The IRS has recently committed substantial audit resources toward small and mid-market companies that are involved with or have formed captive insurance companies under Section 831(b) of the United States Tax Code.
The IRS also included captive insurance in its annual “Dirty Dozen” list of tax scams for the 2015 filing season.
The Service’s primary concern, as expressed to the public, is that some captives have been formed to avoid tax liabilities and do not truly qualify as “insurance” in the traditional sense. It has become clear that the IRS is taking a hard and critical look at captive insurance companies and their legitimacy under the law.
The Firm has first-hand experience working jointly with insurance agents, brokers, and accounting firms when the IRS approaches the captive insurance company with an audit notice. We also have experience litigating captive issues before the United States Tax Court and fighting for captives when targeted by the government.