The Threat of IRS Examination Just the potential of an IRS examination has intimidated many taxpayers to end their insurance arrangement regardless of the legitimacy. Recently, the IRS has confirmed that 80% of taxpayers under audit for their micro-captive have settled with the IRS. This has only fueled the position of the IRS, and it has now announced that 12 new IRS audit teams have been established. These audit teams are comprised of both Large Business & International and Small Business/Self-employed divisions.
As previously mentioned, the IRS has issued limited settlement procedures to a few taxpayers currently in exam. The settlement would require surrendering 100% of the premium and expense deductions taken with a 5-15% penalty depending on whether the taxpayer relied on advice of a competent professional. The captive would be liquidated with taxes paid on the liquidation and a potential penalty as well. We are hoping for more clarification from the IRS. We have had conflicting statements about the liquidation treatment of the premium payments subject to the settlement, but in previous settlements those were treated as capital contributions.
The Threat of IRS Examination
ReplyDeleteJust the potential of an IRS examination has intimidated many taxpayers to end their insurance arrangement regardless of the legitimacy. Recently, the IRS has confirmed that 80% of taxpayers under audit for their micro-captive have settled with the IRS. This has only fueled the position of the IRS, and it has now announced that 12 new IRS audit teams have been established. These audit teams are comprised of both Large Business & International and Small Business/Self-employed divisions.
As previously mentioned, the IRS has issued limited settlement procedures to a few taxpayers currently in exam. The settlement would require surrendering 100% of the premium and expense deductions taken with a 5-15% penalty depending on whether the taxpayer relied on advice of a competent professional. The captive would be liquidated with taxes paid on the liquidation and a potential penalty as well. We are hoping for more clarification from the IRS. We have had conflicting statements about the liquidation treatment of the premium payments subject to the settlement, but in previous settlements those were treated as capital contributions.