Showing posts with label Lance Wallach. Show all posts
Showing posts with label Lance Wallach. Show all posts
Captive Insurance
Most accountants and small business owners are unfamiliar with a great way to reduce taxes and expenses. By either creating or sharing "a captive insurance company", substantial tax and cost savings willbenefit the small business owner. Over 80% of Fortune 500 companies take advantage of some kind of captive insurance company arrangement. They set up their own insurance companies to provide coverage when they think outside insurers are charging too much, or coverage is simply unavailable. The parentcompany creates a captive so that it has a self-financing option for buying insurance. The captive then either retains the risk of providing insurance or pays reinsurers (companies that reinsure insurers) to take the risk.
Captive Insurance Plans, Want to Get Audited? - HG.org
Captive Insurance Plans, Want to Get Audited? - HG.org
When one scheme fails it isn’t long before a resourceful promoter comes up with a different product. Inevitably promoters find some lawyer or accountant to draft a favorable opinion letter and a new industry is born. In a few years, however, the IRS catches up and declares the arrangement to be a listed transaction and abusive tax shelter. As an expert witness I have never lost a case in this field. It is easy to beat the deep pockets of the insurance companies who provide product to these plans. Even though they have business owners sign fraudulent disclaimers saying that the owners will get their own tax advice. These disclaimers are then used when the inevitable happens, the IRS audits and the business owner sues the insurance company.
The latest entries seeking to find a way to make life insurance premiums deductible is a small business captive insurance company or CIC.
The insurance industry have been conjuring ways to make life insurance premiums tax deductible. Over the years we have seen many schemes that have failed IRS scrutiny. Welfare benefit plans set up under I.R.C. section 419, 412(e) plans and Producer Owned Reinsurance Companies (PORCs) are all common examples.
When one scheme fails it isn’t long before a resourceful promoter comes up with a different product. Inevitably promoters find some lawyer or accountant to draft a favorable opinion letter and a new industry is born. In a few years, however, the IRS catches up and declares the arrangement to be a listed transaction and abusive tax shelter. As an expert witness I have never lost a case in this field. It is easy to beat the deep pockets of the insurance companies who provide product to these plans. Even though they have business owners sign fraudulent disclaimers saying that the owners will get their own tax advice. These disclaimers are then used when the inevitable happens, the IRS audits and the business owner sues the insurance company.
The latest entries seeking to find a way to make life insurance premiums deductible is a small business captive insurance company or CIC.
IRS Issues Final Regulations for Material Advisors, Accountants, Attorneys and Insurance Agents - HG.org
IRS Issues Final Regulations for Material Advisors, Accountants, Attorneys and Insurance Agents - HG.org
If you sold, advised on or had anything to do with a listed transaction you will be fined by the IRS. For those that bought listed transactions like, 419 welfare benefit plans or 412i plans, you have been or will also be fined.
On July 30, 2014, the Internal Revenue Service issued final regulations regarding the imposition of penalties under Internal Revenue Code section 6707 against material advisors who fail to file true, complete or timely disclosure returns with respect to reportable or listed transactions. The effective date of the final regulations is July 31, 2014.
No Shelter Here: Beware of These Insurance Plans | Remodeling
No Shelter Here: Beware of These Insurance Plans | Remodeling
During the past few years, the Internal Revenue Service (IRS) has fined many business owners hundreds of thousands of dollars for participating in several particular types of insurance plans.
The 412(i), 419, captive insurance, and section 79 plans were marketed as a way for small-business owners to set up retirement, welfare benefit plans, or other tax-deductible programs while leveraging huge tax savings, but the IRS put most of them on a list of abusive tax shelters, listed transactions, or similar transactions, etc., and has more recently focused audits on them. Many accountants are unaware of the issues surrounding these plans, and many big-name insurance companies are still encouraging participation in them.
Insurance Agents: Help for those who sold 419 and 412i plans.
Insurance Agents: Help for those who sold 419 and 412i plans.
Our team of experienced consulting "tax attorneys", CPAs, and "insurance experts" specializing in 412i" and "419 "IRS
audits" that resulted from plans you sold to your clients, mainly "419 plans", "412i plans", "captive insurance" plans
and "Section 79" plans as well as other similar "employee benefit plans" or "welfare benefit plans" that the IRS is
targeting as "abusive tax shelters".
Our firm has been successful in "defending life insurance agents" and "material advisors" who have participated in
the sale of these "benefit plans".
