Showing posts with label IRS Audits. Show all posts
Showing posts with label IRS Audits. Show all posts
Retirement Plan & 419 Welfare Benefit Plan Abusive Tax-Shelter Litigation
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D. 412(i) Retirement Plan & 419 Welfare Benefit Plan Abusive Tax-Shelter Litigation
There has been much litigation arising out of insureds‘ and their employers‘ participation in defined benefit pension plans intended to meet the requirements of former Section 412(i) of the Internal Revenue Code (the ―Code‖) and welfare benefit plans intended to meet the requirements of Section 419A(f)(6) of the Code (for multiple employer plans) and Section 419(e) of the Code (for single employer plans). In many cases, life insurance policies were the funding vehicle, in whole or in part, for the 412(i) and 419 plans. From approximately 2002-2007, the IRS issued guidance regarding issues related to 412(i) and 419 plans and, since then, the IRS has focused increased scrutiny on the plans, concluding in many cases that the plans did not comply with the relevant Code sections, disallowing deductions taken by the employers and levying harsh penalties. As a result, insureds and their employers have filed lawsuits under various theories against the plan designers and the insurance companies claiming that they were misled regarding the tax benefits of the plans and the compliance of the plans with the Code.
1. Omni Home Fin., Inc. v. Hartford Life & Annuity Ins. Co., 2008 U.S. Dist. LEXIS 35259, 2008 WL 1925248, *5 (S.D. Cal. Apr. 29, 2008) (“Omni I”); Omni Home Fin., Inc. v. Hartford Life & Annuity Ins. Co., 2008 U.S. Dist. LEXIS 85581, 2008 WL 4616796, **3-4 (S.D. Cal. Aug. 1, 2008)(“Omni II”)
In many of the documents used to construct the 412 or 419 plans, the participant agrees that he is not relying on the insurance company‘s representations regarding the validity of the plan or its tax benefits, and the participant represents that he is relying on his own independent tax advisor in deciding to participate in the plan. For instance, in Omni I, the Southern District of California held that a disclosure statement provided to the Plaintiffs precluded claims for fraud and negligent misrepresentation because the plaintiffs could not establish reasonable reliance as a matter of law. Contrary to the language agreed upon in the disclaimer provision, the plaintiffs alleged that Hartford, among others, misrepresented to them the tax consequences of their contributions to a 412(i) plan. After an IRS audit found that the plaintiffs‘ plans did not comply with several requirements for the qualified plans, the plaintiffs filed suit. Despite the fact that the plaintiffs claimed that they did not read the disclaimers they signed, the Omni court held that the receipt of the disclosure statements by plaintiffs precluded a finding of reasonable reliance, and granted summary judgment in favor of Hartford on the plaintiffs‘ claims.
In Omni II, the plaintiffs‘ motion for reconsideration was denied as the court noted that ―the material disclosures were in short documents easily intelligible to plaintiffs, who were reasonably sophisticated businesspeople‖ and furthermore, that such contracts did not violate public policy, nor were they contracts of adhesion as ―it is objectively unreasonable for a sophisticated contracting party to fail to read short, readily comprehensible documents he or she signs.‖ However, the court in Berry v. Indianapolis Life Insurance Co. (discussed in Section II.D.3., supra) denied the insurers motions for summary judgment based on disclosures similar to the disclosures at issue in Omni I and Omni II. Most notably, the court denied summary judgment for the plaintiffs whose claims were governed by Texas law and Wisconsin law. Thus,
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the success of the ―disclaimer of reliance‖ argument may differ may from court to court and will depend on which state‘s law applies.
