Internal Revenue Service Offers New Guidance on FBAR and OVDP Procedures

The IRS has announced new procedures to aid voluntary disclosures by taxpayers with undisclosed foreign accounts.  The new procedures follow the IRS’ January 9, 2012
announcement of the 2012 Offshore Voluntary Disclosure Program (OVDP). The new procedures will allow for resolution of issues related to foreign retirement plans, such as the
Canadian Registered Retirement Savings Plan, including allowance of low compliance risk taxpayers to make untimely elections to defer U.S. taxation of income.  Taxpayers who wish to
enroll in the program will be required to file delinquent tax returns along with appropriate related information.  The new guidelines come into effect on September 1, 2012.     

Taxpayers wishing to participate in this initiative are advised by the American Institute of Certified Public Accounts (AICPA) to contact a tax professional, both a CPA and an attorney,
immediately in order to determine whether disclosure is necessary, ensure that they meet the voluntary disclosure deadlines, and to protect the taxpayer’s rights.
We suggest then opting out to try to reduce taxes. Our ex IRS international division managers suggest that if you take the case to appeals you will usually pay a lot less taxes. Do not let
your advisor learn on the job. You usually get what you pay for. Lance Wallach has a team of ex IRS international division managers and an ex IRS agent appeals officer. The appeals
division is where you will go when you opt out.


People with a financial interest in bank accounts or certain foreign financial accounts must report these accounts, if their cumulative value exceeds a threshold amount. Form TD F 90-
22.1, Report of Foreign Bank and Financial Accounts, commonly known as FBAR, is the form which is used to satisfy this reporting requirement. The FBAR form is required to be filed
annually by June 30th. Unlike rules pertaining to tax returns, the FBAR form must be received by the June 30th deadline, not just post-marked.

On January 9, 2012, the IRS announced they are reopening the Offshore Voluntary Disclosure Program for 2012. The IRS suggests that the 2012 program will be substantially similar to
the 2011 program, which closed in September 2011. However, the penalty has increased to 27.5%, up from 25% for the 2011 program. Depending on individual circumstances, some
taxpayers will be eligible for 12.5% or 5% reduced penalty rates.

An individual who willfully fails to file an FBAR faces a penalty equal to the greater of $100,000 or 50% of the foreign financial account balance as of the June 30th FBAR due date. Willful
violation of the FBAR requirements is also a felony, and punishable by up to five years in prison, a fine not to exceed $250,000, or both. Non-willful noncompliance can be punished with a
maximum penalty of $10,000 per account per year of noncompliance. For an individual who is noncompliant for a number of years, these penalties can quickly exceed the total account
balance.

Consequently, U.S. persons having an interest in or signatory authority over foreign accounts, who believe they may not be in compliance with U.S. tax or banking laws, should contact a
professional who used to be in the international division of the IRS. If they are a CPA that is even better. Lance Wallachs people are both.


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 prosecution.

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 more here.

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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

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Nikolai S. Battoo, The Fund Manager Chased By Two Regulators By James Welsh on September 10, 2012  Two federal regulatory agencies are in hot pursuit of a shadowy hedge fund
figure and various companies associated with him, claiming they pumped millions into Bernard Madoff feeder funds and other unsuccessful investments, and then lied about the losses.
On Sept. 7, both the Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission filed actions in the federal Northern District of Illinois against Nikolai S.
Battoo, 41, who apparently has most recently operated in Florida. In announcing its action, the SEC said Battoo has run numerous hedge funds and claims to manage $1.5 billion for
investors worldwide, including at least $100 million in the United States. Battoo has gathered “tens of millions of dollars” in investments since 2009, all the while losing millions more, the
SEC also said in a detailed, 32-page complaint. He has managed money through a series of companies including BC Capital Group, of Panama, and BC Capital Group Limited, which is
believed to be run from Hong Kong. He also manages several hedge funds and is “senior advisor” for an outfit called Private International Wealth Management, and is thought to be
affiliated with FuturesOne LLC, a commodities pool located in Lincoln, Neb. Battoo has been trying to cover up his failures and overstate the value his investments “in a number of ways,”
the SEC said. When soliciting investors, Battoo has claimed an outstanding track record and “exceptional risk-adjusted returns,” according to the SEC. The agency calls Battoo’s financial
empire “an amorphous syndicate of far-flung funds, entities and affiliates.”

