The "Tax Resolution" Offices of "Lance Wallach"
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WallachInc@gmail.com

Most business owners have no idea that they in an abusive tax shelter until it is too late.  Call the Tax Resolution Offices of Lance Wallach today for a FREE phone consultation.  Don't get fined by the IRS.
The IRS Will Try To Scare You Into Paying
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Don't Let Them Get Away With It When
There Is Help Available


Many business owners are now getting "or already got  a Section 6707A letter from the IRS telling them that they will be forced to pay severe  fines and penalties for participating in "412i  retirement plans" or  419 welfare benefit plans.


Reasons this is a threat:
  • 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"..
  • Huge  "IRS penalties" could apply for each year that they have been in the plan.
  • Listed and reportable transactions that are not handled properly are causing people to experience huge IRS fines and penalties.
  • THIS COULD MEAN YOU!!!   
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In addition, 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, can be sued as well.

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We know that this is a very frightening scenario for you if you have received one of these "IRS letters".  We also know how to best deal with the IRS and   any "tax problems" that may arise regarding 412i and "419 plans" or other "insurance plans" that may be considered by the IRS to be "abusive tax shelters".  We will  help you comply with all IRS requirements before it is too late. 

WHY WAIT WHEN  YOU CAN AVOID THE HEADACHES ALTOGETHER? 

Let us help. The first phone call is FREE, and you have nothing to lose by finding out where you stand with the IRS - before the IRS figures it out and fines you.
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If you have not yet received a  letter from the IRS, you still could.  Don't wait for it!  Call us right away to find out how you can AVOID these "IRS penalties" altogether.  The first phone consultation is FREE.

Call 516 - 938 - 5007 NOW!
(Nationwide Assistance)
Or, email us at WallachInc@gmail.com  

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Some Informational Articles:


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419 Welfare Benefit Plans Continue to Get Accountants Into Trouble

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  Slew of Tax Audits: 412(i)


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  Get Sued! ....412(i) Retirement Plans and Other Targeted Employee Benefit Plans


Understanding Section 419e


Avoid IRS Penalties


Some Helpful Websites

TaxAudit419.com   
Lawyer4audits.com
  
TaxLibrary.US
 
IRS.gov Recognized Abusive Listed Transactions

Lance's New Book!


I have a CPA and an Attorney. Why do I need you?

FACT - "The Federal Tax Code is composed of 45,662 pages that require taxpayers to choose from 703 different forms. The Internal Revenue Code has grown to almost 1.4 million words today and is now 500,000 words longer than the Bible."

There is another unequivocal fact that every small businessperson should know - "small privately held businesses pay a considerably higher percentage of their earnings to taxes than do large corporations in America."

 

Why? Well, two reasons are on the payrolls of most small businesses. Though competent and qualified, the attorneys and accountants serving the small business community are not tax specialist. They are general practitioners. Small business attorneys focus mainly on legal matters such as contracts, entity formation and debt collections. Small business accountants wear many hats, such as: handling the books, interacting with the state and federal revenue services, reconciling bank records, preparing quarterly wage reports, etc. They simply don't have the time to spend 50 hours a week, 52 weeks a year, learning the intricacies of the ever changing tax code and applying the tax saving opportunities that lie within it.

 

When it comes to taxes, we have consistently found that most small businesses are merely doing year-end compliance work. Year-end tax compliance is what the IRS requires of a business. Basically, your accountant subtracts your expenses from your revenues, throws in the standard deductions and tells you how much you owe Uncle Sam. Does this sound familiar?

 

Small businesses should, like big businesses, properly structure their organizations to take advantage of the tax code. They should learn the tax reducing opportunities afforded to all businesses, both big and small. Tax Law Associates provides tax expertise that enables the small business owner to legally hold on to a considerably higher percentage of his earnings. 

 

On average, we reduce our clients' tax burdens by 20% to 40%. In fact, if after a complimentary verification of a client's tax disposition, we determine that we cannot reduce his full year tax payout by more than twice our one time fee, we walk away with no obligation to the client. We are so confident in our abilities that we will sign our name to a binding agreement assuring the client those tax savings.

 

 

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.

 

 


Protecting Clients from Fraud, Incompetence and Scams

by:"Lance Wallach"

The following is an expert taken from this book:

Bruce Hink, who has given me permission to utilize his name and circumstances, is a perfect example of what the IRS is doing to unsuspecting business owners.  What follows is a story about Bruce Hink and how the IRS fined him $200,000 a year for being in what they called a “listed transaction”.  In addition, I believe that the accountant who signed the tax return and the insurance agent who sold the retirement plan will each be fined $200,000 as material advisors.  We have received a large number of calls for help from accountants, business owners, and insurance agents in similar situations.  Don’t think this will happen to you.  It is happening to a lot of accountants and business owners, because most of these so-called listed, abusive plans, or plans substantially similar to the so-called listed, are currently being sold by most insurance agents.

