Benistar messes with finance customers

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419 Life Insurance Plans and Other Scams "" Large IRS Fines ""The IRS Raids Plan Promoter Benistar, and What Does All This Mean To You?

October 13, 2010

Recently IRS raided Benistar, which is also known as the Grist Mill Trust, the promoter and operator of one of the better known and more heavily scrutinized of the Section 419 life insurance plans. IRS attacked the Benistar 419 plan, and one of its tactics was to demand the names of all the clients Benistar worked with "" so they could be audited by the IRS, Benistar refused to give the names and actually appealed the decision to turn over the names. The appeal was unsuccessful, but Benistar officials still refused to give up the names. Recently, the IRS raided the Benistar office and took hundreds of boxes of information, which included information on clients who were in their 419 plan. In documents filed by Benistar itself, they stated that 35 to 50 armed IRS agents descended upon their office to seize documents. IRS has visited, and is still visiting most of the other plans and obtaining names of participants, selling insurance agents, accountants, etc. They have a whole task force devoted to auditing 419, 412i and other abusive plans.It's important to understand what could happen to unsuspecting business owners if they get involved in plans that are not above board. Their names could be turned over to the IRS, where audits could ensue, and where the outcome could be the payment of back taxes and significant penalties. Then they would be fined another time under Section 6707A for not properly reporting on themselves. Most promoters of 419 plans told clients that their plans complied with the laws and, therefore, were not listed tax transactions. Unfortunately, the IRS doesn't care what a promoter of a tax-avoidance plan says; it makes its own determination and punishes those who don't comply.

The McGehee Family Clinic, P.A. was recently hit with back taxes and a penalty under Code Sec. 666A in conjunction with a deduction to the Benistar 419 plan

Dr. McGehee's clinic took a deduction for a 419 plan (the Benistar plan) back in 2005. Eventually, the McGhee Family Clinic was audited. After the audit, the doctor was told that the deduction would be disallowed and that back taxes were due. Additionally, Dr. McGehee was hit with a 20 percent accuracy-related penalty under Code Sec. 6662A. Finally, the tax court sustained the IRS's determination that McGehee was subject to the increased 30 percent penalty, because its return did not include a disclosure statement indicating its participation in the Benistar Trust. I think that in addition to the aforementioned fines, IRS will now fine him, both on a corporate and personal level, another $200,000 or more, under IRC 6707A, for not properly disclosing his participation in a listed transaction. There was a moratorium on those fines until June 2010, pending new legislation to reduce them. The fines had been 200,000 per year on the corporate level and $100,000 per year on the personal level. You got the fine even if you made no contributions for the year. All you had to do was to be in the plan. So Dr. McGehee's fine would be a total of $300,000 per year for every year that he and his corporation were in the plan. IRS also says the fine is not appealable. His fine would be in the million-dollar range and it would be in addition to the back taxes, interest, and penalties already discussed earlier in this paragraph. Legislation just passed slightly reducing those fines, but you still have to properly file to start the Statute of Limitations running to avoid the fines. IRS is fining people who report on themselves, but make a mistake on the forms. Now that the moratorium on the fines has passed, and so has the new legislation, IRS has aggressively moved to fine unsuspecting business owners hundreds of thousands. This is usually after they get audited, and sometimes reach agreement with IRS. Then another division or department of the IRS imposes a fine under 6707A. I am receiving a lot of phone calls from business owners who this is happening to. Unfortunately, some of these people already had called me. I warned them to properly file under 6707A. Either they did not believe me - it is unbelievable - or their accountant or tax attorney filed incorrectly. Then they called again after being fined.If you were involved with one of these abusive plans, there are steps that you can take to minimize IRS problems. With respect to filing under Section 6707A, I know the two best people in the country at filing after the fact, which is what you would be doing at this point, and still somehow avoiding the fine. It is an art that both learned through countless hours of research and numerous conversations with IRS personnel. Both have filed dozens of times for clients, after the fact, without the clients being fined. Either may well still be able to help you.And the right accountant, one with the proper knowledge, experience, and Service contacts, can help with the other IRS problems as well. I recall a case where a CPA I knew and recommended was able to get $300,000 or so in liabilities reduced to three thousand dollars and change. Do not count on a result like this, but help is available.