2. Berry v. Indianapolis Life Ins. Co., 600 F.Supp. 2d 805 (N.D. Tex. 2009)(“Berry I”); Berry v. Indianapolis Life Ins. Co., 638 F.Supp. 2d 732 (N.D. Tex. 2009)(“Berry II”); Berry v. Indianapolis Life Ins. Co., 2010 WL 3422873 (N.D. Tex. Aug. 26, 2010)(“Berry III”)
In this class action lawsuit, the plaintiffs, a nation-wide class consisting of doctors, dentists, and construction company owners, and the companies they operate, filed suit, alleging that the defendants sold life insurance policies to fund defined benefit plans in compliance with section 412(i) of the Internal Revenue Code, but were later deemed abusive tax-shelters by the IRS. Plaintiffs allege that four insurance companies (Indianapolis Life, Hartford, American General, and Pacific Life) knew or should have known that the plans would be scrutinized and found to be illegal by the IRS. Plaintiffs also allege that many of the defendants, including the four insurance companies, conspired to market these plans and made fraudulent or negligent misrepresentations about the tax benefits of these plans without disclosing any risk that the IRS would find the plans to be illegal. Ultimately, many of these claims were dismissed for failure to state a claim for relief. Because the alleged misrepresentations were made prior to the IRS pronouncements calling into question the tax benefits of various plans, they were either not false when made or predictions and opinion that are not actionable.
In Berry I, the court dismissed plaintiffs‘ fraud theory holding that there was no apparent reason why the alleged misrepresentations were false when they were made in 2001 and 2002. The rational behind the court‘s ruling was that the IRS had not made any definitive statement about the legality of the 412(i) plan at the time the plaintiffs enrolled in the plan and purchased life insurance policies to fund the plan. The court noted that the plaintiffs could not use the rulings and rulemakings by the IRS in 2004 and 2005 ―to retroactively demonstrate that representations made by [the insurer‘s] alleged agents in 2001-02 were false when made.‖ Moreover, the court held that, as a matter of law, representations regarding the validity and likely tax treatment of the plaintiffs‘ 412(i) plans were ―forward looking‖ statements or ―opinions‖ as to how the IRS would treat 412(i) plans after plaintiffs funded them with insurance policies. The court found that it was ―inherently unreasonable for any person to rely on a prediction of future IRS enactment, enforcement, or non-enforcement of the law by someone unaffiliated with the federal government.‖ The court concluded that, ―[a]s a matter of law, any representation or prediction by any alleged [insurance company] agent as to how the IRS would treat the 412(i) plans, and the funding thereof, in the future is either an unactionable opinion or was unjustifiably relied upon.‖
Subsequently, the Northern District of Texas allowed the plaintiffs an opportunity to re-plead, and it then reaffirmed its prior ruling and dismissed the Berry plaintiffs‘ fraud-based claims with prejudice. The claims against the other insurance company defendants in Berry have been dismissed for the same reasons but the court has not yet decided whether the plaintiffs will be allowed to re-plead. As of November 2010, the third amended complaint was filed, to which Pacific Life filed a reply. Hartford and Pacific Life filed responses to the synopsis of the third amended complaint.
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3. Zarrella v. Pacific Life Insurance Company, No. 10-60754-CIV, 755 F.Supp.2d 1231 (S.D. Fla. 2011)
In March of 2003, Plaintiffs purchased nine individual policies from Pacific Life for use in Zarrella Construction‘s 412(i) plan. It was not until February of 2004 when the IRS issued a declaration, naming such policies as abusive tax-shelters. Plaintiffs contend that Pacific Life ―marketed and expressly touted the Policies by highlighting these ‗special‘ benefits and/or incentives that – they knew or should have known – violated the IRS Code and presented substantial tax risks to Plaintiffs.‖ On May 10, 2010, Plaintiffs brought a class action against Pacific Life. Following Pacific Life‘s first motion to dismiss being partially granted, Plaintiffs filed their Amended Class Action Complaint in December of 2010. The Plaintiffs asserted the following claims: breach of contract, equitable fraud, negligence, and a violation of California Business and Professions Code § 17200, et seq. Plaintiff‘s alleged that there was a breach of contract ―because the Policies when used to fund 412(i), did not and could not satisfy the requirements of Section 412(i). The court countered by explaining that ―in the written contract, Pacific Life specifically did not guarantee any future tax or legal consequences.‖ Additionally, the court noted that Plaintiff‘s negligence claim failed because they failed to allege the existence of a legal duty.‖
Similarly, the court dismissed the class action fraud allegations against Pacific Life because the plaintiffs failed to explain why the defendants‘ alleged statements were false when made in 2003. The court also noted that fraud must be based on material facts, not a promise or prediction of future events and that the insurance company‘s alleged representations were just ―statements of opinion regarding future events.‖ Thus, once again, Pacific Life‘s 12(b)(6) motion was granted and the amended complaint was dismissed without prejudice on all counts. Accordingly, a second amended complaint was filed by Plaintiff‘s on April 12, 2011. The court has set the trial date for October 24, 2011 and the parties‘ response and reply to Pacific Life‘s motion to dismiss the second amended complaint are before the court.
