"Niche" "Bisys" "Veba" "Doug Williams" "arch bonnema" "steve toth" "captive insurance" "michael sonnenberg" "ron snyder" "brian cave" "benistar" "norm bevan" "doug williams" " williams coulson" "dennis cunning" "phil rowe" "sadi trust" "beta plan" "millennium plan" "grist mill trust" "compass welfare benefit plan" "sea nine" "professional benefits trust" "kenny harstein," "integrity 419" "integrity benefit plan" "veba plan" "sterling 419" "judy carsrud" |


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By Lance Wallach Taxpayers who previously adopted 419, 412i, captive insurance or Section 79 plans are in big trouble. In recent years, the IRS has identified many of these arrangements as abusive devices to funnel tax deductible dollars to shareholders and classified these arrangements as listed transactions." These plans were sold by insurance agents, financial planners, accountants and attorneys seeking large life insurance commissions. In general, taxpayers who engage in a “listed transaction” must report such transaction to the IRS on Form 8886 every year that they “participate” in the transaction, and you do not necessarily have to make a contribution or claim a tax deduction to participate. Section 6707A of the Code imposes severe penalties for failure to file Form 8886 with respect to a listed transaction. But you are also in trouble if you file incorrectly. I have received numerous phone calls from business owners who filed and still got fined. Not only do you have to fi le Form 8886, but it also has to be prepared correctly. I only know of two people in the U.S. who have filed these forms properly for clients. They tell me that was after hundreds of hours of research and over 50 phones calls to various IRS personnel. The filing instructions for Form 8886 presume a timely fi ling. Most people fi le late and follow the directions for currently preparing the forms. Then the IRS fines the business owner. The tax court does not have jurisdiction to abate or lower such penalties imposed by the IRS. "Many taxpayers who are no longer taking current tax deductions for these plans continue to enjoy the benefit of previous tax deductions by continuing the deferral of income from contributions and deductions taken in prior years." Many business owners adopted 412i, 419, captive insurance and Section 79 plans based upon representations provided by insurance professionals that the plans were legitimate plans and were not informed that they were engaging in a listed transaction. Upon audit, these taxpayers were shocked when the IRS asserted penalties under Section 6707A of the Code in the hundreds of thousands of dollars. Numerous complaints from these taxpayers caused Congress to impose a moratorium on assessment of Section 6707A penalties. The moratorium on IRS fines expired on June 1, 2010. The IRS immediately started sending out notices proposing the imposition of Section 6707A penalties along with requests for lengthy extensions of the Statute of Limitations for the purpose of assessing tax. Many of these taxpayers stopped taking deductions for contributions to these plans years ago, and are confused and upset by the IRS’s inquiry, especially when the taxpayer had previously reached a monetary settlement with the IRS regarding its deductions. Logic and common sense dictate that a penalty should not apply if the taxpayer no longer benefits from the arrangement. Treas. Reg. Sec. 1.6011- 4(c)(3)(i) provides that a taxpayer has participated in a listed transaction if the taxpayer’s tax return reflects tax consequences or a tax strategy described in the published guidance identifying the transaction as a listed transaction or a transaction that is the same or substantially similar to a listed transaction. Clearly, the primary benefit in the participation of these plans is the large tax deduction generated by such participation. Many taxpayers who are no longer taking current tax deductions for these plans continue to enjoy the benefit of previous tax deductions by continuing the deferral of income from contributions and deductions taken in prior years. While the regulations do not expand on what constitutes “reflecting the tax consequences of the strategy,” it could be argued that continued benefit from a tax deferral for a previous tax deduction is within the contemplation of a “tax consequence” of the plan strategy. Also, many taxpayers who no longer make contributions or claim tax deductions continue to pay administrative fees. Sometimes, money is taken from the plan to pay premiums to keep life insurance policies in force. In these ways, it could be argued that these taxpayers are still “contributing,” and thus still must file Form 8886. It is clear that the extent to which a taxpayer benefits from the transaction depends on the purpose of a particular transaction as described in the published guidance that caused such transaction to be a listed transaction. Revenue Ruling 2004-20 which classifies 419(e) transactions, appears to be concerned with the employer’s contribution/deduction amount rather than the continued deferral of the income in previous years. Another important issue is that the IRS has called CPAs material advisors if they signed tax returns containing the plan, and got paid a certain amount of money for tax advice on the plan. The fi ne is $100,000 for the CPA, or $200,000 if the CPA is incorporated. To avoid the fine, the CPA has to properly file Form 8918. Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, Wallach is a frequent speaker on retirement plans, financial and estate planning, and abusive tax shelters. He is also a featured writer and has been interviewed on television and financial talk shows including NBC, National Pubic Radio’s All Things Considered and others. Lance authored 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. Contact him at: 516.938.5007, wallachinc@gmail.com, or www.taxadvisorexperts.org, or www.taxlibrary.us. 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. Benefit Plan,Compass 419,Niche 419,CRESP,Sea Nine Veba,American Benefits Trust,National Benefit Plan and Trust,ABT,Benistar 419 Plan,Millennium 419 Plan,Bisys 419,Creative Services Group 419 Plan,Sterling Benefit 419 Plan,CRESP 419,Sea Nine Veba 419,National Benefit Plan and Trust 419,American Benefits Trust 419,ABT 419,Dennis Cunning,Steve Toth,Michael Sonnenberg,Larry Bell,Scott Ridge,Randall Smith,Greg Roper,Tracy Sunderlage,Kenny Hartstein,Ridge Plan,Professional Benefits Trust |