It's not worth it!

Stay away from 419 and similar plans like Section 79 plans. Be very careful with 412i plans. Avoid most captive insurance plans.It's getting closer to the end of the year. This is when every scammer known to man/woman comes out of the woodwork to sell some fly-by-night tax-deductible plan to clients. Sometimes they come in the form of an accountant, insurance agent-financial planner, or even an attorney. I see this in all of my expert witness cases and when I speak at conventions. I have seen this since the 1990s. I wanted to remind readers that, if it sounds too good to be true, it probably is.

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

Comments

Anonymous
#1314188

https://www.dsrabenefittrust.net/dsrabene/index.php/resources/2016-health-insurance-plans

Anonymous
Floral Park, New York, United States #1224706

Benistar Leader Goes To Jail

HOMEABOUT | BENISTARWHO IS THE FOUNDER OF BENISTAR DON TRUDEAU VS.DANIEL CARPENTER | BENISTAR

ABOUT | BENISTAR

Benistar Does not keep its word Untrusted leader 2015

Benistar Changes its agreement to suit their own needs Do Not Sign an agreement with Benistar its worth less than the paper its printed on!!!

LANCE WALLACH HELPS IRS Lance Wallach even tries to help the IRS go after the sellers of abusive 419, 412i, captive insurance and section 79 plans. He has also spoken at conventions partially sponsored by the IRS, met with IRS officials at their headquarters in Washington D.C. and has received phone calls from the IRS on point. Lance Wallach does NOT give the IRS the names of people that RETAIN him to help them.

Lance does not give the IRS the names of people that he refers to others for help. To: Itzkowitz Ronald R Subject: Lance Wallach Hope all is well with you. I never heard from your contact about the abusive shelter information that you sent to him. This stuff on section 79 and captive is not all over the net and is sold by the same promoters that used to sell the 412i and 419 scams??????

Also please see attached two articles that mention section 79 and captives. When I speak at accounting conventions, or write articles about them I am sometimes attacked by promoters of the plans. The articles are not 100% correct, as the publications sometimes change content without...

To read more click here now BAD BAD BENISTAR?“Benistar post-65 retiree benefits administration retiree medical and prescription drug plans solutions Brokers plan administration ONE THOUGHT ON “ABOUT | BENISTAR” admin on August 28, 2015 http://www.listedtransactions.com/articles.html

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Anonymous
Floral Park, New York, United States #1220608

n McGehee Family Clinic the Tax Court ruled that a clinic and shareholder’s investment in an employee benefit plan marketed under the name “Benistar” was a listed transaction substantially similar to the transaction described in Notice 95-34 (1995-1 C.B.309).

This is at least the second case in which the court has ruled against the Benistar welfare benefit plan.

Notice 95-34 was issued in response to trust arrangements sold to companies that were designed to provide deductible benefits such as life insurance, disability and severance pay benefits. The promoters of these arrangements claimed that all employer contributions were tax-deductible when paid, by relying on the 10-or-more-employer exemption from the IRC § 419 limits.

In general, contributions to a welfare benefit fund are not fully deductible when paid. Sections 419 and 419A impose strict limits on the amount of tax-deductible prefunding permitted for contributions to a welfare benefit fund. Section 419A(f)(6) provides an exemption from section 419 and section 419A for certain “10-or-more employers” welfare benefit funds.

In general, for this exemption to apply, the fund must have more than one contributing employer, of which no single employer can contribute more than 10% of the total contributions, and the plan must not be experience- rated with respect to individual employers (that is, one that allows contributions to increase or decrease based on benefits or overall...

As discussed in Notice 95-34, these arrangements typically involve an investment in variable life or universal life insurance contracts on the lives of the covered employees.

The problem is that the employer contributions are large relative to the cost of the amount of term insurance that would be required to provide the death benefits under the arrangement, and the trust administrator may obtain cash to pay benefits other than death benefits, by such means as cashing in or withdrawing the cash value of the insurance policies.The plans are also often designed so that a particular employer’s contributions or its employees’ benefits may be determined in a way that insulates the employer to a significant extent from the experience of other subscribing employers.