4. Chau v. Aviva Life and Annuity, No. 3:09-cv-2305-B, 2011 WL 1990446 (N.D. Tex. May 20, 2011)
Doctors and dentists alleged that Indianapolis Life Insurance Company advertised, marketed, and consummated fraudulent business transactions, resulting in damages. Plaintiffs originally filed their complaint in April of 2009 in Washington state court and after Aviva removed the case to federal district court, the MDL Panel ordered the case transferred to the Northern District of Texas. Prior to the case being transferred, Plaintiffs filed their second amended complaint and subsequently, Aviva filed its motion to dismiss Plaintiff‘s second amended complaint on February 5, 2010. Plaintiffs allege that the insurer knew that the IRS had looked askance at the legality of similar tax-shelter arrangements (welfare benefit trusts) and indicated that these arrangements may be deemed abusive tax shelters, yet continued to market its § 419 Plan as a tax-avoidance plan.
Plaintiffs‘ motion for a suggestion of remand to the Judicial Panel of Multidistrict Litigation was filed on March 3, 2011 and was subsequently denied by the district court.
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However, the court noted that plaintiffs may motion again, should there be further developments in the case. Aviva‘s motion to dismiss the second amended complaint was granted in part and denied in part on May 20, 2011. In its motion, Aviva claimed that Plaintiffs‘ common law fraud/negligent misrepresentation claim did not meet the heightened pleading requirements of Rule 9(b), in addition to failing to state a claim, and the court agreed. However, on the breach of contract claim, the court found that under the applicable law governing the contract, plaintiff‘s claim was not due to be dismissed. The court elaborated on its reasoning, noting that allegations concerning oral representations made about the policies, specifically, their ability to obtain substantial tax savings with the 419 Plan. Plaintiffs asserted in their second amended complaint that those representations were false and resulted in ―substantial tax penalties and interest‖ due to an IRS audit. Thus, the court found that such allegations, accepted as true, state a claim for a breach of contract under Washington state law.
D. 412(i) Retirement Plan & 419 Welfare Benefit Plan Abusive Tax-Shelter Litigation
There has been much litigation arising out of insureds‘ and their employers‘ participation in defined benefit pension plans intended to meet the requirements of former Section 412(i) of the Internal Revenue Code (the ―Code‖) and welfare benefit plans intended to meet the requirements of Section 419A(f)(6) of the Code (for multiple employer plans) and Section 419(e) of the Code (for single employer plans). In many cases, life insurance policies were the funding vehicle, in whole or in part, for the 412(i) and 419 plans. From approximately 2002-2007, the IRS issued guidance regarding issues related to 412(i) and 419 plans and, since then, the IRS has focused increased scrutiny on the plans, concluding in many cases that the plans did not comply with the relevant Code sections, disallowing deductions taken by the employers and levying harsh penalties. As a result, insureds and their employers have filed lawsuits under various theories against the plan designers and the insurance companies claiming that they were misled regarding the tax benefits of the plans and the compliance of the plans with the Code.
