Rarely do we publish alerts on our blog but we have just learned that the IRS has obtained a list of customers of the Compass Agency in St. Petersburg, Florida and may be auditing those clients with a Compass Welfare Benefit Trust Plan. Established as a so-called 419 plan, this type plan is often considered an abusive tax shelter by the IRS and subject to huge penalties of $100,000 or more per year.
Our sources tell us that Herb Green, founder and president of the Compass Agency, suddenly closed his doors with little warning. We checked tonight and the company’s website is still operating and phone calls are going to voice mail.
A decade ago, welfare benefit plans were the rage for small business owners. Insurance agents and financial planners were hustling clients to invest heavily in these plans. According to the promoters, business owners could contribute and sock away hundreds of thousands of dollars into the plans, all tax free. The promoters forgot to tell their clients, however, that the IRS has steadfastly taken a much different position. Although a few plans do pass muster, most do not.
Business owners are often sold these plans as a way of sheltering income from taxation and for providing a large benefit for the future. Unfortunately, in practice the IRS typically disallows the deduction and the investment value of the insurance or annuity product is usually quite poor.
We haven’t seen one of these plans in quite some time. The IRS began cracking down on them in 1995. We last wrote about them in 2012. Apparently, however, Herb Green and his company were continuing to market these Compass Welfare Benefit plans. Now the IRS has thrown a wrench in Mr. Green’s operation if our understanding is correct.
If you have such a plan, expect to be audited in the immediate future. Speak to an experienced tax lawyer before you speak to the IRS.
As part of our due diligence, we would like to talk to other folks who have purchased one of these plans. We are especially interest if you have been contacted by the IRS and in receiving a copy of any promotional materials from Compass.
Mahany & Ertl is a boutique law firm that concentrates in both tax and fraud recovery. We can defend you during an IRS audit or help you get back your hard earned money if you later learn that your plan is worthless.
For more information, contact attorney Bethany Canfield at or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege.