Captive Insurance Plans
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Showing posts with label 419. Show all posts
Showing posts with label 419. Show all posts
How Hartford Life and Other Insurance Companies Tricked their Agents and Got People in Trouble with the IRS - HG.org
How Hartford Life and Other Insurance Companies Tricked their Agents and Got People in Trouble with the IRS - HG.org
Agents from Hartford and other insurance companies were shown ways to sell large life insurance policies. This “Welfare Benefit Trust 419 plan or 412i plan should be shown to their profitable small business owners as a cure for paying too much taxes.
A Welfare Benefit Trust 419 plan essentially works like this:
• The business provides a fringe benefit for their employees, such as health insurance and life insurance.
• The benefit is established in the name of a trust and funded with a cash value life insurance policy
• Here is the gravy: the entire amount deposited into the trust (insurance policy) is tax deductible to the company,and
• The owners of the company can withdraw the cash value from the policy in later years tax-free.
• The business provides a fringe benefit for their employees, such as health insurance and life insurance.
• The benefit is established in the name of a trust and funded with a cash value life insurance policy
• Here is the gravy: the entire amount deposited into the trust (insurance policy) is tax deductible to the company,and
• The owners of the company can withdraw the cash value from the policy in later years tax-free.
Read more by clicking the link above!
Captive Insurance Plans, Want to Get Audited? - HG.org
Captive Insurance Plans, Want to Get Audited? - HG.org
The insurance industry have been conjuring ways to make life insurance premiums tax deductible. Over the years we have seen many schemes that have failed IRS scrutiny. Welfare benefit plans set up under I.R.C. section 419, 412(e) plans and Producer Owned Reinsurance Companies (PORCs) are all common examples.
When one scheme fails it isn’t long before a resourceful promoter comes up with a different product. Inevitably promoters find some lawyer or accountant to draft a favorable opinion letter and a new industry is born. In a few years, however, the IRS catches up and declares the arrangement to be a listed transaction and abusive tax shelter. As an expert witness I have never lost a case in this field. It is easy to beat the deep pockets of the insurance companies who provide product to these plans. Even though they have business owners sign fraudulent disclaimers saying that the owners will get their own tax advice. These disclaimers are then used when the inevitable happens, the IRS audits and the business owner sues the insurance company.
The latest entries seeking to find a way to make life insurance premiums deductible is a small business captive insurance company or CIC.
When one scheme fails it isn’t long before a resourceful promoter comes up with a different product. Inevitably promoters find some lawyer or accountant to draft a favorable opinion letter and a new industry is born. In a few years, however, the IRS catches up and declares the arrangement to be a listed transaction and abusive tax shelter. As an expert witness I have never lost a case in this field. It is easy to beat the deep pockets of the insurance companies who provide product to these plans. Even though they have business owners sign fraudulent disclaimers saying that the owners will get their own tax advice. These disclaimers are then used when the inevitable happens, the IRS audits and the business owner sues the insurance company.
The latest entries seeking to find a way to make life insurance premiums deductible is a small business captive insurance company or CIC.
IRS Criminal Investigation Department Audits Section 79, Captive Insurance, 412i and 419 Scams
IRS Criminal Investigation (CI) has developed a nationally coordinated program to combat these abusive tax schemes. CI's primary focus is on the identification and investigation of the tax scheme promoters as well as those who play a substantial or integral role in facilitating, aiding, assisting, or furthering the abusive tax scheme, such as accountants or lawyers. Just as important is the investigation of investors who knowingly participate in abusive tax schemes.
First the IRS started auditing § 419 plans in the 1990s, and then continued going after § 412(i) and other plans that they considered abusive, listed, or reportable transactions, or substantially similar to such transactions. If an IRS audit disallows the § 419 plan or the § 412(i) plan, not only does the taxpayer lose the deduction and pay interest and penalties, but then the IRS comes back under IRC 6707A and imposes large fines for not properly filing.
Big Trouble Ahead For Many 419 Welfare Benefit Plan and 412i Retirement Plan Participants
- Aug 25, 2010
By Lance Wallach
Business owners and professionals who have adopted 419 welfare benefit plan arrangements are in serious trouble. The IRS has attacked these arrangements as "listed transactions." Business owners who engage in a "listed transaction" must report such transactions on IRS Form 8886 every year that they are participating in the transaction, and you are participating even in years when you do not make any contribution. Internal Revenue Code 6707A imposes severe penalties ($200,000 annually for a business and $100,000 per year for an individual) for failure to file Form 8886 with respect to a listed transaction. Tax Court, according to both the IRS Appeals Office and its own decisions, does not have jurisdiction to abate or lower any penalties imposed by the IRS. Complaints caused Congress to impose a moratorium on collection of Section 6707A penalties. On June 1, 2010, the moratorium ended, and the IRS immediately began sending out notices warning of possible imposition of 6707A penalties. When you get this notice it should be taken very seriously.
Accountants were required to properly prepare and file Form 8918 (if they signed and/or prepare tax returns and got paid). The penalty for accountants for not properly filing the forms is $100,000, or $200,000 if they are incorporated.
Businesses that were in some 419 welfare benefit plans or some 412i retirement as well as some Captive Insurance and Section 79 Plans, were supposed to properly file under IRC Section 6707A each year with the IRS. Either the taxpayer or the accountant was responsible, though the ultimate, primary obligation falls on the taxpayer. The IRS has just begun sending the notices referred to above to participants in many of these plans. This is in addition to any IRS audit you might have had or currently may be having. The large 6707A fine has nothing to do with any other IRS audit. The 6707A fine is for not having properly filed under 6707A with your returns. You are required to file each year with your tax return.
Not only were you required to file with your Federal return, but many states also require protective filings. Some participants in these types of plans have already received notices from the IRS. You must act immediately if you wish to avoid possible huge IRS penalties and interest that could put you out of business for good.
THE STATUTE OF LIMITATIONS IS NOT RUNNING. This means that the IRS can fine you at any time in the future for anything regarding past or present participation in an abusive 419 welfare benefit plan or an abusive 412i retirement plan. There is still time to avoid the IRS penalties and interest. You need to take action immediately and find out right away if the plan you are participating in is abusive by consulting with a professional and experienced 419/412i plan expert.
Most accountants do not know how to properly prepare the appropriate forms. Accountants or other advisors will probably be fined as material advisors. This means that you may be subject to a large fine. Once you get the large fine, the IRS claims it is not subject to an appeal.
You should have filed protectively for every year your entity participated in the plan. Once again, for every year after 2003, the penalty for not properly filing is $200,000 a year for corporations and $100,000 a year for individuals. For example, it is possible an employer in the plan since 2004 could be subject to over one million dollars in penalties solely as a result of the failure to file. For all years in the plan, the Statute of Limitations will not begin to run until after the form is properly filed. In addition, certain individual plan participants should also file for every year of plan participation. Once again, none of this has anything to do with any other audit that you may currently be involved in or may previously have experienced.
It is abundantly clear that taxpayers who receive notices from the IRS regarding Section 6707A penalties should take these letters extremely seriously. These notices do not lend themselves to "do-it-yourself eye surgery".
Reportable Transactions .com: 419 Plan, 412i Plan
Reportable Transactions .com: 419 Plan, 412i Plan, Welfare benefit plan assistan...: 419 Plan, 412i Plan, Welfare benefit plan assistance, audits & Abusive tax shelters
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