Lance Wallach Life Insurance: Captive Insurance Buyer Beware

Advertisements

IRS Facts and Issues

Facts

There is no such thing as a hopeless tax case. Citizens really have so many rights, if you know just a few of them you will never pay taxes, interest or IRS penalties you don’t owe.”

If you are presently embroiled in IRS conflict and need word of encouragement, then read the following…

FACT ONE:

Last year the IRS cancelled 4.9 million penalties, saving taxpayers $11.13 billion in penalties they didn’t owe..

FACT TWO:

When properly challenged, the IRS cancels 60 cents of every dollar assessed in employment tax penalties.

FACT THREE:

There are four IRS approved programs of tax debt forgiveness.

FACT FOUR:

The IRS settles delinquent tax debt for between 10 to 20 cents on the dollar when a proper request is made for tax debt forgiveness.

FACT FIVE:

By asserting the right to a correspondence audit, the average tax audit bill was reduced by as much as 58%.

FACT SIX:

Last year, millions of citizens won installment agreements, thus avoiding wage and bank levies and property seizures.

FACT SEVEN:

IRS auditors have NO POWER to change your tax liability without YOUR approval.

 

IRS ISSUES 

Much has been made of recent restructuring legislation pointed at ending IRS errors and abuse. Historically, such legislation has had little impact on the agency. The reason is the IRS simply does not tell the truth about taxpayers’ rights. Consequently, if you do not understand your rights in a given situation, you cannot expect the IRS to explain them. For example, when was the last time you received a kind letter from the IRS explaining that you paid too much in taxes or overlooked certain rights that might cut your bill? Such letters are rare indeed!

 

On the other hand, millions of citizen are confronted by the agency for alleged legal failings. Each year the IRS…

  • issues some one hundred million computer notices affecting nearly $200 billion in accounts;
  • issues over thirty-four million penalties against individuals and businesses;
  • executes over four million wage and bank levies;
  • files about four million general tax liens;
  • seizes tens of thousands of businesses, autos, homes, and other property, and audits nearly 2 million business and personal income tax returns.

Nearly everybody has gone through some kind of IRS enforcement difficulty and we all know somebody who is going through it now. But few have effective solutions. Too often, professional advice from tax accountants is, “well, it’s the IRS. You just have to pay.” Unfortunately, precious few take the time to understand that there are solutions to every IRS problem. Indeed, there is no such thing as a hopeless tax case. There is always a way to solve the problem.

 

For many people, this Problem Solver provides an immediate solution to a pressing IRS problem. Simple solutions are provided to problems such as wage and bank levies, IRS computer notices and penalty assessments. In other cases, this Problem Solver serves as a guide to what you must do to ultimately solve your problem. And even if you owe taxes, penalties and interest you cannot pay, you can be forgiven of all or part of your debt.

 

Because the IRS resists directing you to solutions to most tax problems (especially the problem of excessive tax debt) this IRS Common Problems Solver is designed to fill that void. It describes numerous taxpayer rights and remedies and shows you the steps to take to determine which solution best suits your situation. In addition, you will be introduced to an array of affordable, effective self-help materials and services to help you end your problem.

 

Too often, the biggest IRS problem for millions of people is the fact that it costs more to fight the agency than it does to just pay the tax. For those who cannot pay the tax or afford professional help, they live only with the promise of life-long indebtedness to the IRS–a hopeless situation. Now there is a solution. 

 

Now, at last, the price of tax freedom is not out of reach for anyone. However, the IRS is always working to close the door to freedom that we have worked so hard to open and expose. The IRS is always working behind the scenes to limit your rights thereby ensuring you are always a slave to tax debt. Therefore, if you have a tax problem, now is the time to address it. It only gets worse as time goes on. As you read this Problem Solver, draw encouragement from the testimonials found throughout the text and act now to solve your problem once and for all.



You may have read about how the IRS gives problems to political organizations. That is nothing compared to the honest hard working people that the IRS will, or has already harmed. To read more, click the link below.

 

Or contact Lance Wallach for more information at a convenient time for you at 51

Free Forum for Finance

Anyone may use this free forum provided by http://www.financeexperts.org
America’s Association of Leading Experts in the Legal, Financial, Accounting and Insurance Fields and Your Source of Trusted Professionals.