To Read More Click Link Below:
http://gettracysunderlagehelp.blogspot.com/2012/12/nikolai-s-battoo-fund-manager-chased-by.html

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California Enrolled Agent

How to Get Fined $100,000 by the IRS and Lose Your License  By Lance Wallach, CLU, ChFC and Ira Kaplan, Esq., CPA, MBA      Over the past decade, business owners have been
overwhelmed by a plethora of arrangements designed to reduce the cost of providing employee benefits and taxes, while simultaneously increasing their own retirement savings. The
solutions ranged from traditional pension and profit sharing plans to more advanced strategies.    Some strategies, such as IRS Section 419 and 412(i) plans, used life insurance as
vehicles to bring about benefits. Unfortunately, the high life insurance commissions (often 90% of the contribution, or more) fostered an environment that led to the marketing and selling
of aggressive and noncompliant plans
.  Read More

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California Broker, June 2011 Employee Retirement Plans By Lance Wallach

412i, 419, Captive Insurance and Section 79 Plans; Buyer Beware

The IRS has been attacking all 419 welfare benefit plans, many 412i retirement plans, captive insurance plans with life insurance in them, and Section 79 plans.  IRS is aggressively
auditing various plans and calling them “listed transactions,” “abusive tax shelters,” or “reportable transactions,” participation in any of which must be disclosed to the Service.  The result
has been IRS audits, disallowances, and huge fines for not properly reporting under IRC 6707A.  
Click here to read more.  Click here for the PDF version


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IRS Audits Focus on Captive Insurance Plans
April 2011 Edition  By Lance Wallach

The IRS started auditing § 419 plans in the 1990s, and then continued going after § 412(i) and other plans that they considered abusive, listed, or reportable transactions, or substantially
similar to such transactions. If an IRS audit disallows the § 419 plan or the § 412(i) plan, not only does the taxpayer lose the deduction and pay interest and penalties, but then the IRS
comes back under IRC 6707A and imposes large fines for not properly filing.
Read More

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Treasury, IRS Issue Proposed Regulations for FATCA Implementation

National Society of Accountants

Captive Insurance and Other Tax Reduction Strategies – The Good, Bad, and Ugly

By Lance Wallach       

Every accountant knows that increased cash flow and cost savings are critical for businesses in 2008. What is uncertain is the best path to recommend to garner these benefits.  

Over the past decade business owners have been overwhelmed by a plethora of choices designed to reduce the cost of providing employee benefits while increasing their own retirement
savings. The solutions ranged from traditional pension and profit sharing plans to more advanced strategies.  

Some strategies, such as IRS section 419 and 412(i) plans, used life insurance as vehicles to bring about benefits. Unfortunately, the high life insurance commissions (often 90% of the
contribution, or more) fostered an environment that led to aggressive and non-compliant plans.  
Read More


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California Enrolled Agent   Abusive 412(i) Retirement Plans Can Get Accountants Fined $200,000  By Lance Wallach & Ira Kaplan, Esq.   plans.  The large insurance commissions
generate some of the enthusiasm.  Unlike other retirement plans, the 412(i) plan must have insurance products as the funding mechanism.  This seems to generate enthusiasm among
insurance agents.  The IRS has been auditing almost all participants in 412(i) plans for the last few years.  At first, they thought all 412(i) plans were abusive.  Many participants’
contributions were Most insurance agents sell 412(i) retirement disallowed and there were additional fines of plans.  The large insurance commissions $200,000 per year for the
participants.  The accountants who signed the tax returns (who the IRS called “material advisors”) were also fined $200,000 with a referral to the Office of Professional Responsibility.
 