1. Omni Home Fin., Inc. v. Hartford Life & Annuity Ins. Co., 2008 U.S. Dist. LEXIS 35259, 2008 WL 1925248, *5 (S.D. Cal. Apr. 29, 2008) (“Omni I”); Omni Home Fin., Inc. v. Hartford Life & Annuity Ins. Co., 2008 U.S. Dist. LEXIS 85581, 2008 WL 4616796, **3-4 (S.D. Cal. Aug. 1, 2008)(“Omni II”)
In many of the documents used to construct the 412 or 419 plans, the participant agrees that he is not relying on the insurance company‘s representations regarding the validity of the plan or its tax benefits, and the participant represents that he is relying on his own independent tax advisor in deciding to participate in the plan. For instance, in Omni I, the Southern District of California held that a disclosure statement provided to the Plaintiffs precluded claims for fraud and negligent misrepresentation because the plaintiffs could not establish reasonable reliance as a matter of law. Contrary to the language agreed upon in the disclaimer provision, the plaintiffs alleged that Hartford, among others, misrepresented to them the tax consequences of their contributions to a 412(i) plan. After an IRS audit found that the plaintiffs‘ plans did not comply with several requirements for the qualified plans, the plaintiffs filed suit. Despite the fact that the plaintiffs claimed that they did not read the disclaimers they signed, the Omni court held that the receipt of the disclosure statements by plaintiffs precluded a finding of reasonable reliance, and granted summary judgment in favor of Hartford on the plaintiffs‘ claims.
In Omni II, the plaintiffs‘ motion for reconsideration was denied as the court noted that ―the material disclosures were in short documents easily intelligible to plaintiffs, who were reasonably sophisticated businesspeople‖ and furthermore, that such contracts did not violate public policy, nor were they contracts of adhesion as ―it is objectively unreasonable for a sophisticated contracting party to fail to read short, readily comprehensible documents he or she signs.‖ However, the court in Berry v. Indianapolis Life Insurance Co. (discussed in Section II.D.3., supra) denied the insurers motions for summary judgment based on disclosures similar to the disclosures at issue in Omni I and Omni II. Most notably, the court denied summary judgment for the plaintiffs whose claims were governed by Texas law and Wisconsin law. Thus,
15
the success of the ―disclaimer of reliance‖ argument may differ may from court to court and will depend on which state‘s law applies.
2. Berry v. Indianapolis Life Ins. Co., 600 F.Supp. 2d 805 (N.D. Tex. 2009)(“Berry I”); Berry v. Indianapolis Life Ins. Co., 638 F.Supp. 2d 732 (N.D. Tex. 2009)(“Berry II”); Berry v. Indianapolis Life Ins. Co., 2010 WL 3422873 (N.D. Tex. Aug. 26, 2010)(“Berry III”)
In this class action lawsuit, the plaintiffs, a nation-wide class consisting of doctors, dentists, and construction company owners, and the companies they operate, filed suit, alleging that the defendants sold life insurance policies to fund defined benefit plans in compliance with section 412(i) of the Internal Revenue Code, but were later deemed abusive tax-shelters by the IRS. Plaintiffs allege that four insurance companies (Indianapolis Life, Hartford, American General, and Pacific Life) knew or should have known that the plans would be scrutinized and found to be illegal by the IRS. Plaintiffs also allege that many of the defendants, including the four insurance companies, conspired to market these plans and made fraudulent or negligent misrepresentations about the tax benefits of these plans without disclosing any risk that the IRS would find the plans to be illegal. Ultimately, many of these claims were dismissed for failure to state a claim for relief. Because the alleged misrepresentations were made prior to the IRS pronouncements calling into question the tax benefits of various plans, they were either not false when made or predictions and opinion that are not actionable.
In Berry I, the court dismissed plaintiffs‘ fraud theory holding that there was no apparent reason why the alleged misrepresentations were false when they were made in 2001 and 2002. The rational behind the court‘s ruling was that the IRS had not made any definitive statement about the legality of the 412(i) plan at the time the plaintiffs enrolled in the plan and purchased life insurance policies to fund the plan. The court noted that the plaintiffs could not use the rulings and rulemakings by the IRS in 2004 and 2005 ―to retroactively demonstrate that representations made by [the insurer‘s] alleged agents in 2001-02 were false when made.‖ Moreover, the court held that, as a matter of law, representations regarding the validity and likely tax treatment of the plaintiffs‘ 412(i) plans were ―forward looking‖ statements or ―opinions‖ as to how the IRS would treat 412(i) plans after plaintiffs funded them with insurance policies. The court found that it was ―inherently unreasonable for any person to rely on a prediction of future IRS enactment, enforcement, or non-enforcement of the law by someone unaffiliated with the federal government.‖ The court concluded that, ―[a]s a matter of law, any representation or prediction by any alleged [insurance company] agent as to how the IRS would treat the 412(i) plans, and the funding thereof, in the future is either an unactionable opinion or was unjustifiably relied upon.‖
Subsequently, the Northern District of Texas allowed the plaintiffs an opportunity to re-plead, and it then reaffirmed its prior ruling and dismissed the Berry plaintiffs‘ fraud-based claims with prejudice. The claims against the other insurance company defendants in Berry have been dismissed for the same reasons but the court has not yet decided whether the plaintiffs will be allowed to re-plead. As of November 2010, the third amended complaint was filed, to which Pacific Life filed a reply. Hartford and Pacific Life filed responses to the synopsis of the third amended complaint.
