Big Trouble Awaiting Many Section 79 Plan, 419 Welfare Benefit Plan, and 412i Retirement
Business owners and professionals who have adopted 419 welfare benefit plan arrangements,412i plans or Section 79 plans
are in serious trouble. The IRS has attacked these arrangements as "listed transactions." Business owners who engage in a
"listed transaction" must report such transactions on IRS Form 8886 every year that they are participating in the transaction, and
you are participating even in years when you do not make any contribution. Internal Revenue Code 6707A imposes severe
penalties ($200,000 annually for a business and $100,000 per year for an individual) for failure to file Form 8886 with respect to
a listed transaction. Tax Court, according to both the IRS Appeals Office and its own decisions, does not have jurisdiction to
abate or lower any penalties imposed by the IRS. Complaints caused Congress to impose a moratorium on collection of Section
6707A penalties. On June 1, 2010, the moratorium ended, and the IRS immediately began sending out notices warning of
possible imposition of 6707A penalties. When you get this notice it should be taken very seriously.
Accountants were required to properly prepare and file Form 8918 (if they signed and/or prepare tax returns and got paid). The
penalty for accountants for not properly filing the forms is $100,000, or $200,000 if they are incorporated.
Businesses that were in some 419 welfare benefit plans or some 412i retirement as well as some Captive Insurance and Section
79 Plans, were supposed to properly file under IRC Section 6707A each year with the IRS. Either the taxpayer or the accountant
was responsible, though the ultimate, primary obligation falls on the taxpayer. The IRS has just begun sending the notices
referred to above to participants in many of these plans. This is in addition to any IRS audit you might have had or currently may
be having. The large 6707A fine has nothing to do with any other IRS audit. The 6707A fine is for not having properly filed under
6707A with your returns. You are required to file each year with your tax return.
Not only were you required to file with your Federal return, but many states also require protective filings. Some participants in
these types of plans have already received notices from the IRS. You must act immediately if you wish to avoid possible huge
IRS penalties and interest that could put you out of business for good.
THE STATUTE OF LIMITATIONS IS NOT RUNNING. This means that the IRS can fine you at any time in the future for anything
regarding past or present participation in an abusive 419 welfare benefit plan or an abusive 412i retirement plan. There is still
time to avoid the IRS penalties and interest. You need to take action immediately and find out right away if the plan you are
participating in is abusive by consulting with a professional and experienced 419/412i plan expert.
Most accountants do not know how to properly prepare the appropriate forms. Accountants or other advisors will probably be
fined as material advisors. This means that you may be subject to a large fine. Once you get the large fine, the IRS claims it is
not subject to an appeal.
You should have filed protectively for every year your entity participated in the plan. Once again, for every year after 2003, the
penalty for not properly filing is $200,000 a year for corporations and $100,000 a year for individuals. For example, it is possible
an employer in the plan since 2004 could be subject to over one million dollars in penalties solely as a result of the failure to file.
For all years in the plan, the Statute of Limitations will not begin to run until after the form is properly filed. In addition, certain
individual plan participants should also file for every year of plan participation. Once again, none of this has anything to do with
any other audit that you may currently be involved in or may previously have experienced.
It is abundantly clear that taxpayers who receive notices from the IRS regarding Section 6707A penalties should take these
letters extremely seriously. These notices do not lend themselves to "do-it-yourself eye surgery."
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