Where can I get Help with Section 79 Plan Problem?

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Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots, by Sid Kess

Author/Moderator: Lance Wallach, CLU, CHFC, CIMC
Publisher: AICPA
Availability: In Stock

Description
Table of Contents
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Description

This course will enable the practitioner to better understand many of the abusive insurance and annuity-based products being marketed to your clients and how you can alleviate exposure to IRS scrutiny.
Objectives: 
  • Identify potentially abusive deductions claimed on your client’s tax return
  • Enable the practitioner to advise his clients so they can avoid IRS penalties and deduction disallowances
  • Learn the pros and cons of the current strategies being employed by financial professionals in developing comprehensive financial plans for individuals and businesses
  • Learn to avoid financial exposure to yourself and your clients for aggressive insurance, retirement and financial planning strategies being marketed today
Prerequisite: None
Accepted for CFP® credit.
See full description

Table of Contents

    • Course Objectives
    • Introduction
    • Organization
  • \Chapter 1 - Abusive Tax Avoidance Transactions - Circular 230 Implications and
733720


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NASBA Field of Study: Taxes
Level: Intermediate
Recommended CPE Credit: 6
Important Information on Your CPE Credit
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11 comments:

  1. irsdogDecember 17, 2014 at 8:56 AM

    Reportable Transactions & 419 Plans Litigation
    412i, 419e plans litigation and IRS Audit Experts for abusive insurance based plans deemed reportable or listed transactions by the IRS.
    ReplyDelete
    Replies

    Lance WallachApril 15, 2014 at 11:17 AM
    Section 79 Plans
    412i, 419e plans litigation and IRS Audit Experts for abusive insurance reportable or listed transactions by the IRS,Section 79, Section 79 Lawsuits,412i, 419e plans litigation and IRS Audit Experts for abusive insurance based plans deemed reportable or listed transactions by the IRS.Benistar,412i Lawsuits,419 lawsuits,412i Help,419 Help, IRS Audits,412i Problems,412i problems, Expert Witness Lance Wallach,412i Help,419 Help, Benistar Lawsuits, 412i lawsuits,419 lawsuits,

    Friday, June 21, 2013

    Follow the plan and get audited.
    Follow the plan and get audited.

    What is a Section 79 Plan?Protection, Retirement, Innovation. A permanent benefit life insurance plan (using IRS codes) that can add substantial retirement income via sheltered cash accumulation and protection to the business owner(s) as well as the employees at a minimal cost and in a tax-advantaged way.

    Delete

    ReplyDelete
  2. Lance WallachApril 21, 2015 at 1:50 PM

    I’ve had several calls lately from doctors who are being pitched Section 79 plans and are wondering if these plans are any good. The doctors are being told that Section 79 plans are the best wealth-building tool they can use to reduce their income taxes and create a tax-free retirement income.

    Unfortunately for these unsuspecting doctors, what they don’t know is that not only are Section 79 plans not the best wealth-building tool they can use, they are not even a good wealth-building tool.

    I have problems with Section 79 plans for several reasons:

    1. You have to lie to employees to implement them. Most try to exclude workers.

    2. The life illustrations given by ignorant or crooked insurance agents are not realistic. Most use today’s historically low lending rates with 2 percent to 3 percent loan spreads on variable loans on EIUL policies (ones that do not have a fixed lending rate).

    3. You have to be a C-corporation to use them. Many agents don’t inform their clients of this.

    4. The life policies sold in these plans are so bad that the companies don’t want them sold unless they are in Section 79 plans. (The policies are designed to have poor performance so the deduction is increased.) This is similar to the springing cash value problems with the 412i and 419 plans that got people audited and sued.

    5. Another very good reason not to use these plans is because there are better alternatives.

    6. Another reason not to use a Section 79 plan is because when you run the real numbers, the client would be better off not funding the plan, taking his/her money home after taxes, and funding a good no load EIUL policy.

    7. The IRS audits many of them and unless you properly file under IRS 6707A the fines are very large.

    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 more than 50 publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Public Radio’s “All Things Considered” and others.

    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.

    ReplyDelete
  3. Lance WallachApril 21, 2015 at 1:50 PM

    I’ve had several calls lately from doctors who are being pitched Section 79 plans and are wondering if these plans are any good. The doctors are being told that Section 79 plans are the best wealth-building tool they can use to reduce their income taxes and create a tax-free retirement income.

    Unfortunately for these unsuspecting doctors, what they don’t know is that not only are Section 79 plans not the best wealth-building tool they can use, they are not even a good wealth-building tool.

    I have problems with Section 79 plans for several reasons:

    1. You have to lie to employees to implement them. Most try to exclude workers.

    2. The life illustrations given by ignorant or crooked insurance agents are not realistic. Most use today’s historically low lending rates with 2 percent to 3 percent loan spreads on variable loans on EIUL policies (ones that do not have a fixed lending rate).

