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How Insurance Companies Scam Consumers

Abusive tax shelter, how insurance companies scam consumers

Despite the IRS’s creation of rules and regulations for a potentially abusive tax shelter and/or a listed transactions by the IRS, promoters continue to market plans to mislead consumers into believing the plan premiums are tax-deductible.

While this benefits the promoters in their sales and commissions, it has serious financial consequences for consumers. Which may include tax penalties and the loss of benefits because of defunct plans.

Typical fraudulent claims of promoters include the following:

  • Misrepresenting premiums as tax deductible
  • Fraudulently claiming plans are exempt from tax deduction limits
  • Failing to analyze whether insurance policies promoted are funds as defined by the IRC
  • Incorrectly claiming exemptions from compliance with ERISA or sections 409, 414, 419, 505, and 79 of the IRC
  • Improper tax deductions
  • Failure to cite the section of the IRC under which contributions to their plan are tax-deductible
  • Failed to comply with non-discrimination laws
  • Taking larger deductions than required to pay term insurance costs for the current tax year