Benistar advertised that enrollees should expect to obtain the same type

- See more at: http://www.journalofaccountancy.com/issues/2011/jan/benistar.html#sthash.CsgiU6QW.dpuf

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Anonymous
#1161567

BENISTAR 419 PLAN HELD BY TAX COURT TO BE A "LISTED TRANSACTION"

09 / 16 / 2010

The United States Tax Court has held that the Benistar 419 Plan & Trust, crafted by Daniel Carpenter, was a plan that offered the same type of tax benefits as those listed in IRS Notice 95-34 (i.e., the deduction of contributions made to the trust arrangement).

In fact, the benefits of the Benistar Plan were touted as "virtually unlimited." Promotional materials described the Benistar Plan as a trust arrangement that claimed to meet the 10-or-more employers-plan exemption under IRC Section 419A(f)(6), offering life insurance.

The policies require large contributions relative to the cost of the amount of term insurance that would be required. When the participants in the plan have the right to receive the value reflected in the underlying insurance policies purchased by the plan, despite the fact that the payments of benefits are contingent upon the death of the insured while employed. As long as participants were willing to benefit by Benistar Plan's distribution policies, there was no reason ever to forfeit a policy. This event was viewed to be an unanticipated event.

While noting that the plan does not reduce benefits if the assets derived from an employer's contributions are insufficient to fund all of the benefits promised to that employer's employees, the Tax Court found that since the plan does mantain separate accountings of the assets...

The Tax Court further found that because the taxpayer failed to file IRS Form 8886, in years 2005, 2006, or 2007, they were liable for the penalty.

The Court held that the IRS is not required to send personalized notices of the potential applicability of the penalty. The year end, December 31, 2004 was after the enactment of I.R.C.

Section 6662A, and so this penalty provision is not retroactive, nor was it being applied retroactively in a way that might raise due process concerns.at 13-15.

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Anonymous
#1127617

this has nothing to do with benistar that sells health insurance, lance wallach, google him for help

Anonymous
#1044277

Benistar Misleads its workers

Benistar's agreements are less useful than the paper its written on

Benistar does not keep its word to its workers

Anonymous
#1044275

Carpenter at first used an account at Merrill Lynch, which warned him about the dangers of options trading.He then switched to Paine Webber, which also warned him about the dangers.

Initially his plan worked well, but early in 2000 he began suffering large trading losses. By late 2000 the losses had mushroomed to about $9 million.

In February 2004, a federal grand jury in Massachusetts returned a 19-count indictment charging Carpenter with 14 counts of wire fraud and five counts of mail fraud. The indictment identified seven exchangors who lost a total of about $9 million. Carpenter pleaded not guilty on all counts.

In September 2004, the grand jury returned a superseding 19-count indictment. Carpenter again pleaded not guilty on all counts.

In July 2005, a 13-day jury trial ended with conviction on all counts. In December 2005, the judge granted Carpenter's motion for a new trial on the grounds that the government used inflammatory language in its closing argument.

The First Circuit, in a split decision, upheld the district court's ruling.The Supreme Court declined to review the case.

benistar.sucks

Anonymous
#966589

Benistar As the Untrusted Leader

Benistar is a famous leader that gets clients in serious trouble with the IRS. They administer and design medical benefits for post-sixty five group retirees. Maybe you should not trust Benistar.

Anonymous
Plainview, New York, United States #685975

also grist mill trust

Anonymous
Plainview, New York, United States #650297

. IRS Investigation & Curcio v. Commissioner

The IRS contacted CMI in December 2006, asserting that CMI's contributions to the Benistar 419 Plan were not deductible under § 419A(f)(6), and commenced an investigation. (Snyder Aff. Ex. S.) The scope of the investigation eventually expanded to include Jones's individual tax liability for tax years 2003, 2004, and 2005. (Id. Ex. T; Jones Aff. ¶ 7.) Jones appealed the IRS's determination of his liability for the tax years in question in light of its conclusion that the Benistar 419 Plan did not satisfy the requirements of § 419A(f)(6). (Doc. No. 34 Ex. D.) After several years of investigation, the IRS determined that the contributions to the Benistar 419 Plan were non-deductible deferred compensation and issued Jones a notice of deficiency on July 17, 2009. (Id. Ex. P.)