    3. You have to be a C-corporation to use them. Many agents don’t inform their clients of this.

    4. The life policies sold in these plans are so bad that the companies don’t want them sold unless they are in Section 79 plans. (The policies are designed to have poor performance so the deduction is increased.) This is similar to the springing cash value problems with the 412i and 419 plans that got people audited and sued.

    5. Another very good reason not to use these plans is because there are better alternatives.

    6. Another reason not to use a Section 79 plan is because when you run the real numbers, the client would be better off not funding the plan, taking his/her money home after taxes, and funding a good no load EIUL policy.

    7. The IRS audits many of them and unless you properly file under IRS 6707A the fines are very large.

    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 more than 50 publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Public Radio’s “All Things Considered” and others.

    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.

    ReplyDelete
  4. UnknownApril 18, 2016 at 11:43 AM

    #section79audits

    ReplyDelete
  5. UnknownApril 18, 2016 at 11:44 AM

    #section79audits

    ReplyDelete
  6. UnknownJune 6, 2016 at 2:21 PM

    Telephone: 516-938-5007
    Telephone: 516-938-5007
    Search SKIP TO CONTENT
    CAPTIVE INSURANCE PROBLEMS? UNDERSTANDING CAPTIVE INSURANCE OUR QUALIFICATIONS OUR SERVICES CONTACT US
    419, 412I, CAPTIVE AND SECTION 79 PLANS CONTINUE TO DRAW IRS ATTENTION
    MAY 13, 2015 ADMIN
    by Lance Wallach
    by Lance Wallach
    Recent court cases have highlighted serious problems in welfare benefit plans issued by Nova Benefit Plans. Recently unsealed IRS criminal case information now raises concerns with other plans as well. If you have any type plan issued by NOVA Benefit Plans, U.S. Benefits Group, Benefit Plan Advisors, Grist Mill trusts, Rex Insurance Service or Benistar, you may have a criminal problem. You may be subject to an audit or in some cases, criminal prosecution.

    On November 17th, Fifty-nine pages of search warrant materials were unsealed in the Nova Benefit Plans litigation currently pending in the U.S. District Court for the District of Connecticut. According to these documents, the IRS believes that Nova is involved in a significant criminal conspiracy involving the crimes of Conspiracy to Impede the IRS and Assisting in the Preparation of False Income Tax Returns.

    In 2010, seventy armed IRS Criminal Division special agents raided the offices of Nova Benefit Plans. The IRS has taken other recent criminal enforcement actions in other states including Nebraska and Milwaukee, Wisconsin. The IRS has told the court that it believes Nova is promoting abusive “section 419” welfare benefit plans.

    continue reading the article

    CAPTIVE INSURANCECAPTIVE INSURANCE HISTORYEXPERT WITNESSLANCE WALLACH EXPERT WITNESS
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    PREVIOUS POST

    ReplyDelete
  7. UnknownJune 6, 2016 at 2:21 PM

    Telephone: 516-938-5007
    Telephone: 516-938-5007
    Search SKIP TO CONTENT
    CAPTIVE INSURANCE PROBLEMS? UNDERSTANDING CAPTIVE INSURANCE OUR QUALIFICATIONS OUR SERVICES CONTACT US
    419, 412I, CAPTIVE AND SECTION 79 PLANS CONTINUE TO DRAW IRS ATTENTION
    MAY 13, 2015 ADMIN
    by Lance Wallach
    by Lance Wallach
    Recent court cases have highlighted serious problems in welfare benefit plans issued by Nova Benefit Plans. Recently unsealed IRS criminal case information now raises concerns with other plans as well. If you have any type plan issued by NOVA Benefit Plans, U.S. Benefits Group, Benefit Plan Advisors, Grist Mill trusts, Rex Insurance Service or Benistar, you may have a criminal problem. You may be subject to an audit or in some cases, criminal prosecution.

    On November 17th, Fifty-nine pages of search warrant materials were unsealed in the Nova Benefit Plans litigation currently pending in the U.S. District Court for the District of Connecticut. According to these documents, the IRS believes that Nova is involved in a significant criminal conspiracy involving the crimes of Conspiracy to Impede the IRS and Assisting in the Preparation of False Income Tax Returns.

