
Many advisory firms offer financial planning and investment services,
but the difference is that Lance Wallach wrote the books on Life
Insurance, Financial & Estate planning that the other consultants
learned from!
If you want to sleep soundly at night, don't go to the students for your
financial answers, go to the one who teaches them, Lance Wallach!
For the past 25 years, successful businesses and individuals have
turned to Lance Wallach and his team for assistance, and they are
glad they did!
Life Insurance & Financial Planning
When you choose the
Lance Wallach team, you
are on the winning team !
Copyright (C) 2009 Lance Wallach
All rights reserved
Lance Wallach, Managing Director, is the nation's
leading expert on life insurance, annuities,
retirement & financial planning for business
executives, sports figures, entertainers, affluent
families and successful entrepreneurs.
Mr. Wallach is a member of the AICPA faculty of
teaching professionals, a frequent keynote speaker
at business conventions, a best selling financial
author, and a renowned national financial expert in
many court cases.
Some of Mr. Wallach best selling financial & law
books are:
* "Wealth Preservation Planning" by the 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
In today's volatile and
unpredictable economic
climate, it is essential
that you protect your
family, your business and
yourself by mapping out
the proper financial
course that will leave you
and your loved ones in a
sound and secure
position in your
retirement years and
beyond.
More than ever before in
our country's history it is
so vitally important to
plan ahead now to be
rea
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