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3. Zarrella v. Pacific Life Insurance Company, No. 10-60754-CIV, 755 F.Supp.2d 1231 (S.D. Fla. 2011)
In March of 2003, Plaintiffs purchased nine individual policies from Pacific Life for use in Zarrella Construction‘s 412(i) plan. It was not until February of 2004 when the IRS issued a declaration, naming such policies as abusive tax-shelters. Plaintiffs contend that Pacific Life ―marketed and expressly touted the Policies by highlighting these ‗special‘ benefits and/or incentives that – they knew or should have known – violated the IRS Code and presented substantial tax risks to Plaintiffs.‖ On May 10, 2010, Plaintiffs brought a class action against Pacific Life. Following Pacific Life‘s first motion to dismiss being partially granted, Plaintiffs filed their Amended Class Action Complaint in December of 2010. The Plaintiffs asserted the following claims: breach of contract, equitable fraud, negligence, and a violation of California Business and Professions Code § 17200, et seq. Plaintiff‘s alleged that there was a breach of contract ―because the Policies when used to fund 412(i), did not and could not satisfy the requirements of Section 412(i). The court countered by explaining that ―in the written contract, Pacific Life specifically did not guarantee any future tax or legal consequences.‖ Additionally, the court noted that Plaintiff‘s negligence claim failed because they failed to allege the existence of a legal duty.‖
Similarly, the court dismissed the class action fraud allegations against Pacific Life because the plaintiffs failed to explain why the defendants‘ alleged statements were false when made in 2003. The court also noted that fraud must be based on material facts, not a promise or prediction of future events and that the insurance company‘s alleged representations were just ―statements of opinion regarding future events.‖ Thus, once again, Pacific Life‘s 12(b)(6) motion was granted and the amended complaint was dismissed without prejudice on all counts. Accordingly, a second amended complaint was filed by Plaintiff‘s on April 12, 2011. The court has set the trial date for October 24, 2011 and the parties‘ response and reply to Pacific Life‘s motion to dismiss the second amended complaint are before the court.
4. Chau v. Aviva Life and Annuity, No. 3:09-cv-2305-B, 2011 WL 1990446 (N.D. Tex. May 20, 2011)
Doctors and dentists alleged that Indianapolis Life Insurance Company advertised, marketed, and consummated fraudulent business transactions, resulting in damages. Plaintiffs originally filed their complaint in April of 2009 in Washington state court and after Aviva removed the case to federal district court, the MDL Panel ordered the case transferred to the Northern District of Texas. Prior to the case being transferred, Plaintiffs filed their second amended complaint and subsequently, Aviva filed its motion to dismiss Plaintiff‘s second amended complaint on February 5, 2010. Plaintiffs allege that the insurer knew that the IRS had looked askance at the legality of similar tax-shelter arrangements (welfare benefit trusts) and indicated that these arrangements may be deemed abusive tax shelters, yet continued to market its § 419 Plan as a tax-avoidance plan.
Plaintiffs‘ motion for a suggestion of remand to the Judicial Panel of Multidistrict Litigation was filed on March 3, 2011 and was subsequently denied by the district court.
17
However, the court noted that plaintiffs may motion again, should there be further developments in the case. Aviva‘s motion to dismiss the second amended complaint was granted in part and denied in part on May 20, 2011. In its motion, Aviva claimed that Plaintiffs‘ common law fraud/negligent misrepresentation claim did not meet the heightened pleading requirements of Rule 9(b), in addition to failing to state a claim, and the court agreed. However, on the breach of contract claim, the court found that under the applicable law governing the contract, plaintiff‘s claim was not due to be dismissed. The court elaborated on its reasoning, noting that allegations concerning oral representations made about the policies, specifically, their ability to obtain substantial tax savings with the 419 Plan. Plaintiffs asserted in their second amended complaint that those representations were false and resulted in ―substantial tax penalties and interest‖ due to an IRS audit. Thus, the court found that such allegations, accepted as true, state a claim for a breach of contract under Washington state law.
