Lance Wallach, Managing Director, is the
nation's leading expert on employee benefit plans,
tax problem resolution and IRS audit defense.

Mr. Wallach is a member of the AICPA faculty of
teaching professionals & a renowned national
expert in many court cases. He is the author of
many best selling financial & law books, including:

    *  "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
About
Us
The Offices of Lance Wallach
Serving clients
nationwide

Call us today:

516-938-5007

Email us at:

LanWalla@aol.com

Fax #:
516-938-6330
Every one of our
consulting attorneys,
CPAs & ex IRS Agents
has over
25 years of
professional experience!
We believe that no firm
has more experienced
professionals to assist
our clients than we do!!
Lance Wallach
Managing Director
Retirement Today                                             Sept

Lance Wallach

Did you get a letter from the IRS threatening to impose this fine? If
you haven’t already, you still may. Consider yourself lucky if you have
not because this means that you have more time to straighten this
situation out. Do not wait for this letter to come from the IRS before
you call an expert to help you. Even if you have been audited already,
you could still get the letter and/or fine. One has nothing to do with
the other, and once the fine has been imposed, it is not able to be
appealed.

Many businesses that participated in a
412i retirement plan or the
IRS is auditing a 419-welfare benefit plan. Many of these plans were
not in compliance with the law and are considered abusive tax
shelters. Many business owners are not even aware that the welfare
benefit plan or retirement plan that they are participating in may be
an
abusive tax shelter and that they are in serious jeopardy of huge
IRS penalties for each year that they have been in this type of plan.


Insurance companies,
CPAs, sellers of these 419 welfare benefit
plans or 412i retirement plans, as well as anyone that gave tax
advice or recommended participation in one or more of these plans,
also known as a material advisor, is in danger of being sued, fined
by the IRS, or both.

There is help available if you think you may be involved with one of
these 419 welfare benefit plans, 412i retirement plans, or any
abusive tax shelter. IRS penalty abatement is an option if you act
now. Feel free to contact me for more information.
www.lancewallach.com

Lance Wallach, National Society of Accountants Speaker of the Year
and member of the AICPA faculty of teaching professionals, is a
frequent speaker on retirement plans, abusive tax shelters,
financial, international tax, and estate planning.  He writes about 412
(i), 419, Section79,
FBAR, and captive insurance plans. He speaks
at more than ten conventions annually, writes for over fifty
publications, is quoted regularly in the press and has been featured
on television and radio financial talk shows including NBC, National
Pubic Radio’s All Things Considered, and others. Lance has written
numerous books including Protecting Clients from Fraud,
Incompetence and Scams published by John Wiley and Sons, Bisk
Education’s CPA’s Guide to Life Insurance and Federal Estate and
Gift Taxation, as well as the AICPA best-selling books, including
Avoiding Circular 230 Malpractice Traps and Common Abusive
Small Business Hot Spots. He does expert witness testimony and
has never lost a case. Contact him at 516.938.5007,
wallachinc@gmail.com or visit www.taxadvisorexpert.com.

The information provided herein is not intended as legal,
accounting, financial or any type of advice for any specific individual
or other entity. You should contact an appropriate professional for
any such advice.

