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Abusive Tax Shelters

Insurance agents and related enterprising people have continually endeavored to concoct plans that make them a great deal of money. And when I say “plans,” I mean welfare benefit plans. These are insurance-based plans that employers can invest money into under the guise that the contributions are tax-deductible; likewise, they are represented as having the benefit of allowing withdrawals at some point in a non-taxable manner.

The IRS has never (as far as we are aware) agreed with one of these Plans. In other words, these types of Plans (and, oftentimes, their promoters) have been subject to extreme scrutiny by the IRS—and this, generally, has included not only an audit of the Plans, but also of participating employers/employees in the Plans.

One of the latest targets by the IRS is Southwest Financial Group, Inc. (“SFG”). SFG is a business located in Phoenix, Arizona, that created and/or promoted a number of “Section 79” Plans. These plans are now the focus of the IRS and their participants are beginning to receive audit notices.