The use of captive insurance by U.S. companies to manage costs and risks and realize tax benefits has been a legitimate activity for years. However, with the IRS recently adding captive insurance to its annual “Dirty Dozen” list of tax scams for the 2015 filing season, the Service has recently focused significant audit resources on small and mid-market companies that are forming small or “micro” captive insurance companies.
In a new article in Accounting Today, “Captive Insurance on the IRS Dirty Dozen List – What Every CPA Needs to Know”, former IRS Acting Commissioner and alliantgroup National Director of Tax, Steven Miller, and alliantgroup Managing Director of Tax Controversy, John Dies, discuss the Service’s recent crackdown on micro captive insurance companies and what this means for those who have, promote or manage micro captives. According to both Miller and Dies, several audits of micro captive insurance companies are already underway and those found non-compliant run the risk of severe penalties from the IRS.
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