Our team of experienced consulting "tax attorneys", CPAs, and "insurance experts" specializing in 412i" and "419 "IRS
audits" that resulted from plans you sold to your clients, mainly "419 plans", "412i plans", "captive insurance" plans
and "Section 79" plans as well as other similar "employee benefit plans" or "welfare benefit plans" that the IRS is
targeting as "abusive tax shelters".
Our firm has been successful in "defending life insurance agents" and "material advisors" who have participated in
the sale of these "benefit plans".
Lance Wallach tells national radio audience how IRS can collect billions by eliminating its bureaucracy and incompetence, and going after the real culprits.
Click here to listen to KMJ Radio's interview with Lance Wallach on this subject.
Lance Wallach, National Society of Accountants Speaker of the Year and member of the American Institute of CPAs faculty of teaching professionals, is a frequent speaker on retirement plans, financial and estate planning, and abusive tax shelters. He speaks at more than ten conventions annually and writes for over fifty publications. 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. Mr. Wallach may be reached at 516/938.5007, wallachinc@gmail.com, or at www.taxaudit419.com or www.lancewallach.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, National Society of Accountants Speaker of the Year and member of the American Institute of CPAs faculty of teaching professionals, is a frequent speaker on retirement plans, financial and estate planning, and abusive tax shelters. He speaks at more than ten conventions annually and writes for over fifty publications. 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. Mr. Wallach may be reached at 516/938.5007, wallachinc@gmail.com, or at www.taxaudit419.com or www.lancewallach.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.
SSI Disability Advocates
SSI Disability Advocates
Lance Wallach's office is nationally recognized as experts in retirement, pension & health care issues facing many Americans with disabilities that prevent them from working.
Mr. Wallach and his team of highly experienced lawyers, pension experts & health care professionals can help you obtain the SSI and Disability benefits that you are entitled to!
The Team Approach to Tax, Financial and Estate Planning
by Lance Wallach
CPAs are the best and most qualified professionals when it comes to serving their clients needs, but they need to know when and how to coordinate with other experts.
Over the last twenty years we have worked with thousands of practitioners who have decided to add financial services to their practices. They do it for a variety of reasons, but the most common are as follows:
*They don’t want to refer their client elsewhere when they request financial services.
* They want to remain competitive.
*They want to diversify and increase their revenue as opposed to depending solely on tax and accounting revenue.
While helping these professionals add planning and investment services to their core offerings, we have found that they achieve four main benefits after doing so:
1. They are more satisfied with their work.
2. Their clients are more satisfied because they can work with someone they trust to meet financial goals.
3. Their clients give them more referrals.
4. Their incomes increase.
We believe that CPAs are the most appropriate--and perhaps the only--professionals who can provide comprehensive financial services to clients because they understand their clients' tax and financial situations. Their clients trust these practitioners to provide professional advice that is in their best interest. In fact, we believe that tax professionals have an obligation and responsibility to advise their clients, and clients expect their professionals to advise them in these important areas.
With a combination of never-ending tax reform, the Tax Code's significant and complex changes, and the market volatility we've experienced over the past few years, clients need guidance more than ever. Practitioners who provide financial planning and investment advisory services are in a position to advise and assist their clients with these issues.
Practitioners just starting out in this arena may not possess the myriad skill sets and substantive knowledge required to embark on new business ventures.
CPAs who don't have all of the necessary talent in-house may find it easier to associate themselves with strategic "partners" who can provide the proper skill sets, training, technology, support and turnkey solutions in their specialized disciplines and niches, to help identify and meet their clients' financial goals.
Adapted from "The Team Approach to Tax, Financial & Estate Planning," edited by Lance Wallach, with chapters by Katharine Gratwick Baker, Fredda Herz Brown, Dr. Stanly J. Feldman, Ira Kaplan, Joseph W. Maczuga, Roger E. Nauheimer, Roger C. Ochs, Matthew J. O'Connor, Richard Preston, Steve Riley, Carl Lloyd Sheeler, Peter Spero, Paul J. Williams, and Roger M. Winsby. Product 017235.
Lance Wallach, the National Society of Accountants Speaker of the Year, speaks and writes extensively about retirement plans, Circular 230 problems and tax reduction strategies. He speaks at more than 40 conventions annually, writes for over 50 publications, is quoted regularly in the press, and has written numerous best-selling AICPA books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Business Hot Spots. Contact him at 516.938.5007 or visit www.vebaplan.com.
