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| by Lance Wallach |
Insurance agents and costs attacked. - Enrolled Agents Journal March*April - For years promoters of life insurance companies and agents have tried to find ways of claiming that the premiums paid by business owners were tax deductible. This allowed them to sell policies at a “discount”.
The problem became especially bad a few years ago with all of the outlandish claims about how §§419A(f)(5) and 419A(f)(6) exempted employers from any tax deduction limits. Many other inaccurate statements were made as well, until the IRS finally put a stop to such assertions by issuing regulations and naming such plans as “potentially abusive tax shelters” (or “listed transactions”) that needed to be disclosed and registered. This appeared to put an end to the scourge of such scurrilous promoters, as such plans began to disappear from the landscape.
And what happened to all the providers that were peddling §§419A(f)(5) and (6) life insurance plans a couple of years ago? We recently found the answer: most of them found a new life as promoters of so-called “419(e)” welfare benefit plans.
And what happened to all the providers that were peddling §§419A(f)(5) and (6) life insurance plans a couple of years ago? We recently found the answer: most of them found a new life as promoters of so-called “419(e)” welfare benefit plans.
The IRS has again commenced assessing penalties under Code Section 6707A, the penalty provision applicable to failure to disclose Congress-enacted reportable transactions in 2004. Congress amended Section 6707A in 2010 to help alleviate its draconian consequences. Under newly amended Section 6707A, applicable to all penalties assessed after December 31, 2006, the penalty, subject to certain maximum and minimum amounts, is equal to 75% of the decrease in reported tax as a result of the reportable transaction. How the IRS is applying the Section 6707A penalty can be described as “troubling.” The following case shows how troubling the IRS position is.
ReplyDeleteIn 2004 and 2005, a taxpayer took deduc