Bruce was a small business owner facing $400,000 in IRS penalties for 2004 and 2005 for his 412(i) plan (IRC6707A).  Here is how the story developed.

In 2002 an insurance agent representing a 100-year-old well-established insurance company suggested he start a pension plan.  Bruce was given a portfolio of information from the insurance company, which was given to the company’s outside CPA to review and to offer an opinion.  The CPA gave the plan the green light and the plan was started for tax year 2002.

Contributions were made in 2003.  Then the administrator came out with amendments to the plan, based on new IRS guidelines, in October 2004.

The business owner’s agent disappeared in May 2005 before implementing the new guidelines from the administrator with the insurance company.  The business owner was left with a refund check from the insurance company, a deduction claim on his 2004 tax return that had not been applied, and without an agent.

I took six months of making calls to the insurance company to get a new insurance agent assigned.  By then, the IRS had started an examination of the pension plan.  Bruce asked for advice from the CPA and the local attorney (who had no previous experience in such cases), which made matters worse, with a “big name” law firm being recommended and more than $30,000 in additional legal fees being billed in three months.

To make a long story short, the audit stretched on for more than two years to examine a two-year old pension with four participants and $178,000 in contributions.

During the audit, no funds went to the insurance company.  The company was awaiting IRS approval and restructuring the plan as a traditional defined benefit plan, which the administrator had suggested and which the IRS had indicated would be acceptable.  The $90,000 2005 contribution was put into the company’s retirement bank account along with the 2004 contribution.

In March 2008, the business owner received an apology from the IRS agent who headed the examination.  Even this sympathetic IRS agent thinks there is a problem with the IRS enforcement of these Draconian penalties.  Below is one of her emails to the business owner who was fined $400,000.

From:  XXXXXXXX XXXXX <XXXXXXXX.XXXXX@irs.gov>

Date: Tue, Mar 4, 2008 at 7:12 AM

Subject: RE: Urgent

To: Bruce Hink  <brucehink@XXXXXXX.com>

Thanks Bruce – yes – please just overnight then to the Grand Rapids address.  Once again, I’m sorry about this.  Basically, our Counsel told us that we needed language specific to the IRC 6707A penalty in order for that statute to be extended.  I will ask the Reviewer to hold off an extra day.

            I’m also very sorry that this is getting you down.  Deeply sorry.  It’s very difficult for me as well – before I started working on this project (412(i)) I was doing audits of 401(k) and profit sharing plans.  If there was an error on the plan, the employer would just fix it and the audit was over.  There wasn’t anything controversial about it – and I felt like I was helping people – employers and plan participants.  I really liked my job.  In two years time, that has completely changed.  I know it’s not very “professional” to make such confessions – so forgive me.  But I guess I just wanted you to know that I really sympathize with your situation – and have been doing whatever I can to help.  I know that having this hanging over your head can’t be fun – but as this project goes forward – I think that the IRS is going to have to soften their position somewhat – so these delays may be to your benefit.
    Also, I’m not really supposed to be sending emails to you – but when I went through the file I couldn’t find a good phone number for you.  Could you just send me a note or an email with a current phone number?
   Looking to receive the signed 872s on Thursday.  If you have any questions at any time – please call me at XXX-XXX-XXXX. I’m usually in the office in the mornings.
   The IRS subsequently denied any appeal and ruled in October 2008 that the $400,000 penalty would stand.

Could You or One of Your Clients Be Next?

Some of the areas SB/SE will be examining include pass-though entities, high-income filers, and abusive transactions.  S corporations are likely to receive particular scrutiny.  Further review would not be limited to S corporations, but would extend to pass-through entities like partnerships, which can expect to receive a “significant amount of attention” because SB/SE has found an area of abuse and would like to curb what is called a growing trend of abusive high-income filers, typically classified as those with an adjusted gross income of more than $200,000.

The IRS has been cracking down on what it considers to be abusive tax shelters.  Many of them are being marketed to small business owners by insurance professionals, financial planners, and even accountants and attorneys.  I speak at numerous conventions, for both business owners and accountants.  And after I speak, I am always approached by many people who have questions about tax reduction plans that they have heard about.