The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
CPAs are the best and most qualified professionals when it comes to serving their clients needs, but they need to know when and how to coordinate with other experts.
Over the last twenty years we have worked with thousands of practitioners who have decided to add financial services to their practices. They do it for a variety of reasons, but the most common are as follows:
*They don’t want to refer their client elsewhere when they request financial services.
* They want to remain competitive.
*They want to diversify and increase their revenue as opposed to depending solely on tax and accounting revenue.
While helping these professionals add planning and investment services to their core offerings, we have found that they achieve four main benefits after doing so:
1. They are more satisfied with their work.
2. Their clients are more satisfied because they can work with someone they trust to meet financial goals.
3. Their clients give them more referrals.
4. Their incomes increase.
We believe that CPAs are the most appropriate--and perhaps the only--professionals who can provide comprehensive financial services to clients because they understand their clients' tax and financial situations. Their clients trust these practitioners to provide professional advice that is in their best interest. In fact, we believe that tax professionals have an obligation and responsibility to advise their clients, and clients expect their professionals to advise them in these important areas.
With a combination of never-ending tax reform, the Tax Code's significant and complex changes, and the market volatility we've experienced over the past few years, clients need guidance more than ever. Practitioners who provide financial planning and investment advisory services are in a position to advise and assist their clients with these issues.
Practitioners just starting out in this arena may not possess the myriad skill sets and substantive knowledge required to embark on new business ventures.
CPAs who don't have all of the necessary talent in-house may find it easier to associate themselves with strategic "partners" who can provide the proper skill sets, training, technology, support and turnkey solutions in their specialized disciplines and niches, to help identify and meet their clients' financial goals.
Adapted from "The Team Approach to Tax, Financial & Estate Planning," edited by Lance Wallach, with chapters by Katharine Gratwick Baker, Fredda Herz Brown, Dr. Stanly J. Feldman, Ira Kaplan, Joseph W. Maczuga, Roger E. Nauheimer, Roger C. Ochs, Matthew J. O'Connor, Richard Preston, Steve Riley, Carl Lloyd Sheeler, Peter Spero, Paul J. Williams, and Roger M. Winsby. Product 017235.
Lance Wallach, the National Society of Accountants Speaker of the Year, speaks and writes extensively about retirement plans, Circular 230 problems and tax reduction strategies. He speaks at more than 40 conventions annually, writes for over 50 publications, is quoted regularly in the press, and has written numerous best-selling AICPA books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Business Hot Spots. Contact him at 516.938.5007 or visit www.vebaplan.com.
The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
Dont Give the IRS Every Last Drop
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.
Dont Give the IRS Every Last Drop
Section 79 Scams and Captive Insurance History - HG.org
When trying to understand how a product becomes a target of government scrutiny it helps to know its history. In the case of plans that fall under Internal Revenue Code Section 79, that history is complex.
Insurance companies, agents, financial planners, and others have pushed abusive 419 and 412i plans for
years. They claimed business owners could obtain large tax deductions. Insurance companies, agents and others earned very large life insurance commissions in the process. Eventually, the IRS cracked down on the unsuspecting business owners. Not only did they lose the tax deductions, but they were also fined, in addition to being charged penalties and interest. A skilled CPA with extensive IRS experience could usually eliminate the penalties and reduce the fines. Most accountants, tax attorneys and others have been unsuccessful in accomplishing this.
After the business owner was assessed the fines and lost his tax deduction, he had another huge, unforeseen problem. The IRS then came back and fined him a huge amount of money for not telling on himself under IRC 6707A. If you participate in a listed or reportable transaction, you must alert the IRS or face a large fine. In essence, you must alert the IRS if you were in a transaction that has the possibility of tax avoidance or evasion. Not only must you file Form 8886 telling on yourself, but the form needs to be filed properly, and done every year that you are in the plan in any way at all, even if you are no longer making contributions.
years. They claimed business owners could obtain large tax deductions. Insurance companies, agents and others earned very large life insurance commissions in the process. Eventually, the IRS cracked down on the unsuspecting business owners. Not only did they lose the tax deductions, but they were also fined, in addition to being charged penalties and interest. A skilled CPA with extensive IRS experience could usually eliminate the penalties and reduce the fines. Most accountants, tax attorneys and others have been unsuccessful in accomplishing this.