Small Business Retirement Plans
Fuel Litigation

Maryland Trial Lawyer
Dolan Media Newswires                  
Januar
y


Small businesses facing audits and potentially huge tax
penalties over certain types of retirement plans are filing
lawsuits against those who marketed, designed and sold
the plans. The
412(i) and 419(e) plans were marketed in the
past several years as a way for small business owners to
set up retirement or welfare benefits plans while leveraging
huge tax savings, but the IRS put them on a list of abusive
tax shelters and has more recently focused audits on them.
The penalties for such transactions are extremely high and
can pile up quickly.
There are business owners who owe taxes but have been
assessed 2 million in penalties. The existing cases involve
many types of businesses, including doctors’ offices, dental
practices, grocery store owners, mortgage companies and
restaurant owners. Some are trying to negotiate with the
IRS. Others are not waiting. A class action has been filed
and cases in several states are ongoing. The business
owners claim that they were targeted by insurance
companies; and their agents to purchase the plans without
any disclosure that the IRS viewed the plans as
abusive tax
shelters. Other defendants include financial advisors who
recommended the plans, accountants who failed to fill out
required tax forms and law firms that drafted opinion letters
legitimizing the plans, which were used as marketing tools.
A 412(i) plan is a form of defined benefit pension plan. A 419
(e) plan is a similar type of health and benefits plan.
Typically, these were sold to small, privately held
businesses with fewer than 20 employees and several
million dollars in gross revenues. What distinguished a
legitimate plan from the plans at issue were the life
insurance policies used to fund them. The employer would
make large cash contributions in the form of insurance
premiums, deducting the entire amounts. The insurance
policy was designed to have a “springing cash value,”
meaning that for the first 5-7 years it would have a near-zero
cash value, and then spring up in value.
Just before it sprung, the owner would purchase the policy
from the trust at the low cash value, thus making a tax-free
transaction. After the cash value shot up, the owner could
take tax-free loans against it. Meanwhile, the insurance
agents collected exorbitant commissions on the premiums –
80 to 110 percent of the first year’s premium, which could
exceed million.
Technically, the IRS’s problems with the plans were that the
“springing cash” structure disqualified them from being 412
(i) plans and that the premiums, which dwarfed any payout to
a beneficiary, violated incidental death benefit rules.
Under
§6707A of the Internal Revenue Code, once the IRS
flags something as an abusive tax shelter, or “listed
transaction,” penalties are imposed per year for each failure
to disclose it. Another allegation is that businesses weren’t
told that they had to file Form 8886, which discloses a listed
transaction.
According to Lance Wallach of Plainview, N.Y. (516-938-
5007), who testifies as an expert in cases involving the
plans, the vast majority of accountants either did not file the
forms for their clients or did not fill them out correctly.
Because the IRS did not begin to focus audits on these types
of plans until some years after they became listed
transactions, the penalties have already stacked up by the
time of the audits.
Another reason plaintiffs are going to court is that there are
few alternatives – the penalties are not appeasable and
must be paid before filing an administrative claim for a
refund.
The suits allege misrepresentation, fraud and other
consumer claims. “In street language, they lied,” said Peter
Losavio, a plaintiffs’ attorney in Baton Rouge, La., who is
investigating several cases. So far they have had mixed
results. Losavio said that the strength of an individual case
would depend on the disclosures made and what the sellers
knew or should have known about the risks.
In 2004, the IRS issued notices and revenue rulings
indicating that the plans were listed transactions. But
plaintiffs’ lawyers allege that there were earlier signs that
the plans ran afoul of the tax laws, evidenced by the fact
that the IRS is auditing plans that existed before 2004.
“Insurance companies were aware this was dancing a
tightrope,” said William Noll, a tax attorney in Malvern, Pa.
“These plans were being scrutinized by the IRS at the same
time they were being promoted, but there wasn’t any
disclosure of the scrutiny to unwitting customers.”
A defense attorney, who represents benefits professionals
in pending lawsuits, said the main defense is that the plans
complied with the regulations at the time and that “nobody
can predict the future.”
An employee benefits attorney who has settled several
cases against insurance companies, said that although the
lost tax benefit is not recoverable, other damages include
the hefty commissions – which in one of his cases
amounted to 400,000 the first year – as well as the costs of
handling the audit and filing amended tax returns.
Defying the individualized approach an attorney filed a class
action in federal court against four insurance companies
claiming that they were aware that since the 1980s the IRS
had been calling the policies potentially abusive and that in
2002 the IRS gave lectures calling the plans not just
abusive but “criminal.” A judge dismissed the case against
one of the insurers that sold 412(i) plans.
The court said that the plaintiffs failed to show the
statements made by the insurance companies were
fraudulent at the time they were made, because IRS
statements prior to the revenue rulings indicated that the
agency may or may not take the position that the plans were
abusive. The attorney, whose suit also names law firm for
its opinion letters approving the plans, will appeal the
dismissal to the 5th Circuit.
In a case that survived a similar motion to dismiss, a small
business owner is suing Hartford Insurance to recover a
“seven-figure” sum in penalties and fees paid to the IRS. A
trial is expected in August.
But tax experts say the audits and penalties continue. “There’
s a bit of a disconnect between what members of Congress
thought they meant by suspending collection and what is
happening in practice. Clients are still getting bills and
threats of liens,” Wallach said. “Thousands of business
owners are being hit with million-dollar-plus fines. … The
audits are continuing and escalating. I just got four calls
today,” he said. A bill has been introduced in Congress to
make the penalties less draconian, but nobody is expecting
a magic bullet.
“From what we know, Congress is looking to make the
penalties more proportionate to the tax benefit received
instead of a fixed amount.”
Lance Wallach can be reached at: WallachInc@gmail.com
For more information, please visit www.taxadvisorexperts.
org Lance Wallach, National Society of Accountants Speaker
of the Year and member of the AICPA faculty of teaching
professionals, is a frequent speaker on retirement plans,
abusive tax shelters, financial, international tax, and estate
planning.  He writes about 412(i), 419, Section79, FBAR, and
captive insurance plans. He speaks at more than ten
conventions annually, writes for over fifty publications, is
quoted regularly in the press and has been featured on
television and radio financial talk shows including NBC,
National Pubic Radio’s All Things Considered, and others.
Lance has written numerous books including Protecting
Clients from Fraud, Incompetence and Scams published by
John Wiley and Sons, Bisk Education’s CPA’s Guide to Life
Insurance and Federal Estate and Gift Taxation, as well as
the AICPA best-selling books, including Avoiding Circular
230 Malpractice Traps and Common Abusive Small
Business Hot Spots. He does expert witness testimony and
has never lost a case. Contact him at 516.938.5007,
wallachinc@gmail.com or visit www.taxadvisorexperts.
com.

The information provided herein is not intended as legal,
accounting, financial or any type of advice for any specific
individual or other entity. You should contact an appropriate
professional for any such advice.
Internal Revenue Bulletin: 2010-45
November 8, 2010
REG-119921-09        
Notice of Proposed Rulemaking Series LLCs and
Cell Companies
__________________________________
______


C.
Insurance company classification

Section 7701(a)(3) and §301.7701-2(b)(4) provide that
an arrangement that qualifies as an insurance
company is a corporation for Federal income tax
purposes. Sections 816(a) and 831(c) define an
insurance company as any company more than half
the business of which during the taxable year is the
issuing of insurance or annuity contracts or the
reinsuring of risks underwritten by insurance
companies. See also §1.801-3(a)(1), (“[T]hough its
name, charter powers, and subjection to State
insurance laws are significant in determining the
business which a company is authorized and intends
to carry on, it is the character of the business actually
done in the taxable year which determines whether a
company is taxable as an insurance company under
the Internal Revenue Code.”). Thus, an insurance
company includes an arrangement that conducts
insurance business, whether or not the arrangement
is a state law entity.

3. Overview of Series LLC Statutes and Cell Company
Statutes

A. Domestic statutes...

To Read More Click Link Below:
http://lancewallachexpertatyourservice.blogspot.
com/2013/02/insurance-company-classification.html
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