HAVE YOU BEEN THE VICTIM OF THE SALE OF ABUSIVE LIFE INSURANCE AND ANNUITY PRODUCTS SOLD AS PART OF A PENSION PLAN OR RETIREMENT PLAN?
Abusive Tax Shelters, Insurance and Annuity Product Fraud Lawsuit
RECOVER YOUR LOSSES FROM LIFE INSURANCE 412 (i) AND ANNUITY PRODUCTS SOLD AS PART OF A PENSION PLAN OR RETIREMENT PLAN
Insurance and Annuity Product Fraud Lawsuit
Life Insurance Companies and their Agents have been selling abusive life insurance and annuity products. Many pension plans have been promoted as legitimate retirement plans which contain various life insurance products and annuities. Unfortunately the Internal Revenue Service (“IRS”) has now attacked many of these pension and retirement plans and is conducting audits to demand payment for taxes, penalties and interest and attempting to disqualify many plans.
If you are an accountant, business owner, corporate officer, dentist, doctor, professional athlete, professional or corporation of high net worth, you were unscrupulously targeted by life insurance companies and their agents to purchase a 412i defined benefit pension plan. You were chosen to purchase a 412i plan because you have the net worth to pay for it.
Our investigation has disclosed that many life insurance companies, promoters, attorneys,
and accountants promoted and sold these plans, including but not limited to the following:
• American General Life Insurance Company
• Guardian Life Insurance Company
• Hartford Life and Annuity Insurance Company
• Indianapolis Life Insurance Company
• Pacific Life Insurance Company
• Pension Services, LLC
• Many Other Life Insurance Companies and Agents
• Guardian Life Insurance Company
• Hartford Life and Annuity Insurance Company
• Indianapolis Life Insurance Company
• Pacific Life Insurance Company
• Pension Services, LLC
• Many Other Life Insurance Companies and Agents
The individuals and groups above devised a scheme to sell abusive tax shelters under the auspices of Section 412(i) of the tax code. A 412(i) is a defined benefit pension plan. It provides specific retirement benefits to participants once they reach retirement and must contain assets sufficient to pay those benefits. A 412(i) plan differs from other defined benefit pension plans in that it must be funded exclusively by the purchase of individual life insurance products. To create a 412(i) plan, there must
be a trust to hold the assets. The employer funds the plan by making cash contributions to the trust, and the Code allows the employer to take a tax deduction in the amount of the contributions, i.e. the entire amount.
The trust uses the contributed funds to purchase some combination of life insurance products (insurance or annuities) for the plan. As the plan participants retire, the trust will usually sell the policies for their present cash value and purchase annuities with the proceeds. The revenue stream from the annuities pays the specified retirement benefit to plan participants.
These defendants (with the aid and knowledge of the insurance companies) used the traditional structure and sold life insurance policies with excessively high premiums. The trust then uses the large cash contributions to pay high insurance premiums and the employer takes a deduction for the sum of those large contributions. As you might expect, these policies were designed with excessively high fees or “loads” which provided exorbitant commissions to the insurance companies and the agents who sold the products.
The policies that were sold were termed Springing Cash Value Policies. They had little or no cash value for the first 5-7 years, after which they had significant cash value. Under this scheme, after 5-7 years, and just before the cash value sprung, the participant typically purchases the policy from the trust for the policy’s surrender value. In theory, you have a tax free transaction.
The IRS does not recognize the tax benefit of such a plan and has repeatedly issued announcements indicating that such plans are contrary to federal tax laws and regulations.
Have you received a letter from the IRS either (1) informing you of an upcoming audit of your plan or (2) demanding payment for substantial tax “penalties and interest”? The “tax free” benefit pension plan you purchased might be a scam, a fraud. Please allow us to speak with you and review your documentation to help you to determine your best course of action. Your communications will be treated with the strictest attorney-client confidence.