In 2010, the Tax Court issued its decision in Curcio v. Commissioner, T.C. Memo. 2010-115, 2010 WL 2134321 (T.C. 2010). Curcio consolidated "three groups of test cases to resolve a number of disputes regarding companies participating in the Benistar § 419 Plan & Trust." Id. at *2. Carpenter testified over the course of two days as a witness for the taxpayers in Curcio. (See Snyder Aff. Ex. C.) During his testimony, Carpenter stated that Defendants kept a contribution summary that listed details of each employer and the historical account contributions and premium payments, segregated those records, and ensured that plan participants were current...

Jones commenced the instant action in the Hennepin County District Court on July 14, 2011, asserting claims of intentional misrepresentation and violations of the Minnesota Consumer Fraud Act, Minn. Stat. § 325F.69, and the Minnesota False Statement in Advertising Act, Minn. Stat. § 325F.67. Defendants removed the action to this Court, and presently before the Court are Defendants' Motions for Sanctions (Doc. No. 13) and Summary Judgment (Docs. No. 19, 21). The issues have been fully briefed, and the Court heard oral argument on July 25, 2012. The Motions are ripe for disposition

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vebaplan2
Plainview, New York, United States #619614

this is about the benistar 419 plans, NOT the health plan that they sell to govt. and non profits.

TAX MATTERS

TAX BRIEFS

ABUSIVE INSURANCE PLANS GET RED FLAG

The IRS in Notice 2007-83 identified as listed transactions certain trust arrangements involving cash-value life insurance policies. Revenue Ruling 2007-65, issued simultaneously, addressed situations where the tax deduction has been disallowed, in part or in whole, for premiums paid on such cash-value life insurance policies. Also simultaneously issued was Notice 2007-84, which disallows tax deductions and imposes severe penalties for welfare benefit plans that primarily and impermissibly benefit shareholders and highly compensated employees.

Taxpayers participating in these listed transactions must disclose such participation to the Service by January 15. Failure to disclose can result in severe penalties--- up to $100,000 for individuals and $200,000 for corporations.

Ruling 2007-65 aims at situations where cash-value life insurance is purchased on owner/employees and other key employees, while only term insurance is offered to the rank and file. These are sold as 419(e), 419(f) (6), and 419 plans. Other arrangements described by the ruling may also be listed transactions. A business in such an arrangement cannot deduct premiums paid for cash-value life insurance.

A CPA who is approached by a client about one of these arrangements must exercise the utmost...

Prepared by Lance Wallach, CLU, ChFC, CIMC, of Plainview, N.Y.,

516-938-5007, a writer and speaker on voluntary employee’s beneficiary associations and other employee benefits.

Journal of Accountancy January 2008

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Anonymous
#572019

PRODUCERSWEB.com

For Smart Advisors

Get Sued

By Lance Wallach Wednesday, April 8, 2009

The IRS is cracking down on what it considers to be abusive tax shelters. Many of them are being marketed to small business owners by insurance professionals, financial planners and even accountants and attorneys. I speak at numerous conventions, for both business owners and accountants. And after I speak, I am always approached by many people who have questions about tax reduction plans that they have heard about. Below are the most common.

419 tax reduction insurance plans

These come in various versions, and most of them have or will get the participant audited and the salesman sued. They purportedly allow the business owner to make a large tax-deductible contribution, and some or all of the contribution pays for a life insurance product. The IRS has been disallowing most versions of these plans for years, yet they continue to be sold. After everyone gets into trouble and the insurance agents get sued, the promoters of the abusive versions sometimes change the name of their company and call the plan something else. The insurance companies whose policies are sold are legitimate companies. What usually is not legitimate is the way that most of the plans are operated. There can also be a $200,000 IRS fine facing the insurance agent who sold the plan if Form 8918 has not been properly filed. I've reviewed hundreds of these forms...

When the IRS audits a participant in one of these plans, the tax deductions are lost. There is also the interest and large penalties to consider. The business owner can also be facing a $200,000-a-year fine if he did not properly file Form 8886. Most of these forms have been filled out improperly. In my talks with the IRS, I was told that the IRS considers not filling out Form 8886 properly almost the same as not filing at all.

412(i) retirement plans

The IRS has been auditing participants in these types of retirement plans. While there is generally nothing wrong with many of the newer plans, the IRS considered most of the older abusive plans. Forms 8918 and 8886 are also required for abusive 412(i) plans.

