or Don’t Comply: It Doesn’t Matter
by Mark Nestmann: Questions,
We Get Questions…
I just completed
a four-month ordeal, courtesy of our friends at the Internal Revenue
I purchased a foreign variable annuity policy. Since U.S. persons
who purchase foreign annuities must pay a 1% excise tax, I dutifully
wrote a check for this amount. With the check I enclosed a completed
copy of IRS Form 720 and sent it off to the United States Treasury.
Form 720 is a Quarterly Federal Excise Tax Return. Its
used for a myriad of tax payments, including almost as an afterthought,
it seems a 1% excise tax on life insurance, sickness
and accident policies, and annuity contracts.
later, the fun began. I received a letter from the IRS requesting
my taxpayer identification number. This was despite the fact that
the instructions for Form 720 stipulate that anyone making a one-time
filing of this form enter their Social Security number (SSN) on
informed me that the IRS had received a payment associated with
Form 720, but that it didnt know how to apply it as I had
not provided a taxpayer ID number. I could either apply for a taxpayer
ID number, or call a department at the IRS with the imaginative
name of the Entity Control Unit for further assistance.
I dialed the
number and to my surprise I immediately reached a human. The IRS
representative was helpful but couldnt understand why I hadnt
listed a taxpayer ID number on Form 720. When I pointed out that
the instructions had told me to use my SSN for a one-time filing,
he admitted that procedure was correct. But, he also observed that
Form 720 was used more by businesses than individuals. For that
reason, the IRS computer system was set up to deal with taxpayer
ID numbers in association with Form 720, not SSNs. He asked me to
fax documentation of the payment, and told me he would try to have
the payment credited properly.
later, I received another letter from the IRS. This time, was addressed
to a domestic LLC that I own. The letter informed me that there
the IRS was assessing a deficiency against the LLC equal to the
payment I had made with Form 720, plus penalties and interest. The
letter gave me another number to contact for assistance.
I once again
contacted the Entity Control Unit. I also called the number on the
notice of deficiency. I faxed both IRS departments the full details
of the payment. I was again assured all was well, and that the payment
would be properly credited soon.
weeks passed. The day before I was to leave on an international
business trip, another letter arrived from the IRS. This letter
was a notice of intent to levy against my assets for the entire
amount of the payment I had already sent to the IRS, plus additional
penalties and interest. There was yet another IRS contact number
I contacted the Entity Control Unit and the IRS contact number on
the notice to levy. Both offices assured me I had nothing to worry
about. I could safely go on my business trip and not be concerned
that when I returned, the IRS would start seizing assets.
And when I returned, I was happy to find acknowledgement that the
IRS had credited my original payment to my SSN, as I had originally
In this case,
there was a happy ending. The IRS finally found my payment and credited
it properly. However, I could have avoided the entire ordeal, which
took up at least eight hours of my time, by simply applying online
for an employer ID number, as Form 720 suggests.
If I ever buy
another foreign annuity policy, thats what Ill do first.
And I suggest you do the same, if you purchase one.
with permission from The Sovereign
Mark Nestmann is a journalist with more than 20
years of investigative experience and is a charter member of The
Sovereign Society’s Council of Experts. He has authored over a dozen
books and many additional reports on wealth preservation, privacy
and offshore investing. Mark serves as president of his own international
consulting firm, The Nestmann Group, Ltd. The Nestmann Group provides
international wealth preservation services for high-net worth individuals.
Mark is an Associate Member of the American Bar Association (member
of subcommittee on Foreign Activities of U.S. Taxpayers, Committee
on Taxation) and member of the Society of Professional Journalists.
In 2005, he was awarded a Masters of Laws (LL.M) degree in international
tax law at the Vienna (Austria) University of Economics and Business
© 2011 Mark
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