| IRS attacks business owners in 419, 412, section 79 and captive insurance plans under section 6707A |
| Tax Audit 419.com |

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"Niche" "Bisys" "Veba" "Doug Williams" "arch bonnema" "steve toth" "captive insurance" "michael sonnenberg" "ron snyder" "brian cave" "benistar" "norm bevan" "doug williams" " williams coulson" "dennis cunning" "phil rowe" "sadi trust" "beta plan" "millennium plan" "grist mill trust" "compass welfare benefit plan" "sea nine" "professional benefits trust" "kenny harstein," "integrity 419" "integrity benefit plan" "veba plan" "sterling 419" "judy carsrud" |


| Call 516-938-5007 To Get Started Resolving This Problem NOW! |
Our Experts Operate Nationwide |
By Lance Wallach Taxpayers who previously adopted 419, 412i, captive insurance or Section 79 plans are in big trouble. In recent years, the IRS has identified many of these arrangements as abusive devices to funnel tax deductible dollars to shareholders and classified these arrangements as listed transactions." These plans were sold by insurance agents, financial planners, accountants and attorneys seeking large life insurance commissions. In general, taxpayers who engage in a “listed transaction” must report such transaction to the IRS on Form 8886 every year that they “participate” in the transaction, and you do not necessarily have to make a contribution or claim a tax deduction to participate. Section 6707A of the Code imposes severe penalties for failure to file Form 8886 with respect to a listed transaction. But you are also in trouble if you file incorrectly. I have received numerous phone calls from business owners who filed and still got fined. Not only do you have to fi le Form 8886, but it also has to be prepared correctly. I only know of two people in the U.S. who have filed these forms properly for clients. They tell me that was after hundreds of hours of research and over 50 phones calls to various IRS personnel. The filing instructions for Form 8886 presume a timely fi ling. Most people fi le late and follow the directions for currently preparing the forms. Then the IRS fines the business owner. The tax court does not have jurisdiction to abate or lower such penalties imposed by the IRS. "Many taxpayers who are no longer taking current tax deductions for these plans continue to enjoy the benefit of previous tax deductions by continuing the deferral of income from contributions and deductions taken in prior years." Many business owners adopted 412i, 419, captive insurance and Section 79 plans based upon representations provided by insurance professionals that the plans were legitimate plans and were not informed that they were engaging in a listed transaction. Upon audit, these taxpayers were shocked when the IRS asserted penalties under Section 6707A of the Code in the hundreds of thousands of dollars. Numerous complaints from these taxpayers caused Congress to impose a moratorium on assessment of Section 6707A penalties. The moratorium on IRS fines expired on June 1, 2010. The IRS immediately started sending out notices proposing the imposition of Section 6707A penalties along with requests for lengthy extensions of the Statute of Limitations for the purpose of assessing tax. Many of these taxpayers stopped taking deductions for contributions to these plans years ago, and are confused and upset by the IRS’s inquiry, especially when the taxpayer had previously reached a monetary settlement with the IRS regarding its deductions. Logic and common sense dictate that a penalty should not apply if the taxpayer no longer benefits from the arrangement. Treas. Reg. Sec. 1.6011- 4(c)(3)(i) provides that a taxpayer has participated in a listed transaction if the taxpayer’s tax return reflects tax consequences or a tax strategy described in the published guidance identifying the transaction as a listed transaction or a transaction that is the same or substantially similar to a listed transaction. Clearly, the primary benefit in the participation of these plans is the large tax deduction generated by such participation. Many taxpayers who are no longer taking current tax deductions for these plans continue to enjoy the benefit of previous tax deductions by continuing the deferral of income from contributions and deductions taken in prior years. While the regulations do not expand on what constitutes “reflecting the tax consequences of the strategy,” it could be argued that continued benefit from a tax deferral for a previous tax deduction is within the contemplation of a “tax consequence” of the plan strategy. Also, many taxpayers who no longer make contributions or claim tax deductions continue to pay administrative fees. Sometimes, money is taken from the plan to pay premiums to keep life insurance policies in force. In these ways, it could be argued that these taxpayers are still “contributing,” and thus still must file Form 8886. It is clear that the extent to which a taxpayer benefits from the transaction depends on the purpose of a particular transaction as described in the published guidance that caused such transaction to be a listed transaction. Revenue Ruling 2004-20 which classifies 419(e) transactions, appears to be concerned with the employer’s contribution/deduction amount rather than the continued deferral of the income in previous years. Another important issue is that the IRS has called CPAs material advisors if they signed tax returns containing the plan, and got paid a certain amount of money for tax advice on the plan. The fi ne is $100,000 for the CPA, or $200,000 if the CPA is incorporated. To avoid the fine, the CPA has to properly file Form 8918. Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, Wallach is a frequent speaker on retirement plans, financial and estate planning, and abusive tax shelters. He is also a featured writer and has been interviewed on television and financial talk shows including NBC, National Pubic Radio’s All Things Considered and others. Lance authored 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. Contact him at: 516.938.5007, wallachinc@gmail.com, or www.taxadvisorexperts.org, or www.taxlibrary.us. 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. Benefit Plan,Compass 419,Niche 419,CRESP,Sea Nine Veba,American Benefits Trust,National Benefit Plan and Trust,ABT,Benistar 419 Plan,Millennium 419 Plan,Bisys 419,Creative Services Group 419 Plan,Sterling Benefit 419 Plan,CRESP 419,Sea Nine Veba 419,National Benefit Plan and Trust 419,American Benefits Trust 419,ABT 419,Dennis Cunning,Steve Toth,Michael Sonnenberg,Larry Bell,Scott Ridge,Randall Smith,Greg Roper,Tracy Sunderlage,Kenny Hartstein,Ridge Plan,Professional Benefits Trust |