Finance Experts Forum

Nobody Likes Paying Taxes

March 8, 2010

In a speech last May, President Obama said, “Nobody likes paying taxes . . . . And yet, even as most American citizens and businesses meet these responsibilities, there are others who are shirking theirs.” He was referring to offshore tax havens and other loopholes that wealthy Americans often exploit to reduce their tax burden. But it doesn’t take moving money to Switzerland to avoid paying taxes. If history is any guide, 2010 will be a year in which many Americans use a few simple methods to reduce their tax liability, which could potentially cost the government billions of dollars.

This year is the last before the expiration of tax cuts originally put in place by the Bush administration. If Congress allows these tax cuts to expire, as the president supports, in 2011 the top marginal tax rates will increase from 28, 33, and 35 percent to 31, 36, and 39.6 percent.

Although it is not certain that tax rates will go up, many wealthy Americans are looking at 2010 as the end of the party. “Everybody thinks taxes are going up and tax breaks are being eliminated. Everybody’s thinking this, and they’re planning for it,” says Lance Wallach, a New York author, lecturer, and financial consultant who advises high net-worth clients, including entertainers and athletes. His phone is ringing off the hook with questions from clients about how they can take advantage of this year’s rates relative to 2011’s.

One of the most popular strategies is moving income from 2011 to this year. Usually, accountants encourage clients to postpone income so there is less income taxed in one year. But in 2010, the incentives have flipped. “This is the exact opposite. Accelerating your income makes 100 percent sense,” says Wallach.

Creative maneuvering. This would not be the first year taxpayers have pursued this strategy. In 1992, Bill Clinton was elected president with promises to raise taxes on wealthy Americans, which Congress did in 1993, boosting the top marginal rate from 31 to 39.6 percent. In late 1992, many taxpayers, expecting rates to be higher the next year because of Clinton’s victory, moved more income onto 1992’s tax return to avoid paying more with the higher rate. Robert Carroll, an economist at a Washington research organization called the Tax Foundation, estimates that about $20 billion was shifted and paid at the 31 percent rate rather than the 39.6 percent—meaning there was about $1.5 billion that the federal government did not collect in revenue.

Something similar could happen this year. “Anyone who has flexibility with income is going to try to shift their income,” says Carroll. An example of flexibility would be a business owner who gives himself or herself a bonus in December 2010 rather than January 2011.

There’s also an incentive to delay tax deductions. For example, state property and income taxes can be deducted from federal income tax returns. Wallach says he is recommending that clients hold off on paying those taxes until next year, so that the deductions can be cashed in at the higher rate.

Some may choose to delay charitable gifts for the same reason—charitable giving is tax deductible, so some taxpayers may decide to hold off on a gift they would make in 2010 and instead give a larger amount in 2011. “What we know from history, if the taxes go up, people will delay their giving,” says Nancy Raybin, chair of the Giving Institute, an association of nonprofit consultants. But Raybin says such delays usually are not significantly damaging to charities because people will often just push a gift forward a few months—from December to January, for example. “If there’s a 12-month delay, it could be a problem. But if a donor is just delaying one month, it’s not a big problem,” she says.

These tax-avoidance strategies will probably be a one-time deal for those who pursue them. A study by economist Austan Goolsbee, currently a member of the Council of Economic Advisers, found that the 1993 drop-off in reported income was temporary. Income bounced back in following years. If tax rates appear to be steady after 2011, accelerating one’s income or delaying deductions is no longer advantageous. But taxpayers will continue to look for ways to reduce their liability—they just need the time and money to find the loopholes.

Wallach says most of his clients will adjust to higher tax rates with his help. “For the very sophisticated people, there will always be loopholes,” he says, such as deducting travel and entertainment expenses. “None of my clients pay more in taxes than a schoolteacher.” For issues like these Wallach has various websites including www.taxlibrary.us .

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, financial and estate planning, and abusive tax shelters.  He writes about 412(i), 419, 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 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.taxaudit419.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.

Tax Shelter Penalty Cases Hurt Thousands of Small Business Owners

Gerson Lehrman Group

March, 2011

  • Analysis by: GLG Expert Contributor Lance Wallach

Summary

Insurance agents and others sell 412i, 419, captive insurance and section 79 plans to unsuspecting business owners. Since the IRS is calling these plans abusive tax shelters, many small business owners are getting audited and getting penalties under IRC 6707A. They have even fined material advisors and accountants for their participation, and small business owners need to know how to protect themselves from the long reach of the IRS.

