If you have received a letter on this subject, returning the IRS letter indicating that you have ceased the use of a micro-captive arrangement along with the Penalties of Perjury statement, can potentially be used against you.
SAN DIEGO (PRWEB) April 13, 2020
Note: As long as a taxpayer that has, (or merely appears too) willfully committed tax crimes (potentially including the intentionally improper use of a captive insurance company) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply. A letter from the IRS concerning your captive insurance company involvement does not necessarily prevent you from successfully entering a voluntary disclosure.
Why is the IRS Targeting Captive Insurance Arrangements?
The IRS suspect that taxpayers have formed micro-captives in an attempt to shelter up to $2.2 million of income from tax without having met the diversification requirements contained in the statute. Micro-captives are even explicitly listed by the IRS as part of the annual IRS Dirty Dozen tax schemes.
If you have received a letter on this subject, returning the IRS letter indicating that you have ceased the use of a micro-captive arrangement, along with the Penalties of Perjury statement, can potentially be used against you in future legal proceedings and may even amount to a criminal tax admission. Especially for those who continue to use micro-captives, it is critical to ensure that your arrangement meets the legal requirements imposed by section 831(b) and the relevant regulations and case law. Willful ignorance to the requirements of a micro-captive insurance arrangement cannot be used as a defense if the IRS deems your captive structure to be out of compliance. In either case, taxpayers should contact an experienced tax defense attorney to discuss next steps and options on how to respond to the letter or whether a response is appropriate, at all.
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Public Contact: Dave Klasing Esq. M.S.-Tax CPA, firstname.lastname@example.org
SOURCE Tax Law Offices of David W. Klasing, PC