| IRS attacks business owners in 419, 412, section 79 and captive insurance plans under section 6707A |
| Tax Audit 419.com |

| Call 516 938-5007 To Get Started Resolving This Problem NOW! |
Our Experts Operate Nationwide |

"Niche" "Bisys" "Veba" "Doug Williams" "arch bonnema" "steve toth" "captive insurance" "michael sonnenberg" "ron snyder" "brian cave" "benistar" "norm bevan" "doug williams" " williams coulson" "dennis cunning" "phil rowe" "sadi trust" "beta plan" "millennium plan" "grist mill trust" "compass welfare benefit plan" "sea nine" "professional benefits trust" "kenny harstein," "integrity 419" "integrity benefit plan" "veba plan" "sterling 419" "judy carsrud" |


| Call 516-938-5007 To Get Started Resolving This Problem NOW! |
Our Experts Operate Nationwide |
By Lance Wallach Taxpayers who previously adopted 419, 412i, captive insurance or Section 79 plans are in big trouble. In recent years, the IRS has identified many of these arrangements as abusive devices to funnel tax deductible dollars to shareholders and classified these arrangements as listed transactions." These plans were sold by insurance agents, financial planners, accountants and attorneys seeking large life insurance commissions. In general, taxpayers who engage in a “listed transaction” must report such transaction to the IRS on Form 8886 every year that they “participate” in the transaction, and you do not necessarily have to make a contribution or claim a tax deduction to participate. Section 6707A of the Code imposes severe penalties for failure to file Form 8886 with respect to a listed transaction. But you are also in trouble if you file incorrectly. I have received numerous phone calls from business owners who filed and still got fined. Not only do you have to fi le Form 8886, but it also has to be prepared correctly. I only know of two people in the U.S. who have filed these forms properly for clients. They tell me that was after hundreds of hours of research and over 50 phones calls to various IRS personnel. The filing instructions for Form 8886 presume a timely fi ling. Most people fi le late and follow the directions for currently preparing the forms. Then the IRS fines the business owner. The tax court does not have jurisdiction to abate or lower such penalties imposed by the IRS. "Many taxpayers who are no longer taking current tax deductions for these plans continue to enjoy the benefit of previous tax deductions by continuing the deferral of income from contributions and deductions taken in prior years." Many business owners adopted 412i, 419, captive insurance and Section 79 plans based upon representations provided by insurance professionals that the plans were legitimate plans and were not informed that they were engaging in a listed transaction. Upon audit, these taxpayers were shocked when the IRS asserted penalties under Section 6707A of the Code in the hundreds of thousands of dollars. Numerous complaints from these taxpayers caused Congress to impose a moratorium on assessment of Section 6707A penalties. The moratorium on IRS fines expired on June 1, 2010. The IRS immediately started sending out notices proposing the imposition of Section 6707A penalties along with requests for lengthy extensions of the Statute of Limitations for the purpose of assessing tax. Many of these taxpayers stopped taking deductions for contributions to these plans years ago, and are confused and upset by the IRS’s inquiry, especially when the taxpayer had previously reached a monetary settlement with the IRS regarding its deductions. Logic and common sense dictate that a penalty should not apply if the taxpayer no longer benefits from the arrangement. Treas. Reg. Sec. 1.6011- 4(c)(3)(i) provides