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How Insurance Companies Scam Consumers

Despite the creation of regulations listing potentially abusive tax shelters (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 and agents in their sales and commissions, it has serious financial consequences for consumers, including tax penalties and the loss of benefits because of defunct plans. Typical fraudulent claims of promoters include the following:scam

  • 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