On Friday, the IRS called on participants in "offensive" microcaptive insurance arrangements to leave the programs and warned that it would impose sanctions on such captive owners.
The statement comes a month after the IRS won its fourth victory against the tax court against so-called 831 (b) microcapaptives.
Prisoners are taxed only on investment income – not insurance income – provided their annual premiums do not exceed a ceiling of $ 2.3 million. Microcaptive advocates say the programs give smaller organizations an opportunity to enter the captive market, but critics say they can be used as a tax system for wealthy families and individuals.
"In several cases before the courts, judges have ruled that these" imaginative "and" unreasonable "arrangements do not supplement insurance in the generally accepted sense," said IRS Commissioner Chuck Rettig in the statement. independent legal advice separate from those that helped guide them into these offensive arrangements. "
Microcapaptic owners should also consult with an independent tax adviser before filing their tax returns for 2020, the statement said. continue to impose sanctions, where applicable, including the strict liability applicable to transactions that do not have the financial substance, ”added it.