Thursday, June 1, 2017

Tax Advisor Expert .org

Expert help with 419a, 419e, 419, 412i, welfare benefit plans, 6707a penalties, form 8886, IRS audits, Section 79, Captive insurance, FBAR, tax masters, jk harris, wpi, us tax shield

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  1. From Spencer's Benefits Reports: In two notices and a revenue ruling issued on October 18, the Internal Revenue Service has provided a series of warnings and cautions in an attempt to curtail the growing use of certain trust arrangements under IRC Sec. 419(e), which are being sold to professional corporations and other small businesses as welfare benefit funds.

    According to the IRS, “There are many legitimate welfare benefit funds that provide benefits, such as health insurance and life insurance, to employees and retirees. However, the arrangements that concern the IRS primarily benefit the owners or other key employees of businesses, sometimes in the form of distributions of cash, loans, or life insurance policies.” Donald L. Korb, chief counsel for the IRS, said that the “action sends a strong signal that these abusive schemes must stop.”

    Notice 2007-83
    In Notice 2007-83, the IRS notes that it is aware of certain trust arrangements utilizing cash value life insurance policies and purporting to provide welfare benefits to active employees. These arrangements are being promoted to small businesses and other closely held businesses as a way to provide cash and other property to the owners of the business on a tax-favored basis and to improperly claim federal income and employment tax benefits.

    The arrangements are sometimes referred to by persons advocating their use as “single-employer plans” and sometimes as “419(e) plans.” According to the IRS, advocates claim that the employers’ contributions to the trust are deductible under IRC Secs. 419 and 419A as a qualified cost, but that there is not a corresponding inclusion in the owner’s income.

    Notice 2007-83 informs taxpayers that the tax benefits claimed for these arrangements are not allowable for federal tax purposes. These transactions are tax avoidance transactions, and the IRS identifies certain transactions using trust arrangements involving cash value life insurance policies, and substantially similar transactions, as “listed transactions.” If a transaction is designated as a listed transaction, affected persons have disclosure obligations and might be subject to applicable penalties. Taxpayers who otherwise would b