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January 4, 2011

By Lance Wallach

Have you seen the commercials where certain companies advertise that they can settle an IRS
debt for “pennies on the dollar”? Usually the offer is too good to be true. Besides, you never want
to have the problem in the first place.

The chances of an individual being audited have approximately doubled since 2000. So you need
to be careful with your tax return.

IRS officials say research has shown that tax “noncompliance” typically is highest among people
who work for themselves, who deal in large amounts of cash, who don’t have taxes withheld from
their pay and whose income isn’t reported separately to the IRS, such as by their employer.

Another area that IRS has been focusing on for noncompliance is S corporations. With a typical S
corporation, profits or losses flow through to the individual owners, who in turn are supposed to
report those items on their individual returns.

Another are that could command attention is capital gains taxes. The reason: IRS officials suspect
the government is losing billions of dollars in tax revenue because many investors inflate the cost
basis, or the price they originally paid for stocks and other securities, in order to report lower
capital gains when the securities are sold.

There have been some significant changes in the way the IRS targets businesses for audits and
how it conducts them. Audits are up this year and will continue to increase,
But the numbers are very misleading, because the IRS is getting much smarter about how it
chooses returns for audit and how its examiners conduct their audits.

Over the past few years, the IRS has dramatically stepped up efforts to study specific industries,
and to educate examiners about business practices, terminology, accounting methods and
common industry practices. It has also identified areas of inquiry that produce audit results.

Examiners are told specifically to look for certain red flags to get at what is really going on in a
business or transaction. The result: examinations are more sharply focused on potential areas that
will generate increased taxes, penalties and interest. Fortunately, there is a positive side to all of
this; it’s very easy to obtain a free copy of this information from the IRS.

When you have a certain medical problem, you go to a specialist. The same rule should be
applied to financial problems. Always engage an accountant who specializes in your type of
business. One of our long-term retirement plan clients recently retained our firm to perform a self-
audit. The client, a successful businessman, was concerned when one of his colleagues was found
liable for back taxes and penalties because of some mistakes by his accounting firm. Nervous that
he might become an IRS target as well. Our client hired us to do an audit of his income taxes for
the last three years, both personally and for his various businesses. What we found was shocking.
Even though this client had used an accounting firm for his various returns, the taxes he had paid
were far from what he owed. Luckily for him, it was an overpayment. This client will get a refund of
almost $200,000

Now let us turn to more positive alternatives, things that you can take the initiative on.


·        Cash balance plan: A cash balance plan is a retirement plan that allows large contributions
for owners. The deduction for owner sometimes can exceed salary. It can be combined with a 401
(k) plan.

·        SEP-IRA or basic profit-sharing plan? Think K instead. Many small business owners have
used a SEP-IRA or basic profit sharing plan for their retirement needs due to the simplicity and
low cost of these designs. However, recent changes to the Internal Revenue Code have made
these designs virtually obsolete. The K is a retirement plan for the small business owner that
allows him or her to achieve: greater potential contributions; “catch up” deferrals at age 50+;
increased current tax savings; plan loans up to $50,000; expand survivor benefits; complete
flexibility; and low costs. Unlike SEP-IRA, a K will allow you to borrow up to 50 percent of your
account balance (not to exceed $50,000) as long as you pay yourself back. And whereas a typical
401(k) plan may cost $1,000 or more to establish and perhaps more to administer each year, a K
can be established and administered for a fraction of that cost.

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.


"LANCE WALLACH" is the nation's leading expert in these matters and how it all relates to
you and the IRS. Mr. Wallach testifies as an
"expert witness" in cases involving these
plans and his side has
never lost a case. Lance and his team of insurance, legal, and
accounting professionals, as well as former IRS agents, have saved his clients hundreds
of thousands of dollars in anticipated IRS penalties.

Call the
"Tax Resolution Offices" of Lance Wallach now for a FREE 5 minute telephone
consultation. Let us deal with the headaches so you don't have to!

We help clients with:
  • "IRS audit defense"
  • "IRS tax penalties" relating to "419e plans"
  • "412i plans"
  • "employee benefit plans"
  • "corporation income taxes"
  • "listed transactions"
  • abusive "tax shelters"
  • "IRS appeals"
  • "IRS Offer in Compromise"
  • "tax settlements"
  • "benefit plan" reviews
  • "insurance company plan loss recovery"
  • "benefit plan" remediation for profession practices and small business corporations,
  • and "IRS audit defense" representation.

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abatement" "expert witness irs" veba "expert witness services" "expert witness irs help" "pension audit" "Grist Mill Trust" Benistar "SADI Trust" "Beta 419" "Millennium Plan" Bisys
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“unfiled taxes” 419 412i "listed transactions" "form 8886" 6707A "tax shelters" "IRS audit defense" "expert witness irs help" "welfare benefit plan help" "419 plan help" "irs penalty
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The IRS Dog's Pack Practices Nationwide

Don't waste any more time chasing your tail!
“abusive tax shelter help” "tax letter" "irs letter" "irs letters" "irs determination letter" 419e 412i 6707a "form 8886" "listed transactions" "abusive tax shelter assistance" "irs penalty
abatement" "expert witness irs" veba "expert witness services" "expert witness irs help" "pension audit" "Grist Mill Trust" Benistar "SADI Trust" "Beta 419" "Millennium Plan" Bisys
"Creative Services Group" "Sterling Benefit Plan" "Compass 419" Niche  "Sea Nine Veba" 419 412i 419e "expert witness insurance" "welfare benefit plans" "419 plan help" "expert
witness irs" “abusive tax shelter help” “irs appeal” “tax resolution services” “insurance expert witnesses” “pension plan audit” “tax preparer penalties” “tax audit defense” “business
tax audit” “tax penalty abatement” “irs tax problems” “circular 230” “retirement tax shelters” “health insurance fraud” “employer insurance fraud” “irs trouble” “unfiled tax returns”
“unfiled taxes” 419 412i "listed transactions" "form 8886" 6707A "tax shelters" "IRS audit defense" "expert witness irs help" "welfare benefit plan help" "419 plan help" "irs penalty
abatement"  "fight the irs" "412i retirement plans" "tax resolution services" "irs problem solvers" "how to avoid irs audit" "abusive tax shelter help"
Call 516 - 938 - 5007
or
email: wallachinc@gmail.com