As an expert witness Lance Wallach side has never lost a case!
Specialize in 419 plans,412i plans, captive insurance plans, welfare benefit plans, section 79 plans
Wednesday, May 27, 2015
Do You Have a Potential Abusive Tax Avoidance Transaction
People think that accountants and tax lawyers lead boring lives. Perhaps that may be true for some, but there is plenty of action these days with the IRS and their Employment Plans tax group. Recently, the IRS identified an “emerging issue” that it calls a potential Abusive Tax Avoidance Transaction. If you are a small business with an employment benefit plan, those words are never good to hear.
According to an internal IRS training document we recently obtained, the IRS is now targeting for audit small and medium sized businesses that created their own separate management companies. While creating a separate company to provide management services is legal, the IRS wants to make sure there is a legitimate business reason for doing so. The IRS is actively examining (auditing) businesses that are funneling large sums of money from the operating company to the management company and thus insuring the operating company pays little or no taxes. By transferring funds to the management company, the business strips away much of the income from operations.