After the business owner was assessed the fines and lost his tax deduction, he had another huge, unforeseen problem. The IRS then came back and fined him a huge amount of money for not telling on himself under IRC 6707A. If you participate in a listed or reportable transaction, you must alert the IRS or face a large fine. In essence, you must alert the IRS if you were in a transaction that has the possibility of tax avoidance or evasion. Not only must you file Form 8886 telling on yourself, but the form needs to be filed properly, and done every year that you are in the plan in any way at all, even if you are no longer making contributions.
Section 79 Plans: Section 79, Captive Insurance, IRS Audits and Lawsuits on 419 and 412i Plans
Section 79 Plans: Section 79, Captive Insurance, IRS Audits and Lawsuits on 419 and 412i Plans (click the link to go to the page)
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.
Hg Experts
Legal Experts Directory
By Lance Wallach, CLU, CHFC Abusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness
IRS Attacks Business Owners in 419, 412, Section 79 and Captive Insurance Plans Under Section 6707A - 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 file 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 filling. Most people file 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 fine 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, 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. 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 the 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.taxadvisorexpert.com.
"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 fine 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, 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. 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 the 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.taxadvisorexpert.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.
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.
How to Avoid IRS Fines for You and Your Clients | LifeHealthPro
Beware: The IRS is cracking down on small-business owners who participate in tax-reduction insurance plans sold by insurance agents, including defined benefit retirement plans, IRAs, and even 401(k) plans with life insurance. In these cases, the business owner is motivated by a large tax deduction; the insurance agent is motivated by a substantial commission.
A few years ago, I testified as an expert witness in a case in which a physician was in an abusive 401(k) plan with life insurance. It had a so-called "springing cash value policy" in it. The IRS calls plans with these types of policies "listed transactions." The judge called the insurance agent "a crook."
Establishing a Buy-Sell Agreement | LifeHealthPro
Working with an attorney, you can help a company establish a buy-sell agreement that sets down in writing what happens to the company's ownership structure in the event a member of the ownership group or a major shareholder dies or becomes disabled.
Without such an agreement in place, a company can be thrown into disarray if one of its owners or key shareholders dies, since the deceased's stake will likely revert to their estate. In that case, the surviving owners' attempts to redeem stock from the estate of the deceased can be a complicated, prolonged, and sometimes contentious process, particularly when it comes to valuing that stock.
VEBA Basic Concepts Revisited | LifeHealthPro
Since my last article on Voluntary Employees' Beneficiary Associations, I've received hundreds of phone calls with basic questions which I will attempt to answer in this article.
First and perhaps most important, a VEBA only becomes a tax-exempt organization under Internal Revenue Code Section 501(c)(9) when it has received a Letter of Determination from the Internal Revenue Service granting it tax exempt status.
If a business or professional wants to participate, it joins an existing multiple employer VEBA which has received this determination letter from the IRS. (It is important to note that while several VEBAs have received IRS determination letters, not all programs purporting to be VEBAs have received them.)
VEBAs allow large amounts of tax-deductible contributions for the funding of life insurance, accident insurance, sickness and other benefits for the members of the VEBA, their employees, dependents and beneficiaries. Contribution amounts can be made flexible and benefits are highly favorable to the business owner.
Under the proper conditions, a small business can sometimes put in hundreds of thousands of tax-deductible dollars per year to fund its VEBA.
Using VEBAs For Employer-Owners | LifeHealthPro
Imagine a program that allows large, flexible, tax-deductible contributions to accumulate and compound on a tax-deferred basis. Distributions are received at any age without penalties, regardless of the amount. Assets are protected from creditors' claims. There are income and estate tax-free survivor benefits. The program is fully insured and, by a favorable Letter of Determination, the Internal Revenue Service has granted a tax exemption to the Section 501(c)(9) trust.
The program also can acquire tax-deductible life insurance, provide funds to pay estate taxes and provide tax-deductible educational benefits for children.
These are some of the benefits of a Voluntary Employees' Beneficiary Association (VEBA). VEBAs are tax-exempt trusts (or nonprofit corporations) that are described in Section 501(c)(9) of the Internal Revenue Code of 1986. They require a letter of determination from the IRS granting tax exempt trust status. If the statutory requirements are met and the IRS issues a favorable Letter Of Determination, then, in general, the qualified cost of contributions by an employer to the VEBA that are ordinary and necessary expenses, are deductible for federal income tax purposes.
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