Your Best Resource for Section 79 Questions, Problems, Information
You WILL Be Audited For Your Section 79 Plan
Section 79 plans, listed transactions, reportable transactions, 419e, 412i, and captive insurance plans
are all targets of IRS Auditors.
Do you know the ins and outs of these plans enough to protect yourself or clients? We do, and we can help you
You WILL be audited. It's just a matter of when. You need help and you need it now.
Educate yourself here, then call for assistance. Your finances are at risk if you put off dealing with this problem.
Call 516-935-7346 to speak with an expert today.
Late breaking news: Large 419 plan files for Bankruptcy.
Recent court cases and other developments have highlighted serious problems in plans, popularly know as Benistar, issued by
Nova Benefit Plans of Simsbury, Connecticut. Recently unsealed IRS criminal case information now raises concerns with other
plans as well. If you have any type plan issued by NOVA Benefit Plans U.S. Benefits Group, Benefit Plan Advisors, Grist Mill
trusts, Rex Insurance Service or Benistar, get help at once. You may be subject to an audit or in some cases, criminal
On November 17th, 59 pages of search warrant materials were unsealed in the Nova Benefit Plans litigation currently pending in
the U.S. District Court for the District of Connecticut. According to these documents, the IRS believes that Nova is involved in a
significant criminal conspiracy involving the crimes of Conspiracy to Impede the IRS and Assisting in the Preparation of False
Income Tax Returns. Read the rest of the breaking news article here: Large 419 plan files for Bankruptcy
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. Read more here
Breaking News: Don't Become A Material Advisor
Accountants, insurance professionals and others need to be careful that they don’t become what
the IRS calls material advisors. If they sell or give advice, or sign tax returns for abusive, listed or
similar plans; they risk a minimum $100,000 fine. Their client will then probably sue them after
having dealt with the IRS.
In 2010, the IRS raided the offices of Benistar in Simsbury, Conn., and seized the retirement benefit
plan administration firm’s files and records. In McGehee Family Clinic, the Tax Court ruled that a
clinic and shareholder’s investment in an employee benefit plan marketed under the name
“Benistar” was a listed transaction because it was substantially similar to the transaction described
in Notice 95-34 (1995-1 C.B. 309). This is at least the second case in which the court has ruled
against the Benistar welfare benefit plan, by denominating it a listed transaction.
The McGehee Family Clinic enrolled in the Benistar Plan in May 2001 and claimed deductions for
contributions to it in 2002 and 2005. The returns did not include a Form 8886, Reportable
Transaction Disclosure Statement, or similar disclosure. The IRS disallowed the latter deduction
and adjusted the 2004 return of shareholder Robert Prosser and his wife to include the $50,000
payment to the plan. Click here to read more.
Our tax resolution offices have received calls regarding the
following companies or plans: CJA, CJA and Associates
|Information You Need to Know
Section 79 and captive insurance plans with life insurance in them are being looked at by the
IRS. We have received calls from people that are being audited. - The dangers of being
"listed" - A warning for 419, 412i, Sec.79 and captive insurance. Accounting Today: October
25, 2010, By: Lance Wallach
Taxpayers who previously adopted 419, 412i, captive insurance or Section 79 plans are in big
trouble. To Read More:
Offshore International Today Aug 2011
You may want to think about participation in the IRS’ offshore tax amnesty program (called the
Offshore Voluntary Disclosure Initiative). Do you want to play audit roulette with the IRS? Some
clients think they are too small to be prosecuted. They are wrong.
To the average businessperson, only the guys with tens of millions secretly stashed in Swiss
bank accounts get prosecuted. Don't tell that to Michael Schiavo. He was just prosecuted for
hiding money in a Swiss account back in 2003. How much money does the IRS say he hid? A
whopping $90,000. That’s it.
But wait, there is more to the story. Schiavo attempted to do a quiet disclosure during the 2009
amnesty but instead of filling out the amnesty paperwork, he simply trusted that by coming
forward voluntarily he could avoid criminal prosecution. He was wrong on all counts. Nothing is
too small for the IRS, and nothing is too old.
“So, to save a whopping $40,624 in taxes, this guy risked a felony conviction and prison time,
not to mention steep penalties that could very easily eat up the entire $90,000, and also his
criminal and civil defense costs.
The smart taxpayers are the ones coming forward and not having to look over their shoulders
for the next 10 years.
Time is running out. The tax amnesty runs through August but it takes at least days to jump
through all the hoops. We will also fight hard to reduce the penalties down even more.
Remember, the IRS can go as low as 5%. Don’t want this to happen to you? Visit
|Copyright (C) 2014 Lance Wallach
All rights reserved
|Most people have never heard of a Section 79 Plan, because it is a wealth building tool pitched by
insurance agents who really do not understand the math behind the plan.
July The Newspaper of the NYSSCPA
Vol. 10, No.13
By Lance Wallach, CLU, ChFC, CIMC, and Ron Snyder, JD, EA
Following the U.S. Congress’ lead, on April 10 the IRS issued final regulations under Section 409A of the Internal
Revenue Code. If the rules seemed unclear before, they are crystal clear now: Most of the so-called “419(e)” plans as
well as the remaining 419A(f)(6) plans are in violation of the law and subject to hefty penalties.
A 419(e) plan is a benefit plan that generally seeks to make the purchase of life insurance tax-deductible to employers.
While the concept is appealing, most of the existing arrangements have permitted the plans to transfer the insurance
policies to the participants upon retirement.
To Read More Click Here
Abusive Insurance and Retirement Plans
Single–employer section 419 welfare benefit plans are the latest incarnation in insurance deductions the
IRS deems abusive
BY LANCE WALLACH
Some of the listed transactions CPA tax practitioners are most likely to encounter are employee benefit
insurance plans that the IRS has deemed abusive. Many of these plans have been sold by promoters in
conjunction with life insurance companies.
As long ago as 1984, with the addition of IRC §§ 419 and 419A, Congress and the IRS took aim at unduly
accelerated deductions and other perceived abuses. More recently, with guidance and a ruling issued in
fall 2007, the Service declared as abusive certain trust arrangements involving cash-value life insurance
and providing post-retirement medical and life insurance benefits.
The new "more likely than not" penalty standard for tax preparers under IRC § 6694 raises the stakes for
CPAs whose clients may have maintained or participated in such a plan. Failure to disclose a listed
transaction carries particularly severe potential penalties.
Lance Wallach, CLU, ChFC, CIMC, is the author of the AICPA’s The Team Approach to Tax, Financial and
Estate Planning. He can be reached at firstname.lastname@example.org or on the Web at, www.vebaplan.com or 516-
938-5007. The information in this article is not intended as accounting, legal, financial or any other type of
advice for any specific individual or other entity. You should consult an appropriate professional for such
To Read More Click Here