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Tag: Abusive tax shelters

Tax Problems of Captive Insurance Companies

Tax Problems of Captive Insurance Companies

The tax concept of captive insurance is relatively straightforward. The parent company pays insurance premiums to its captive insurance company and seeks to deduct these premiums, usually in a high-tax jurisdiction.

Today, several U.S. states allow the formation of captive companies. Protection from tax assessment is a sought-after benefit for the parent company.

Whether the parent company realizes a tax break from creating a captive insurance company depends on the classification of insurance that the company handles. In the United States, the Internal Revenue Service (IRS) requires risk distribution and risk shifting to be present for a transaction to fall into the category of insurance. The IRS has publicly declared it would take action against captive insurance companies suspected of abusive tax evasion. Some risks could result in substantial expenses for the captive insurance company, potentially leading to bankruptcy.

Insurance is a significant expense for big or small companies. While buying into a captive may seem like a cost-effective plan, unfortunately, many captive insurance agents are not always aware of updated laws and restrictions. When you’re audited, you will end up having to pay huge penalties or be at risk of losing your company if you have not filed ccorrectly. Don’t risk an audit. Contact me for an assessment, nationwide!

 

 

Get the Help You Deserve, Lance Wallach

Forbes Article Highlighting Renowned Tax Expert

Forbes Article Highlighting Renowned Tax ExpertThis recently published Forbes article highlights some of the incredible work from the nation’s leading tax expert, Lance Wallach.
For years Lance has been helping thousands of people avoid IRS audits and fines. His expertise in the pitfalls of abusive tax shelters has guided hundreds to exit these harmful schemes before they were hit with audits, hefty fines or lawsuits.
Give the article a read and contact Lance directly at [email protected] or 516-236-8440 for any questions or assistance. He is here to help you before it’s too late.

Forbes Article Highlighting Tax Expert, Lance Wallach

Captive Insurance Plans Will Be Audited

Captive Insurance PlansCaptive Insurance Plans.CIC Services has suggested that the Internal Revenue Service’s (IRS) “scare tactics” have left businesses unprepared amid the current COVID-19 pandemic.

The captive management company explained that in light of the current pandemic, many businesses “now regret their decision to forgo insuring their business via a captive insurance company”.

CIC Services said that this was a decision “strongly influenced by the IRS’s targeting of certain captive insurance arrangements and its refusal to provide honest taxpayers with any substantive guidance about operating such companies in good faith”.

The firm added that because of such “harassment” many businesses who desperately need captive insurance have declined to form a captive insurance company due to fear of “buying an IRS audit”.

CIC Services said: “Many businesses who once enjoyed the insurance protection offered by a captive insurance company have since shut down their captives for identical reasons. These businesses now find themselves unprotected and uninsured during one of the most profound periods of uncertainty the country has faced in decades.”

The Tennessee-based firm revealed that it has seen its own clients hurt by “IRS scare tactics”.

Randy Sadler, who leads CIC Services’ marketing and client empowerment, said: “Over the years we’ve talked with many physicians groups that earn most of their income from elective surgeries. All of them have now been devastated by this coronavirus—they lost their income stream when the states banned all elective procedures.”

He added: “Unfortunately, the IRS’s scare tactics dissuaded many of them from setting up a captive insurance company that would have helped them endure this interruption to business. But our clients who do have them are mostly thrilled at the movement, IRS concerns or not.”

Earlier this year, CIC Services petitioned the Supreme Court of the US to hear its lawsuit against the IRS regarding IRS Notice 2016-66. CIC Services revealed that its lawsuit continued to gain increasing support from legal scholars and it expects to have a ruling on the petition “within a couple of months”.

“Too many people think of captive insurance arrangements as a tax strategy,” said Sadler. He concluded: “But while there may or may not be tax benefits in a given instance, there are essential and sometimes business-saving risk management and insurance benefits in every instance. Taxpayers can always enjoy the latter regardless of whether or not they choose to pursue the former.”