I have been an expert witness in many of these 419 and 412(i) lawsuits and I have not lost one of them.  If you sold one or more of these plans, get someone who really knows what they are doing to help you immediately.  Many advisors will take your money and claim to be able to help you.  Make sure they have experience helping accountants who signed the tax returns.  IRS calls them material advisors and fines them $200,000 if they are incorporated or $100,000 if they are not.  Do not let them learn on the job, with your career and money at stake.

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Lance Wallach, a member of the AICPA faculty of teaching professionals and an AICPA course developer, is a frequent and popular speaker on retirement plans, financial and estate planning, reducing health insurance costs, and tax-oriented strategies at accounting and financial planning conventions. He has authored numerous books including The Team Approach to Tax, Financial and Estate Planning, Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots, and Sid Kess’ Alternatives to Commonly Misused Tax Strategies: Ensuring Your Client’s Future, all published by the AICPA, and Wealth Preservation Planning by the National Society of Accountants. His newest books CPAs’ Guide to Life Insurance and CPAs’ Guide to Federal and Estate Gift Taxation by Bisk CPEasy, and Protecting Clients from Fraud, Incompetence, and Scams, published by John Wiley and Sons, Inc.

Mr. Wallach, CLU, CHFC, is a leading speaker on accounting and taxation topics and the author of numerous AICPA CPA exam publications.  In addition to developing CPE courses, he is also a member of the AICPA faculty of teaching professionals, and has been featured in the
Wall Street Journal, the New York Times, Bloomberg Financial News, NBC, National Pubic Radio’s All Things Considered, and other radio talk shows.  Mr. Wallach is listed in Who’s Who in Finance and Business.

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.

 Section 79

 

a) General rule

There shall be included in the gross income of an employee for the taxable year an amount equal to the cost of group-term life insurance on his life provided for part or all of such year under a policy (or policies) carried directly or indirectly by his employer (or employers); but only to the extent that such cost exceeds the sum of—

(1)the cost of $50,000 of such insurance, and

(2)the amount (if any) paid by the employee toward the purchase of such insurance.

(b) Exceptions

Subsection (a) shall not apply to—

(1)the cost of group-term life insurance on the life of an individual which is provided under a policy carried directly or indirectly by an employer after such individual has terminated his employment with such employer and is disabled (within the meaning of section 72(m)(7)),

(2)the cost of any portion of the group-term life insurance on the life of an employee provided during part or all of the taxable year of the employee under which—

(A)the employer is directly or indirectly the beneficiary, or

(B)a person described in section 170(c) is the sole beneficiary,

for the entire period during such taxable year for which the employee receives such insurance, and

(3)the cost of any group-term life insurance which is provided under a contract to which section 72(m)(3) applies.

(c) Determination of cost of insurance

For purposes of this section and section 6052, the cost of group-term insurance on the life of an employee provided during any period shall be determined on the basis of uniform premiums (computed on the basis of 5-year age brackets) prescribed by regulations by the Secretary.

(d) Nondiscrimination requirements

(1) In general

In the case of a discriminatory group-term life insurance plan—

(A)subsection (a)(1) shall not apply with respect to any key employee, and

(B)the cost of group-term life insurance on the life of any key employee shall be the greater of—

(i)such cost determined without regard to subsection (c), or

(ii)such cost determined with regard to subsection (c).

(2) Discriminatory group-term life insurance plan

For purposes of this subsection, the term “discriminatory group-term life insurance plan” means any plan of an employer for providing group-term life insurance unless—

(A)the plan does not discriminate in favor of key employees as to eligibility to participate, and

(B)the type and amount of benefits available under the plan do not discriminate in favor of participants who are key employees.

(3) Nondiscriminatory eligibility classification

(A) In general

A plan does not meet requirements of subparagraph (A) of paragraph (2) unless—

(i)such plan benefits 70 percent or more of all employees of the employer,

(ii)at least 85 percent of all employees who are participants under the plan are not key employees,

(iii)such plan benefits such employees as qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of key employees, or

(iv)in the case of a plan which is part of a cafeteria plan, the requirements of section 125 are met.

(B) Exclusion of certain employees

For purposes of subparagraph (A), there may be excluded from consideration—

(i)employees who have not completed 3 years of service;

(ii)part-time or seasonal employees;

(iii)employees not included in the plan who are included in a unit of employees covered by an agreement between employee representatives and one or more employers which the Secretary finds to be a collective bargaining agreement, if the benefits provided under the plan were the subject of good faith bargaining between such employee representatives and such employer or employers; and

(iv)employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).

There is no mention of the IRS and how the audit people that use these plans.