Captive Insurance Plans

The IRS has initiated audits of hundreds of taxpayers who use captive insurance companies and is also examining practitioners that are assisting Captive Insurance Companies with compliance.

The IRS has named Captive insurance companies to its Dirty Dozen List.

For those businesses and practitioners found non compliant with IRS standards, the consequences are severe and could include understatement and negligence penalties.

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If the IRS finds that the captive insurance company isn’t up to par, it means losing the premium deduction, incurring a 20 percent penalty with added interest. The IRS is also considering imposing economic substance penalties and the 20 percent goes up to 40 percent.

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