Did you Participate in a 419 or 412i Benefit Plan? Lance Wallach is the nation's foremost expert on 419 plans, 412i plans,listed transactions,reportable transactions,Section 79 plans, captive Insurance plans
SUNDAY, JULY 14, 2013
419 Welfare Benefit Plans A view from a former IRS Agent, CPA, College Professor - Sam Susser - Welfare Benefit Plans (WBP), also known as Welfare Benefit Trusts and Welfare Benefit Funds are vehicles by which employers may offer their employees and retirees with certain types of insurance coverage (e.g., life insurance, health insurance, disability insurance, and long-term care), as well as other benefits such as severance payments and educational funding.
If properly designed and in compliance with IRC sections 419 and 419A, WBPs offer employers with a valid tax deduction. However, as is the case with many plans that offer opportunities for deductibility, some WBPs fail to comply with Code standards, invite abuse, and otherwise are used inappropriately as a basis to reduce taxable income.
It is, therefore, not surprising that the Internal Revenue Service (IRS) has targeted WBP, designating many such plans as “listed transactions.” The IRS’ attack arsenal includes, but is not limited to: Notice 2007-83 (where the IRS intends to challenge claimed tax benefits meeting the definition of a “listed transaction”); Notice 2007-84 (where the IRS may challenge trust arrangements purporting to provide non-discriminatory medical and life insurance benefits, if such plans are, in substance, discriminatory); Revenue Ruling 2007-65 (where the IRS will not disallow deductions for such arrangements for prior year tax years, except to the extent that deductions have exceeded the amount of insurance included on the participant’s Form W-2 for a particular year), and IR-2007-170 (the IRS’ guidance position on WBPs). Accordingly, taxpayers who have claimed deductions pursuant to Internal Revenue Code (Code) Section 419 are receiving letters from the IRS inviting them to an audit.
The Good:
Let’s start off with a proposition that may surprise many of you – the IRS is generally good. No, that’s not an oxymoron. The rest of this article is in the words of Sam Susser:
For over 35 years, I have had the privilege of representing the IRS and the US taxpayers on tax audits. Our goal was to always determine the correct tax –whether the outcome was a deficiency or a refund. The bottom line, which the IRS supported, was to “do the right thing.” Over these years, I have met and befriended many competent and exemplary agents. As with all industries, there are a few who simply go through the motions, and there are a few who are simply incompetent. Fortunately, the latter two groups are in the minority. Now that I represent clients who are being audited by IRS, my objectives have not changed. The right thing must still be done. I only hope to get a well-versed agent who knows the law and can make a determination based on facts and circumstances, and not by preconceived notions.
I have been resolving the WBP issue mostly at the Revenue Agent (RA) level. Most RAs are knowledgeable in the area of WBP, and it it a pleasure dealing with them. My clients became involved with both abusive plans as well as what I determined to be non-abusive plan. Because most clients have sought the opinions of an independent professional tax attorney, CPA, Enrolled Agent , or other independent professionals who the IRS deems to be knowledgeable and capable of rendering an opinion on a Plan, Prior to 2007 I had a good case for abating t
Did you Participate in a 419 or 412i Benefit Plan?
ReplyDeleteLance Wallach is the nation's foremost expert on 419 plans, 412i plans,listed transactions,reportable transactions,Section 79 plans, captive Insurance plans
SUNDAY, JULY 14, 2013
419 Welfare Benefit Plans
A view from a former IRS Agent, CPA, College Professor - Sam Susser - Welfare Benefit Plans (WBP), also known as Welfare Benefit Trusts and Welfare Benefit Funds are vehicles by which employers may offer their employees and retirees with certain types of insurance coverage (e.g., life insurance, health insurance, disability insurance, and long-term care), as well as other benefits such as severance payments and educational funding.
If properly designed and in compliance with IRC sections 419 and 419A, WBPs offer employers with a valid tax deduction. However, as is the case with many plans that offer opportunities for deductibility, some WBPs fail to comply with Code standards, invite abuse, and otherwise are used inappropriately as a basis to reduce taxable income.
It is, therefore, not surprising that the Internal Revenue Service (IRS) has targeted WBP, designating many such plans as “listed transactions.” The IRS’ attack arsenal includes, but is not limited to: Notice 2007-83 (where the IRS intends to challenge claimed tax benefits meeting the definition of a “listed transaction”); Notice 2007-84 (where the IRS may challenge trust arrangements purporting to provide non-discriminatory medical and life insurance benefits, if such plans are, in substance, discriminatory); Revenue Ruling 2007-65 (where the IRS will not disallow deductions for such arrangements for prior year tax years, except to the extent that deductions have exceeded the amount of insurance included on the participant’s Form W-2 for a particular year), and IR-2007-170 (the IRS’ guidance position on WBPs). Accordingly, taxpayers who have claimed deductions pursuant to Internal Revenue Code (Code) Section 419 are receiving letters from the IRS inviting them to an audit.
The Good:
Let’s start off with a proposition that may surprise many of you – the IRS is generally good. No, that’s not an oxymoron. The rest of this article is in the words of Sam Susser:
For over 35 years, I have had the privilege of representing the IRS and the US taxpayers on tax audits. Our goal was to always determine the correct tax –whether the outcome was a deficiency or a refund. The bottom line, which the IRS supported, was to “do the right thing.” Over these years, I have met and befriended many competent and exemplary agents. As with all industries, there are a few who simply go through the motions, and there are a few who are simply incompetent. Fortunately, the latter two groups are in the minority. Now that I represent clients who are being audited by IRS, my objectives have not changed. The right thing must still be done. I only hope to get a well-versed agent who knows the law and can make a determination based on facts and circumstances, and not by preconceived notions.
I have been resolving the WBP issue mostly at the Revenue Agent (RA) level. Most RAs are knowledgeable in the area of WBP, and it it a pleasure dealing with them. My clients became involved with both abusive plans as well as what I determined to be non-abusive plan. Because most clients have sought the opinions of an independent professional tax attorney, CPA, Enrolled Agent , or other independent professionals who the IRS deems to be knowledgeable and capable of rendering an opinion on a Plan, Prior to 2007 I had a good case for abating t