    In 2010, seventy armed IRS Criminal Division special agents raided the offices of Nova Benefit Plans. The IRS has taken other recent criminal enforcement actions in other states including Nebraska and Milwaukee, Wisconsin. The IRS has told the court that it believes Nova is promoting abusive “section 419” welfare benefit plans.

    continue reading the article

    CAPTIVE INSURANCECAPTIVE INSURANCE HISTORYEXPERT WITNESSLANCE WALLACH EXPERT WITNESS
    Post navigation
    PREVIOUS POST

    ReplyDelete
  8. Lance WallachAugust 10, 2016 at 10:03 AM

    419 Plan Litigation – (516) 935-7346
    419 Plan Litigation – (516) 935-7346
    Search SKIP TO CONTENT
    UNDERSTANDING 419 LITIGATION HOW INSURANCE COMPANIES SCAM CONSn the amount of tax-deductible prefunding permitted for contributions to a welfare benefit fund. Section 419(A)(F)(6) provides an exemption from
    Section 419 and Section 419A for certain “10-or-more-employers” welfare benefit funds. In general, for this exemption to apply, the fund must have more than one contributing employer of which no single employer can contribute more than 10% of the total contributions. Also, the plan must not be experience-rated with respect to individual employers.
    According to the Notice, these arrangements typically involve an investment in variable life or universal life insurance contracts on the lives of the covered employees. The problem is that the employer contributions are large relative to the cost of the amount of term insurance that would be required to provide the death benefits under the arrangement. Also, the trust administrator can cash in or withdraw the cash value of the insurance policies to get cash to pay benefits other than death benefits. The plans are often designed to determine an employer’s contributions or its employees’ benefits based on a way that insulates the employer to a significant extent from the experience of other subscribing employers. In general, the contributions and claimed tax deductions tend to be disproportionate to the economic realities of the arrangements.

    Benistar advertised that enrollees should expect the same type of tax benefits as listed in the transaction described in Notice 95-34. The advertising packet listed the following benefits of enrollment:

    Read more

    419E419E LITIGATIONLANCE WALLACH EXPERT WITNESS
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    More Problems for 419 Plans
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    ReplyDelete
  9. UnknownApril 24, 2017 at 9:46 AM


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    Section 79 Plans
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    Disadvantages of Section 79 Plans
    MoneyInTheToiletThe reason that the Section 79 plans are so marginal is because the insurance policy that is being purchased is set up poorly to get the full deduction. The types of cash value life insurance policies resulting from Section 79 plans don’t return much money in retirement. It is more beneficial if the business owner takes a smaller deduction and has a better cash value life insurance policy. With a quality Cash Value Life Insurance Policy, the business owner would receive a deduction of between 5% and 8% which doesn’t make economic sense.

    Life insurance agents push Section 79 plans without full disclosure. Agents have 2 main reasons for pushing these plans. Reason 1: business owners hate paying taxes and are attracted to the tax deductions with Section 79 plans. Reason 2: advisors want to make a sale.

    Business owners really need to be informed so that they could make educated decisions in regards to such plans. These plans do not provide much in terms of financial benefits, asset protection, or wealth building for retirement. In most cases agents suggest these plans just because they know the owner is looking for tax deductions. However, this does not mean that the plans are beneficial. There are much better ways to get tax deductions.

    Life insurance agents will rarely take the time to crunch numbers and present the actual breakdown to the client. This is why business owners must be aware of what they are buying into. Instead of getting involved with a Section 79 plan, small business owners would reap more benefits from paying the business income taxes and then funding a good Equity Indexed Universal Life in order to generate wealth in retirement.

    Example:

    Section 79 loaned money that is tax free annually = $125,469
    Quality policy loaned money annually = $187,626
    The difference in the amounts are definitely not worth the 40% deduction for the Section 79 Plan. It would actually be a very poor choice on behalf of the business owner if he decided to use a Section 79 plan after seeing the math.



    Agents will try to convince business owners into using a Section 79 Plan by placing the majority of the focus on the deduction.

    Unfortunately most business owners won’t calculate the numbers before jumping right in.

    Life insurance advisors main incentives are to make money, which means they want to sell insurance period.

    They really don’t care if these plans are the right way or the wrong way for the business owner.

    This is why it is essential for business owners to ask for full disclosure from the advisor before making any decision.
    SECTION 79 PLANS MAY NOT BE THE WISEST DECISION
    Even though many small business owners would like to benefit from the 20-40% tax deduction, we want to focus on why the Section 79 plans give lesser returns than other retirement plans. Even with the tax deduction, they don't make good financial sense.
    SECTION 79 PLANS ARE TARGETS OF IRS AUDITORS
    We know the ins and outs of these plans enough to protect you and your clients. You WILL be audited. It's not a question of if, just a matter of when. Educate yourself here and then feel free to call for assistance. Your finances are at risk if you put off dealing with problems of such.
    CIVIL AND CRIMINAL PENALTIES – ABUSIVE TAX SCHEMES
    Investors of abusive tax schemes that try to escape their legal tax responsibilities are still liable for taxes, interest, and civil penalties. Violations of the Internal Revenue Code with the intent to evade income taxes may result in a civil fraud penalty or criminal prosecution. Civil fraud can include a penalty of up to 75% of the underpayment of tax attributable to fraud, in addition to the taxes owed. Criminal convictions of promoters and investors may result in fines up to $250,000 and up to five years in prison.

    ReplyDelete
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