Read more


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Journal of Accountancy  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  Parts of this article are from the AICPA CPE self-study course Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots, by
Sid Kess, authored by Lance Wallach.  Many of the listed transactions that can get your clients into trouble with the IRS are exotic shelters that relatively few practitioners ever encounter.
When was the last time you saw someone file a return as a Guamanian trust (Notice 2000-61)? On the other hand, a few listed transactions concern relatively common employee benefit
plans the IRS has deemed tax-avoidance schemes or otherwise abusive. Perhaps some of the most likely to crop up, especially in small business returns, are arrangements purporting
to allow deductibility of premiums paid for life insurance under a welfare benefit plan
. Read More


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For years the IRS has been pursuing – the disclosure of information regarding undeclared interests of U.S. taxpayers (or those who ought to be U.S. taxpayers) in foreign financial
accounts.
Lance Wallach

On June 26, 2012 the IRS released IR-2012-64/65 and updated Frequently Asked Questions (FAQs) providing updated guidance regarding the currently pending offshore voluntary
disclosure program (the initial terms of the 2012 OVDP were set forth in IR-2012-5 released on January 9, 2012). The OVDP follows on the success of the 2009 Offshore Voluntary
Disclosure Program (the 2009 OVDP) and the 2011 Offshore Voluntary Disclosure Initiative (the 2011 OVDI), which were announced many years after the 2003 Offshore Voluntary
Compliance Initiative (OVCI) and the 2003 Offshore Credit Card Program (OCCP). Such initiatives typically offer reduced penalties in exchange for taxpayers voluntarily coming into
compliance before the IRS is aware of their prior tax indiscretions. In part, the success of such initiatives often depends on the perception that they will be followed by strong government
tax enforcement efforts. To Read More Click Link Below: http://www.hgexperts.com/article.asp?id=28190

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Case 1:07-cv-00883-CG-N Document 223 Filed 11/12/10

419, Veba Case Lance Wallach gets one of the case is a good example of how plaintiff’s attorneys are losing 419, 412i and other cases because they lack experience in these matters. As
an expert witness for both plaintiffs and defendants Lance Wallach’s side has never lost a case. Lance Wallach is versed in how plaintiffs can win, or how defendants can get 419,412i
cases dismissed.

IN THE UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION J&M ASSOCIATES, INC.,
Plaintiff, vs.  CIVIL ACTION NO. 07-0883-CG-C MARK C. CALLAHAN, d/b/a )  CALLAHAN FINANCIAL SOLUTIONS, et. al.,  )Defendants,
ORDER

On December 21, 2007, J&M Associates Inc. (“J&M”) brought a lawsuit against Mark C. Callahan d/b/a Callahan Financial Solutions, Lalat Pattanaik d/b/a I.P.S. Private Advisors, Brady
Richardson d/b/a Richardson Consultants, J. Michael Mangawang, Fredrick A. Romero, and
American General Life Insurance Company (“AIG”) alleging breach of contract, negligence, wantonness, fraud, fraudulent concealment, and civil conspiracy relating to J&M’s enrollment in
a welfare benefit plan that ultimately led to “huge tax liability and penalties.”  (Doc. 1).  On
April 3, 2010, this court entered default against Brady Richardson d/b/a Richardson Consultants, J. Michael Mangawang, and Fredrick A. Romero for failure to plead or otherwise defend
the action.  (Doc. 47).  On June 15, 2010, Mark Callahan d/b/a Callahan Financial Solutions, Lalat
Pattanaik d/b/a I.P.S. Private Advisors, and Brady Richardson d/b/a Richardson Consultants were dismissed with prejudice.  (Docs. 148, 153, & 154).   This matter is now before the court.
To Read More:  
http://www.gpo.gov/fdsys/pkg/USCOURTS-alsd-1_07-cv-00883/pdf/USCOURTS-alsd-1_07-cv-00883-1.pdf
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