IRS: Disclose Offshore Accounts or Go to Jail

IRS: Disclose Offshore Accounts or Go to Jail


That's pretty much the headline from a CNBC article on Friday. And it's true.

In 2009, 15,000 Americans came forward and admitted having foreign bank accounts. Unfortunately, Uncle Sam estimates there are some 500,000 more people hiding money offshore. Opening a bank account in another country isn't illegal. There are a whole host of reasons why people may wish to send money offshore. It only becomes illegal when you send money to a foreign country in the hopes of cheating Uncle Sam.

U.S. law makes it a felony if you fail to declare the income from foreign investments on your U.S. tax return and makes it illegal to not disclose the existence of the foreign account.

So what is a person to do? Taxpayers can do nothing and hope they don't lose the "audit lottery" (there are no winners with the IRS). Or taxpayers can come into compliance, report the account and pay the government ¼ of the highest dollar amount that was in the account. That's right, if you had an account with $200,000 in it, get out the checkbook and write a check to the IRS for $50,000.

Taxpayers wanting to take advantage of the current amnesty program (called the Offshore Voluntary Disclosure Initiative) must move quickly, however. Unlike the 2009 program, which simply said you had to apply be the deadline, the current amnesty requires that all missing forms ("FBAR's"), amended returns and payment must be made by the deadline. There is a great deal of paperwork involved with the new program, waiting until the last minute is a recipe for disaster.

Those that don't comply face prison and loss of 50% of their highest account value.

So what is the risk of getting caught? We think it is quite high.

Transparency within the international banking community is at an all time high. And the developed countries are exchanging information. That means if Germany obtains information about accounts in a Bermuda bank it will likely share that information with other countries.

The U.S. has been issuing "John Doe" subpoenas to foreign banks fishing for the names of American account holders. Countries like Germany have been bribing foreign bank officials to simply steal the information and turn it over.

Still not convinced? The IRS paid its first award under the new whistleblower program - $4.5 million to an accountant who reported his employer! If anyone, anywhere knows you have a foreign account; they may report you and keep a large percentage of what you pay.

The world suddenly got much smaller.

This is interesting article but I do not believe everything in it is correct. I have received numerous phone calls from participants in these plans and the IRS is auditing.  For the most accurate information contact: Lance Wallach at or call 516-935-7346

Lance Wallach Life Insurance: Captive Insurance Buyer Beware

Is a captive insurance cell the way to go? - Accounting Today - Captive Insurance: Achieve large tax and cost reductions by renting a “CAPTIVE”. Most accountants and small business owners are unfamiliar with a great way to reduce taxes and expenses. By either creating or sharing “a captive insurance company”, substantial tax and cost savings will benefit the small business owner.

To read the entire article, click here

Re-entering The Tax System                                                                                                                            July 2011

by Lance Wallach

 Taxpayers who have failed to file federal tax returns for three years or more and owe more than $75,000 in tax should find this section particularly interesting.  (i.e., pure tax ― no interest, no penalties).

Rule No. 1:

Under no circumstances should you attempt to re-enter the tax system on your own. Tax evasion, failing to file a timely tax return, and perjury are very serious tax crimes, and one mistake can send you to federal prison for a very long time. Your voluntary admission of a tax crime is similar to Pandora’s box; once the lid has been opened there is nothing you can do to get it closed again. The biggest mistake that most people make is hiring advisors that do not specialize in failure-to-file cases and have little or no knowledge of the IRS/Criminal Investigation Division (IRS/CID) procedures and criminal-tax violations.

Rule No. 2

Under no circumstance should you assume that the IRS/CID and the U.S. Attorney’s Office (USAO) will grant you immunity from prosecution simply because you volunteered to come forward, bare your soul, and beg for forgiveness.  The IRS terminated its guaranteed non-prosecution policy for voluntary disclosure of tax crimes in 1961. If you have not filed federal tax returns for three years or more and owe more than $75,000 in back taxes, then you will likely receive a visit from the IRS/CID six to eighteen months after you file your delinquent tax returns. The “reward” you get for filing true and correct delinquent tax returns is that you may be able to avoid additional perjury charges. But you will still have to pay a very large tax liability, which will include interest and a whopping 75% civil tax fraud penalty. Your full disclosure will be appreciated, and under current IRS guidelines you “may” avoid criminal prosecution only if you pay the entire amount due.

Call our office today for a free 3-5 minute consultation with Lance Wallach, the nation’s foremost tax expert, or visit   

Rule No. 3

You must hire the best tax advisors that money can buy. Preferably you will want someone with at least 23 years experience handling failure-to-file cases before the IRS, and preferably this same person will have experience as a former IRS Special Agent. That’s where we come in.

         Last year I received over a thousand phone calls from business owners, accountants and other professionals who were in trouble with the IRS over a recent large fine. If you were in what the IRS considers an abusive, listed or similar to transaction, you face a hundred thousand dollar IRS fine under IRS code 6707A.  The IRS is attacking thousands of people for either being in, selling, or advising about, various types of plans, which are primarily marketed by insurance professionals. 

If you are or were in a 412i, 419, captive insurance, or section 79 plan, you should immediately file under 6707A protectively. If you have already filed you should find someone who knows what he is doing to review the forms. I only know of two people who know how to properly file. The IRS instructions are vague.  If a taxpayer files wrong, or fills out the forms wrong he still gets the fine. I have had hundreds of phone calls from people in that situation.

Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, financial and estate planning, and abusive tax shelters.  He writes about 412(i), 419, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Pubic Radio’s All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education’s CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, or visit

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.

How Hartford Life and Other Insurance Companies Tricked their Agents and Got People in Trouble with the IRS -

How Hartford Life and Other Insurance Companies Tricked their Agents and Got People in Trouble with the IRS -

Agents from Hartford and other insurance companies were shown ways to sell large life insurance policies. This “Welfare Benefit Trust 419 plan or 412i plan should be shown to their profitable small business owners as a cure for paying too much taxes.

A Welfare Benefit Trust 419 plan essentially works like this:

• The business provides a fringe benefit for their employees, such as health insurance and life insurance.

• The benefit is established in the name of a trust and funded with a cash value life insurance policy

• Here is the gravy: the entire amount deposited into the trust (insurance policy) is tax deductible to the company,and

• The owners of the company can withdraw the cash value from the policy in later years tax-free.
Read more by clicking the link above!

Similarities and Differences Between IRC Section 419A(f)(6) and IRC Section 419(e) Plans CPA’s Guide to Life Insurance

Author/Moderator: Lance Wallach, CLU, CHFC, CIMC

Below is an excerpt from one of Lance Wallach’s new books.

Similarities and Differences Between IRC Section 419A(f)(6) and IRC Section 419(e) Plans

                        One popular type of listed transaction is the so-called “welfare benefit plan,” which once relied on IRC §419A(f)(6) for its authority to claim tax deductions, but now more commonly relies on IRC §419(e).  The IRC §419A(f)(6) plans used to claim that the section completely exempted business owners from all limitations on how much tax could be deducted.  In other words, it was claimed, tax deductions were unlimited.  These plans featured large amounts of life insurance and accompanying large com­missions, and were thus aggressively pushed by insurance agents, financial planners, and sometimes even accountants and attorneys.  Not to mention the insurance companies themselves, who put millions of dollars in premiums on the books and, when confronted with questions about the outlandish tax claims made in marketing these plans, claimed to be only selling product, not giving opinions on tax questions.