Journal of Accountancy
Protecting Clients from Fraud Incompetence and Scams

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Abusive Insurance and Retirement Plans

Single–employer section 419 welfare benefit plans are the latest incarnation in insurance deductions the IRS deems abusive

EXECUTIVE SUMMARY

 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.​

LIFE INSURANCE LITIGATION

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