Section

79

Problem​

412i IRS audits, listed transactions

April 24, 2012     
​By Lance Wallach, CLU, CHFC
IRS auditing 412i plans Protecting Clients From Fraud, Incompetence, and Scams By: Lance Wallach Published by John Wiley and Sons, Inc. Copyright Ó 2010. All rights reserved. Excerpts have been taken from this book about: Bruce Hink, who has given me permission to utilize his name and circumstances, is a perfect example of what the IRS is doing to unsuspecting business owners. What follows is a story about Bruce Hink and how the IRS fined him $200,000 a year for being in what they called a “listed transaction”. In addition, I believe that the accountant who signed the tax return and the insurance agent who sold the retirement plan will each be fined $200,000 as material advisors. We have received a large number of calls for help from accountants, business owners, and insurance agents in similar situations. Don’t think this will happen to you. It is happening to a lot of accountants and business owners, because most of these so-called listed, abusive plans, or plans substantially similar to the so-called listed, are currently being sold by most insurance agents.
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Don’t Become A Material Advisor

JULY 1, 2011 BY LANCE WALLACH 
​Accountants, insurance professionals and others need to be careful that they don’t become what the IRS calls material advisors.
​If they sell or give advice, or sign tax returns for abusive, listed or similar plans; they risk a minimum $100,000 fine. Their client will then probably sue them after having dealt with the IRS.  In 2010, the IRS raided the offices of Benistar in Simsbury, Conn., and seized the retirement benefit plan administration firm’s files and records.
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The dangers of being "listed"

A warning for 419, 412i, Sec.79 and captive insurance Accounting Today: October 25, 2010 By: Lance Wallach Taxpayers who previously adopted 419, 412i, captive insurance or Section 79 plans are in big trouble. In recent years, the IRS has identified many of these arrangements as abusive devices to funnel tax deductible dollars to shareholders and classified these arrangements as "listed transactions." These plans were sold by insurance agents, financial planners, accountants and attorneys seeking large life insurance commissions. In general, taxpayers who engage in a "listed transaction" must report such transaction to the IRS on Form 8886 every year that they "participate" in the transaction, and you do not necessarily have to make a contribution or claim a tax deduction to participate.  Section 6707A of the Code imposes severe penalties ($200,000 for a business and $100,000 for an individual) for failure to file Form 8886 with respect to a listed transaction. But you are also in trouble if you file incorrectly.  

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Winter 2010  IRS Attacks Business Owners in 419, 412, Section 79 and Captive Insurance Plans Under Section 6707A   By Lance Wallach Taxpayers who previously adopted 419, 412i, captive insurance or Section 79 plans are in big trouble.  In recent years, the IRS has identified many of these arrangements as abusive devices to funnel tax deductible dollars to shareholders and classified these arrangements as listed transactions." These plans were sold by insurance agents, financial planners, accountants and attorneys seeking large life insurance commissions. In general, taxpayers who engage in a “listed transaction” must report such transaction to the IRS on Form 8886 every year that they “participate” in the transaction, and you do not necessarily have to make a contribution or claim a tax deduction to participate. Section 6707A of the Code imposes severe penalties for failure to file Form 8886 with respect to a listed transaction. But you are also in trouble if you file incorrectly. I have received numerous phone calls from business owners who filed and still got fined. To Read More Click Link


Lance Wallach

Section 79

Fall 2008 If I Were President… NATP members propose new tax law changes Change.  Americans have heard a lot of rhetoric over the past few months from politicians who are no longer satisfied with the status quo. Though you’d be hard pressed to find anyone who agrees with everything a candidate says, one thing is clear—the public could be better served.  As a tax professional, your top priority is serving your clients.  You work hard to make sure they don’t pay more than their fair share of taxes.  But, what exactly is fair?  We asked NATP members to list the tax laws they would change if they could.  In straight talk, here’s what they had to say… Lance Wallach would change the IRC §6707A, which, in part, provides for penalties of up to $100,000 (for individuals) or $200,000 (for corporations) for failure to inform the IRS of participation in a “listed transaction” by filing Form 8886 (in the case of taxpayers).  Also, tax professionals and accountants face the same penalties if they fail to file Form 8918, which alerts the Service to the taxpayer’s participation, and which must be filed by all “material advisors” to the taxpayer with respect to the transaction in question.  In other words, the professional is enlisted to be an “informant”.
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Protecting Clients from Fraud, Incompetence and Scams
Posted: Nov 12, 2010  Parts of this article are from the book published by John Wiley and Sons, Protecting Clients from Fraud, Incompetence and Scams, authored by Lance Wallach. Every financial expert out there knows that bad faith and bad planning can take down even the biggest firms, wiping out millions of dollars of value in an instant. Whether it's internal fraud, a scammer, or an incompetent planner that takes your client's cash, the bottom line is: The money is gone and the loss should have been prevented.Filled with authoritative advice from financial expert Lance Wallach, Protecting Clients from Fraud, Incompetence, and Scams equips you as an accountant, attorney, or financial planner with the weaponry you need to detect bad investments before they happen and protect your clients' wealth - as well as your own.
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