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The IRS Has Made It Difficult For Your
Accountant To Help You
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Golf Range Magazine June 2008

By Lance Wallach

Every business owner thinks he pays too much in taxes, and in reality, most actually do. These
days your accountant has to “play it safe”. This is not reducing your tax bill.

Many times a tax preparer’s work on a typical return is subject to ‘interpretations’ of the tax code.
New legislation may force preparers who hope to lower a client’s tax bill to be less aggressive with
respect to these interpretations, or else they may risk substantially increased penalties.

Furthermore, if a tax preparer’s client insists on an aggressive deduction, the preparer may
include a form explaining the circumstances. This could eliminate the potential preparer penalty,
but it is a certain red flag for the IRS.

This should anger taxpayers who feel strongly about particular deductions. What’s more, these
penalties do not apply to taxpayers preparing their own returns. This could prompt a taxpayer to tell
a preparer: “who needs you; I’ll do it myself ”. The remainder of this article explains why your
accountant is reluctant to be aggressive anymore, and is less likely to give you the benefit of the
doubt on tax deductions.

The new law alters the standard from a “realistic possibility” that a preparer’s position will be
sustained to a “more likely than not” standard, or more than 50% likelihood.

Instead of paying just $250 if an interpretation is disallowed, the preparer will now be penalized the
greater of $1000 or half the income derived by the preparer. Thus, if a preparer charges $500 to
do a routine 1040, he or she faces losing the income on two such returns, and if “willful or reckless
conduct” is found, the penalty jumps from $1000 to the greater of $5000 or half the income derived
by the tax preparer. But if the taxpayer prepares his or her own return, these “crimes” may bring
absolutely no penalty.

Another new wrinkle not sitting well with preparers expands these penalties beyond income tax
returns to other tax work: estate & gift tax returns, excise tax returns, exempt organization returns,
and employment tax returns.

If an accountant allows a taxpayer to deduct what the accountant may think is a listed transaction,
the accountant has to file a form with the IRS to alleviate a potential $200,000 penalty to the
accountant. This form is likely to get the business owner audited. So what does the business
owner do? He can forget about the deduction, prepare his own return, or he can retain an
accountant that is not afraid to fight with the IRS. Unfortunately, all of these options are difficult or
worse. The tax code is complex and very few accountants understand most of it. And the IRS has
recently made the accountant a policeman. Most accountants are honest, knowledgeable and
cautious. They try to do what is best for their clients, but the IRS has recently made that almost
impossible. Also, every year, the tax laws are changed to one extent or another, and accountants
are constantly challenged to remain current, knowledgeable, and proficient.

In light of this, you may want to test your accountant’s knowledge. You may want to ask him the
following questions:

  • Why haven’t I been using a 412(e)(3) plan or a captive insurance company to reduce my
    taxes and other expenses?

  • Why haven’t I been using a VEBA to reduce my health insurance costs?

  • Am I a good candidate for a double K to reduce my taxes and provide security for my
    retirement?

  • What strategies do you have whereby I can legally deduct the cost of my life insurance?

  • Why haven’t you given me a copy of the IRS industry specialization report (which can be
    obtained free from the IRS) which shows the items that the IRS will be looking at in my
    industry: both with respect to who will be audited and what will be looked at in an audit, and
    this will provide me with a lot of other useful information?

  • Am I currently using any strategies that the IRS considers abusive?

  • I would be willing to bet that your accountant has little or no knowledge of the above (6) items.

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.

“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"
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