I have been an expert witness in a lot of these 419 and 412(i) lawsuits and I have not lost one of them. If you sold one or more of these plans, get someone who really knows what they are doing to help you immediately. Many advisors will take your money and claim to be able to help you. Make sure they have experience helping agents that have sold these types of plans. Don't let them learn on the job, with your career and money at stake.

Do not wait for IRS to come and get you, or for your client to sue you. Time is of the essence. Most insurance professionals need help to correct their improperly completed Form 8918 or to fill it out properly in the first place. If you have not previously filled out the form it is late, and therefore you should immediately seek assistance. There are plenty of legitimate tax reduction insurance plans out there. Just make sure that you know the history of the people with whom you conduct business.

Remember, if something looks too good to be true, it usually is. Be careful.

Lance Wallach, the National Society of Accountants Speaker of the Year, speaks and writes extensively about retirement plans, Circular 230 problems and tax reduction strategies. He speaks at more than 40 conventions annually, writes for over 50 publications, is quoted regularly in the press, and has written numerous best-selling AICPA books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Business Hot Spots. Contact him at 516.938.5007 or visit www.vebaplan.com.

The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

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Anonymous
to ty Plainview, New York, United States #603881

NSA: Member Link

Your link to accounting, tax and practice management ideas, tools, news and information.

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

By Lance Wallach May 14, 2008

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 noncompliant plans.

The result has been thousands of audits and an IRS task force seeking out tax shelter promotion. For unknowing clients, the tax consequences are enormous. For their accountant advisors, the liability may be equally extreme.

Recently, there has been an explosion in the marketing of a financial product called Captive Insurance. These so called “Captives” are typically small insurance companies designed to insure the risks of an individual business under IRS...

While captives can be a great cost saving tool, they also are expensive to build and manage. Also, captives are allowed to garner tax benefits because they operate as real insurance companies. Advisors and business owners who misuse captives or market them as estate planning tools, asset protection vehicles, tax deferral or other benefits not related to the true business purpose of an insurance company face grave regulatory and tax consequences.

A recent concern is the integration of small captives with life insurance policies. Small captives under section 831(b) have no statutory authority to deduct life premiums. Also, if a small captive uses life insurance as an investment, the cash value of the life policy can be taxable at corporate rates, and then will be taxable again when distributed. The consequence of this double taxation is to devastate the efficacy of the life insurance, and it extends serious liability to any accountant who recommends the plan or even signs the tax return of the business that pays premiums to the captive.

The IRS is aware that several large insurance companies are promoting their life insurance policies as investments with small captives. The outcome looks eerily like that of the 419 and 412(i) plans mentioned above.

Remember, if something looks too good to be true, it usually is. There are safe and conservative ways to use captive insurance structures to lower costs and obtain benefits for businesses. And, some types of captive insurance products do have statutory protection for deducting life insurance premiums (although not 831(b) captives). Learning what works and is safe is the first step an accountant should take in helping his or her clients use these powerful, but highly technical insurance tools.

Lance Wallach speaks and writes extensively about VEBAs, retirement plans, and tax reduction strategies. He speaks at more than 70 conventions annually, writes for 50 publications, and was the National Society of Accountants Speaker of the Year. Contact him at 516.938.5007 or visit www.vebaplan.com.

The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

National Society of Accountants

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Anonymous
to k Plainview, New York, United States #636280

Have you purchased an IRC 419 Employee Welfare Benefit Plan after being told the contributions were fully deductible from federal and state income taxes, only to find out that this was not the case?

Did you purchase a trust you may not have needed, funded with substantial amounts of life insurance because you were told you could build up cash value tax-free and then have use of the funds tax-free?

If you have been misled about information regarding your employee welfare benefits, you may have been the victim of 419 and 412 plan fraud.

When consumers are misled and given false information by insurance brokers, they have the right to sue the fraudulent agents and insurance company that sold the plan.

Anonymous
to zz Plainview, New York, United States #698259

lance wallach for help

Anonymous
to zz #723637

Sea Nine VEBA, Benistar, Niche, CJA 419 plans IRS audits lawsuits

Anonymous
to zz New York City, New York, United States #747989

benistar cja and associates sea nine veba grist mill trust nova trust sadi trust

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