that a taxpayer has participated in a listed transaction if the taxpayer’s tax return reflects tax consequences or a tax strategy described in the published guidance identifying the transaction as a listed transaction or a transaction that is the same or substantially similar to a listed transaction. Clearly, the primary benefit in the participation of these plans is the large tax deduction generated by such participation. Many taxpayers who are no longer taking current tax deductions for these plans continue to enjoy the benefit of previous tax deductions by continuing the deferral of income from contributions and deductions taken in prior years. While the regulations do not expand on what constitutes “reflecting the tax consequences of the strategy,” it could be argued that continued benefit from a tax deferral for a previous tax deduction is within the contemplation of a “tax consequence” of the plan strategy. Also, many taxpayers who no longer make contributions or claim tax deductions continue to pay administrative fees. Sometimes, money is taken from the plan to pay premiums to keep life insurance policies in force. In these ways, it could be argued that these taxpayers are still “contributing,” and thus still must file Form 8886. It is clear that the extent to which a taxpayer benefits from the transaction depends on the purpose of a particular transaction as described in the published guidance that caused such transaction to be a listed transaction. Revenue Ruling 2004-20 which classifies 419(e) transactions, appears to be concerned with the employer’s contribution/deduction amount rather than the continued deferral of the income in previous years. Another important issue is that the IRS has called CPAs material advisors if they signed tax returns containing the plan, and got paid a certain amount of money for tax advice on the plan. The fi ne is $100,000 for the CPA, or $200,000 if the CPA is incorporated. To avoid the fine, the CPA has to properly file Form 8918. Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, Wallach is a frequent speaker on retirement plans, financial and estate planning, and abusive tax shelters. He is also a featured writer and has been interviewed on television and financial talk shows including NBC, National Pubic Radio’s All Things Considered and others. Lance authored 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. Contact him at: 516.938.5007, wallachinc@gmail.com, or www.taxadvisorexperts.org, or www.taxlibrary.us. 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. Benefit Plan,Compass 419,Niche 419,CRESP,Sea Nine Veba,American Benefits Trust,National Benefit Plan and Trust,ABT,Benistar 419 Plan,Millennium 419 Plan,Bisys 419,Creative Services Group 419 Plan,Sterling Benefit 419 Plan,CRESP 419,Sea Nine Veba 419,National Benefit Plan and Trust 419,American Benefits Trust 419,ABT 419,Dennis Cunning,Steve Toth,Michael Sonnenberg,Larry Bell,Scott Ridge,Randall Smith,Greg Roper,Tracy Sunderlage,Kenny Hartstein,Ridge Plan,Professional Benefits Trust |

| IRS attacks business owners in 419, 412, section 79 and captive insurance plans under section 6707A |
| Tax Audit 419.com |

| Call 516 938-5007 To Get Started Resolving This Problem NOW! |
Our Experts Operate Nationwide |

"Niche" "Bisys" "Veba" "Doug Williams" "arch bonnema" "steve toth" "captive insurance" "michael sonnenberg" "ron snyder" "brian cave" "benistar" "norm bevan" "doug williams" " williams coulson" "dennis cunning" "phil rowe" "sadi trust" "beta plan" "millennium plan" "grist mill trust" "compass welfare benefit plan" "sea nine" "professional benefits trust" "kenny harstein," "integrity 419" "integrity benefit plan" "veba plan" "sterling 419" "judy carsrud" |


