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Late breaking news: Large 419 plan files for Bankruptcy.
Recent court cases and other developments have highlighted serious problems in
plans, popularly know as Benistar, issued by Nova Benefit Plans of Simsbury,
Connecticut. Recently unsealed IRS criminal case information now raises concerns
with other plans as well. If you have any type plan issued by NOVA Benefit Plans, U.S.
Benefits Group, Benefit Plan Advisors, Grist Mill trusts, Rex Insurance Service or
Benistar, get help at once. You may be subject to an audit or in some cases, criminal
On November 17th, 59 pages of search warrant materials were unsealed in the Nova
Benefit Plans litigation currently pending in the U.S. District Court for the District of
Connecticut. According to these documents, the IRS believes that Nova is involved in
a significant criminal conspiracy involving the crimes of Conspiracy to Impede the IRS
and Assisting in the Preparation of False Income Tax Returns.
Earlier this year, 70 armed IRS Criminal Division special agents raided the offices of
Nova Benefit Plans in Connecticut. The IRS has taken other recent criminal
enforcement actions in other locations including Nebraska and Milwaukee, Wisconsin.
The IRS has told the court that it believes Nova is promoting abusive "Section 419"
welfare benefit plans.
The IRS claims that a cooperating witness and several undercover agents
"penetrated" Nova to ascertain its internal operations. They say Nova helped its
clients violate tax laws by claiming the most minor injuries as permanent disabilities to
qualify for special tax treatment. In other words, they would assist clients in claiming
that a minor scrape was a disabling and disfiguring permanent injury.
The IRS also claims that Nova assisted clients in backdating documents filed with the
How does the phony welfare benefit plan scam work? A taxpayer can contribute
money tax free to the plan on behalf of the beneficiary. At a later date, and with the
assistance of Nova, the beneficiary can claim the money (again tax free) because of a
disability. According to the IRS, Nova's plan was a scam because Nova helped
taxpayers claim false disabilities. The Internal Revenue Code says disability payments
are tax free if there is a permanent loss of a bodily part or function. A small scrape is
a far cry from the loss of an eye.
In one recorded conversation, a representative of Nova said, "We've never denied a
claim... I recently, I don't want to say the client's name, but he went through a minor
surgery, had a little--had a mole removed off his elbow I think and left a little scar the
size of a pencil eraser, and, you know, that--that qualified."
When discussing the "independent plan trustee" that must approve the claims, the
Nova representative said, "I, I'm gonna put this very simply for you, we control the
trustee, okay, and I, I don't mean that in a bad way. He's independent but he's part of
the family and we control the stuff that happens, we have ways to make stuff happen...
It's best for us to pay out as much claims so when it times for us to fight this in tax
court, we can play and sing the welfare benefit song."
Nova is not alone in the scam. According to the IRS affidavit, Nova and its principals
have also done business as U.S. Benefits Group, Benefit Plan Advisors, Grist Mill
trusts, Rex Insurance Service and Benistar.
Anyone who has purchased a plan from Nova or the related entities should
immediately seek competent counsel. If the IRS is correct and these plans are not
legitimate, the tax consequences to participants could be very severe. In some cases,
if clients entered these plans with knowledge of Nova's history or promises to evade
taxes, the consequences could involve criminal prosecution and perhaps prison.
As a result of the raid and a cooperating witness (we call these people informants),
the IRS is believed to have the client lists of Nova, Grist Mill and the others. Generally,
as a matter of policy, the IRS will not criminally prosecute a taxpayer who comes
forward voluntarily and agrees to come into compliance. If the IRS knocks on your
door first, however, all bets are off and prosecution is much more likely.
68 Keswick Lane
Plainview, NY 11803
Fax: (516)938-6330 www.vebaplan.com
National Society of Accountants Speaker of The Year
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.
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, email@example.com or
visit www.taxaudit419.com or www.taxlibrary.us.
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.
|Late breaking news:
Large 419 plan files for Bankruptcy.
|Tax Audit 419.com
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