Wednesday, May 21, 2014 412i-419 Plans: 412i-419 Plans: IRS Penalties, Audits, Benefit Pla... 412i-419 Plans: 412i-419 Plans: IRS Penalties, Audits, Benefit Pla...: 412i-419 Plans: IRS Penalties, Audits, Benefit Plans 419e 412i PRODUCERS WEB .com For Smart Advisors Get Sued By Lance Wallach
...PRODUCERSWEB.com
For Smart Advisors
Get Sued By Lance Wallach Wednesday, April 8, 2009
The IRS is cracking down on what it considers to be abusive tax shelters. Many of them are being marketed to small business owners by insurance professionals, financial planners and even accountants and attorneys. I speak at numerous conventions, for both business owners and accountants. And after I speak, I am always approached by many people who have questions about tax reduction plans that they have heard about. Below are the most common.
419 tax reduction insurance plans
These come in various versions, and most of them have or will get the participant audited and the salesman sued. They purportedly allow the business owner to make a large tax-deductible contribution, and some or all of the contribution pays for a life insurance product. The IRS has been disallowing most versions of these plans for years, yet they continue to be sold. After everyone gets into trouble and the insurance agents get sued, the promoters of the abusive versions sometimes change the name of their company and call the plan something else. The insurance companies whose policies are sold are legitimate companies. What usually is not legitimate is the way that most of the plans are operated. There can also be a $200,000 IRS fine facing the insurance agent who sold the plan if Form 8918 has not been properly filed. I've reviewed hundreds of these forms for agents and have yet to see one that was filled out correctly.
When the IRS audits a participant in one of these plans, the tax deductions are lost. There is also the interest and large penalties to consider. The business owner can also be facing a $200,000-a-year fine if he did not properly file Form 8886. Most of these forms have been filled out improperly. In my talks with the IRS, I was told that the IRS considers not filling out Form 8886 properly almost the same as not filing at all.
412(i) retirement plans
The IRS has been auditing participants in these types of retirement plans. While there is generally nothing wrong with many of the newer plans, the IRS considered most of the older abusive plans. Forms 8918 and 8886 are also required for abusive 412(i) plans.
I have been an expert witness in a lot of these 419 and 412(i) lawsuits and I have not lost one of them. If you sold one or more of these plans, get someone who really knows what they are doing to help you immediately. Many advisors will take your money and claim to be able to help you. Make sure they have experience helping agents that have sold these types of plans. Don't let them learn on the job, with your career and money at stake.
Do not wait for IRS to come and get you, or for your client to sue you. Time is of the essence. Most insurance professionals need help to correct their improperly completed Form 8918 or to fill it out properly in the first place. If you have not previously filled out the form it is late, and therefore you should immediately seek assistance. There are plenty of legitimate tax reduction insurance plans out there. Just make sure that you know the history of the people with whom you conduct business.
Remember, if something looks too good to be true, it usually is. Be careful.
Wednesday, May 21, 2014
ReplyDelete412i-419 Plans: 412i-419 Plans: IRS Penalties, Audits, Benefit Pla...
412i-419 Plans: 412i-419 Plans: IRS Penalties, Audits, Benefit Pla...: 412i-419 Plans: IRS Penalties, Audits, Benefit Plans 419e 412i PRODUCERS WEB .com For Smart Advisors Get Sued By Lance Wallach
...PRODUCERSWEB.com
For Smart Advisors
Get Sued
By Lance Wallach Wednesday, April 8, 2009
The IRS
is cracking down on what it considers to be abusive tax shelters. Many of them
are being marketed to small business owners by insurance professionals,
financial planners and even accountants and attorneys. I speak at numerous
conventions, for both business owners and accountants. And after I speak, I am
always approached by many people who have questions about tax reduction plans
that they have heard about. Below are the most common.
419 tax reduction insurance plans
These come in various versions, and most of them have or will get the
participant audited and the salesman sued. They purportedly allow the business
owner to make a large tax-deductible contribution, and some or all of the
contribution pays for a life
insurance product. The IRS has been disallowing most versions of
these plans for years, yet they continue to be sold. After everyone gets into
trouble and the insurance agents get sued, the promoters of the abusive
versions sometimes change the name of their company and call the plan something
else. The insurance companies whose policies are sold are legitimate companies.
What usually is not legitimate is the way that most of the plans are operated.
There can also be a $200,000 IRS fine facing the insurance agent who sold the
plan if Form 8918 has not been properly filed. I've reviewed hundreds of these
forms for agents and have yet to see one that was filled out correctly.
When the IRS audits a participant in one of these plans, the tax deductions are
lost. There is also the interest and large penalties to consider. The business
owner can also be facing a $200,000-a-year fine if he did not properly file
Form 8886. Most of these forms have been filled out improperly. In my talks
with the IRS, I was told that the IRS considers not filling out Form 8886
properly almost the same as not filing at all.
412(i) retirement plans
The IRS has been auditing participants in these types of retirement plans.
While there is generally nothing wrong with many of the newer plans, the IRS
considered most of the older abusive plans. Forms 8918 and 8886 are also
required for abusive 412(i) plans.
I have been an expert witness in a lot of these 419 and 412(i) lawsuits and I
have not lost one of them. If you sold one or more of these plans, get someone
who really knows what they are doing to help you immediately. Many advisors
will take your money and claim to be able to help you. Make sure they have
experience helping agents that have sold these types of plans. Don't let them
learn on the job, with your career and money at stake.
Do not wait for IRS to come and get you, or for your client to sue you. Time is
of the essence. Most insurance professionals need help to correct their
improperly completed Form 8918 or to fill it out properly in the first place.
If you have not previously filled out the form it is late, and therefore you
should immediately seek assistance. There are plenty of legitimate tax
reduction insurance plans out there. Just make sure that you know the history
of the people with whom you conduct business.
Remember, if something looks too good to be true, it usually is. Be careful.