If you were a victim of such a sale of a 412i or 419 plan, we encourage you to contact us immediately . You may also receive a free initial consultation by telephone at 516 9357346 If you desire a free initial phone consultation please leave a specific time or time period within which to contact you.
Since you have already expanded a substantial amount of money in your pension plan and believed it was a legitimate retirement plan, you are obviously shocked to now learn that major life insurance companies and their agents may have sold you improper retirement plans simply to generate enormous commissions on life insurance and annuities. www.taxaudit419 and www.vebaplan.com have more information.
We also help with abusive tax shelters like 419 welfare benefit plans. In 2002 Lance Wallach wrote to Hartford and other insurance companies telling them that IRS will be increasing 419 audits and law firms would be suing them. What did Hartford do? They sent out some emails to others including their compliance department and continued to sell 419 plans. Give us a call if you want a copy of this.
IRS tax relief firm, Lance Wallach, speaking: How to Avoid IRS Fines for You and Your Clients
Captive Insurance Plans For Your Problems
Captive Insurance Plans
Avoid Paying nondeductible fines or penalties
Find out how we can guide you through these times
Avoid Paying nondeductible fines or penalties
Find out how we can guide you through these times
If the IRS Contacts You... - HG.org
Keep your mouth shut-take this advice seriously.
If you give the agents any opening, you're dead.
They'll start with soft background questions, but before you know it, will have trapped you. And many questions won't be genuine-that is, the agents already know the answers and are asking only to see if you will lie or confess.
Questions typically asked by agents include:
Have you reported all of your income?
Where are your bank accounts and safe deposit boxes?
Can you tell us about the cars, boats, planes, and real estate that you own?
What is the procedure for reporting sales in your business?
Do you keep a lot of cash on hand?
Who are your business associates?
Have you traveled out of the country recently?
Have you or any of your businesses been audited?
Faced with a barrage of questions from trained agents who show up unannounced, most people fall apart. They either blurt out a confession or a transparent lie within five minutes. This gives the Justice Department the rope to hang them with.
Don't Let that happen to you.
ABOUT THE AUTHOR: Lance Wallach
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.
Copyright Lance Wallach, CLU, CHFC
More information about Lance Wallach, CLU, CHFC
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
If the IRS Contacts You... - HG.org
They'll start with soft background questions, but before you know it, will have trapped you. And many questions won't be genuine-that is, the agents already know the answers and are asking only to see if you will lie or confess.
Questions typically asked by agents include:
Have you reported all of your income?
Where are your bank accounts and safe deposit boxes?
Can you tell us about the cars, boats, planes, and real estate that you own?
What is the procedure for reporting sales in your business?
Do you keep a lot of cash on hand?
Who are your business associates?
Have you traveled out of the country recently?
Have you or any of your businesses been audited?
Faced with a barrage of questions from trained agents who show up unannounced, most people fall apart. They either blurt out a confession or a transparent lie within five minutes. This gives the Justice Department the rope to hang them with.
Don't Let that happen to you.
ABOUT THE AUTHOR: Lance Wallach
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.
Copyright Lance Wallach, CLU, CHFC
More information about Lance Wallach, CLU, CHFC
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
Something Like this Can Happen to You
Several years ago at the advice of an accountant or investment advisor a client adopts a defined benefit plan for her business. She did so because she had been advised that under this type of plan she could contribute tax deductible contributions far greater than the limits permitted under a defined contribution plan. Each year she funds the maximum that the IRS permitted based on a report from her actuary. The plan investment returns have been very good.
She is now ready to sell her business or retire and informs her advisors that she wants to close out the plan and transfer the money over into her Individual Retirement Account. The advisors come back with the following news. The plan is overfunded and some of the funds cannot be rolled over to an IRA. Those funds that are ineligible for a rollover must return to the company as taxable income and the IRS will in addition, levy a non-tax deductible penalty of at least 20%.
What happened?
She has done nothing along the way that the IRS could challenge. What happened was a combination of several things.
What happened?
She has done nothing along the way that the IRS could challenge. What happened was a combination of several things.
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