By Lance Wallach
Every tax season ushers in a new set of challenges for those who work in the industry. This year is
no exception. Tax professionals nationwide anticipate the downturn in the economy will affect their
practice more than any other single issue. Many are concerned about increased competition from
national franchises and providers of do-it-yourself software. Others worry if their clients will be able
to afford their bookkeeping and tax preparation services. Knowing full well the average American will
need the services of a tax professional now more than ever, NATP members will take care of their
clients with the same great service as always. It just may be a bit harder to do now.
My biggest challenge will be finding time to educate the hundreds of accountants who are being
targeted by the IRS as “material advisors.” Any accountant who allows a 419, 412(i), or other type
of abusive listed transaction (or substantially similar to such a transaction plan) to be deducted, can be
labeled a material advisor by the IRS and be subject to a $200,000 fine. In addition, the information
will be forwarded to the Office of Professional Responsibility and they could lose their license. This
past year, I often received as many as fifty calls a week from people needing help with this problem.
For example, I recently received a phone call from an accountant whose client went into an insurance
company-sponsored 412(i) retirement plan in 2003. The business owner made no contribution to the
plan in 2004 or 2005, and actually tried to get out of the plan. The IRS audited the returns for 2004
and 2005 and fines the business owner $400,000 for being in a listed transaction. I believe they are
now fining the accountant $200,000 for being a material advisor. The accountant had nothing to do
with the plan, did not think anything was wrong, and still can’t understand what’s going on. If you
think that this can’t happen to you, think again. It’s happening to a lot of honest accountants.
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
Public 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, firstname.lastname@example.org or visit www.taxadvisorexperts.org or www.taxlibrary.us.
of advice for any specific individual or other entity. You should contact an appropriate
professional for any such advice.
Winter 2009 The Quarterly Magazine for Tax Professionals
|Climbing Mt. Neverest
NATP members confront the challenges they’ll face