Analysis

Insurance agents and others sell 412i, 419, captive insurance and section 79 scams to unsuspecting business owners. The IRS considers many of these plans abusive tax shelters, listed transactions, reportable transactions, or what it calls “similar to,” which allows them to target the plan. The unsuspecting business owners then get audited by the IRS, lose their deductions, and pay interest and penalties. Then comes the bad news. The IRS comes back and fines the business owners a large amount of money for not properly filing under IRC 6707A. They have even fined hundreds of business owners who have filed. The IRS says that they prepared the forms incorrectly or filed improperly, or lied to the IRS.

Taxpayers must report certain transactions to the IRS under Section 6707A of the Tax Code, which was enacted in 2004 to help detect, deter, and shut down abusive tax shelter activities. For example, reportable transactions may include being in a 419,412i, or other insurance plan sold by insurance agents for tax deduction purposes. Other abusive transactions could include captive insurance and section 79 plans, which are usually sold by insurance agents for tax deductions. Taxpayers must disclose their participation in these and other transactions by filing a Reportable Transactions Disclosure Statement (Form 8886) with their income tax returns. People that sell these plans are called material advisors and must also file 8918 forms properly. Failure to report the transactions could result in very large penalties. Accountants who sign tax returns that have these deductions can also be called material advisors and should also file forms 8918 properly.

The IRS has fined hundreds of taxpayers who did file under 6707A. They said that they did not fill out the forms properly, or did not file correctly. The plan administrator or a 412i advised over 200 of his clients how to file. They were then all fined by the IRS for filling out the forms wrong. The fines averaged about $500,000 per taxpayer.

A report by the Treasury Inspector General for Tax Administration (TIGTA) found that the procedures for documenting and assessing the Section 6707A penalty were not sufficient or formalized, and cases often are not fully developed.

TIGTA evaluated the IRS’s effectiveness in identifying, developing, and applying the Section 6707A penalty. Based on its review of 114 assessed Section 6707A penalties, TIGTA determined that many of these files were incomplete or did not contain sufficient audit evidence. TIGTA also found a need for better coordination between the IRS’s Office of Tax Shelter Analysis and other functions.

“As penalties are meant to encourage voluntary taxpayer compliance, it is important that IRS procedures for documenting and assessing them be well developed and fully documented,” said TIGTA Inspector General J. Russell George in a statement. “Any failure to do so raises the risk that taxpayers will not receive consistent and fair treatment under the law, and could further reduce their willingness to comply voluntarily.”

The Section 6707A penalty is a stand-alone penalty and does not require an associated income tax examination; therefore, it applies regardless of whether the reportable transaction results in an understatement of tax. TIGTA determined that, in most cases, the Section 6707A penalty was substantially higher than additional tax assessments taxpayers received from the audit of underlying tax returns. I have had phone calls from taxpayers that contributed less than $100,000 to a listed transaction and were fined over $500,000. I have had phone calls from taxpayers that went into 419, or 412i plans but made no contributions and were fined a large amount of money for being in a listed transaction and not properly filing forms under IRC section 6707A. The IRS claims that the fines are non appealable.

On July 7, 2009, at the request of Congress, the IRS agreed to suspend collection enforcement actions. However, this did not preclude the issuance of notices of assessment that are required by law and adjustment notices that inform the taxpayer of any account activity. In addition, taxpayers continued to receive balance due and final notices of intent to levy, and demands to pay Section 6707A penalties.

TIGTA recommended that the IRS fully develop, document, and properly process Section 6707A penalties. The IRS agreed with TIGTA’s recommendation and plans to take appropriate corrective actions. I think as a result of this many taxpayers who have not yet been fined will shortly receive the fines. Unless a taxpayer files properly there is no statute of limitations. The IRS has, and will continue to go back many years and fine people that are in listed, reportable or substantially similar to transactions.

If you are, or were in a 412i, 419, captive insurance or section 79 plan you should immediately file under 6707A protectively. If you have already filed you should find someone who knows what he is doing to review the forms. I only know of two people who know how to properly file. The IRS instructions are vague. If a taxpayer files wrong, or fills out the forms wrong he still gets the fine. I have had hundreds of phone calls from people in that situation.


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, financial and estate planning, and abusive tax shelters.  He writes about 412(i), 419, and captive insurance plans. He speaks at more than ten conventions annually, writes for more than 20 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 AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and his side has never lost a case. Visit www.taxaudit419.com for more on this subject.

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.