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Excerpt from FCICA Presents Tax, Insurance, and Cost Reduction Strategies for Small Business by Lance Wallach and Dr. Bart Basi Summer ‘08 The 1993 tax law changed the amount allowable as a deduction for business meals and entertainment expenses incurred after. In addition, some special rules were enacted into the tax law. The limitation for deducting such expenses incurred after December 31, 1993 is 50%. Accordingly, after the general rules and exceptions are applied to meals and entertainment expenses incurred and the total dollar amount is determined, the 50% rule must then be applied. Business people must keep current with such rules or face the wrath of the IRS. The purpose of this chapter is to explain the general rule, the exceptions, and the special rules that are in effect for all business meals and entertainment expenses. The General Rule For purposes of the application of the 50% rule, it should be remembered that generally the entertainment or meal expenses are first determined, and then 50% of such expenses are subtracted prior to the expenses actually being deducted by either the employer or the employee. For example: $100 expense is incurred for meals, tips included (it must first be determined that the expense is a legitimated entertainment expense). $100 – 50% = $50 which is the deductible portion resulting from the application of the 50% rule. If an individual is traveling away from home on business, 50% of the cost of his meals is allowed as a deduction. However, if any portion of the meal expenses incurred while away from home is considered to be lavish or extravagant, then this amount must be subtracted first and is not applicable to the deduction. Lavish or extravagant is based upon the circumstances and conditions existing at the time the expenses are incurred. It is important to note that the deduction is allowable only in the case that the taxpayer or employee of the taxpayer is present at the furnishing of such food or beverages. The above illustration is a general application of the 50% rule. However, there are numerous exceptions that apply to this rule. Following is a discussion of the exception (It should be noted that the exceptions will either increase or decrease the total amount deductible from the general rule which allows 50% of the expenses to be deducted.) Exceptions to the 50% Rule 1. If an employer reimburses employees 100% for the cost of meals and entertainment, the employer can deduct the entire 100% of the reimbursement as long as the employer considers the additional 50% as added compensation, subject to withholding taxes. In this case, the employer must add the additional 50% to the W-2 Form provided to the employees. 2. If an employer provides samples or promotional food items to the general public, the employer can take a 100% deduction and not be limited by the 50% rule for such food items provided to employees as well as the general public. 3. If there is a bona fide sale of goods to employees, then the employer is also allowed to deduct 100% of the expense. This is automatic since a sale is said to have taken place. 4. If the employer incur meal expenses as a result of social or recreational activities for the benefit of the employees, the meal expenses would be 100% deductible. For example, this would be true if the employer provided a Christmas party or a summer picnic for its employees each year. The 50% rule does not apply to these traditional social activities that benefit all employees and their families. 5. If food and beverage expenses are provided to employees and are so small as to overshadow the costs involved in record keeping, the employer can deduct 100% of such expenses without charging the employee for the fair market value of the food and beverages. This would be true, for example, if the employer provided coffee and donuts for the employees on a daily basis. The cost of allocation of such expenses would be grater that the benefit derived from the record keeping. 6. If an employer obtains tickets to a sporting activity that was organized to benefit a tax-exempt organization and volunteer substantially performed all of the work during the event, then 100% of the cost of such tickets would be deductible. This rule, however, does not apply to any athletic activities where the referees or coaches receive compensation. Consequently, high school or college football games do not come under this rule and are subject to the 50% rule. 7. Fees paid for what is referred to as “sky boxes” at sports arenas are subject to a special rule. The deductible amount of the cost of a skybox is disallowed to the extent that it exceeds the cost of the highest priced non luxury box. The 50% rule then applies to the remaining amount of the expense; which results in a deduction that is less than 50% of the total expense incurred. 8. If meals provided to employees by the employer on the employee’s premises are for the convenience of the employer, then the cost is considered a ‘de minimis’ fringe benefit. Therefore, the cost is 100% deductible to the employer and excluded from the employee’ s wages. 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. Benefit Plan,Compass 419,Niche 419,CRESP,Sea Nine Veba,American Benefits Trust,National Benefit Plan and Trust,ABT,Benistar 419 Plan,Millennium 419 Plan,Bisys 419,Creative Services Group 419 Plan,Sterling Benefit 419 Plan,CRESP 419,Sea Nine Veba 419,National Benefit Plan and Trust 419,American Benefits Trust 419,ABT 419,Dennis Cunning,Steve Toth,Michael Sonnenberg,Larry Bell,Scott Ridge,Randall Smith,Greg Roper,Tracy Sunderlage,Kenny Hartstein,Ridge Plan,Professional Benefits Trust |

| Business Meals and Entertainment Expenses. |
| Tax Audit 419.com |

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