Latest News on Tax Scams

IRS offers to settle with insurance tax scammers

Since 2014, the list of Dirty Dozen Tax Scams has included “captive” insurance companies. Although the law allows companies to create captive insurance companies to insure against legitimate risk. In that case, the insured company can deduct the premiums it pays for the insurance.

“However, in some “micro-captive” structures, promoters, accountants or wealth planners persuade business owners to participate in scams that lack many of the attributes of insurance.”

The IRS has pursued hundreds of cases against such schemes in Tax Court after auditing the taxpayer companies.  After prevailing in three recent U.S. Tax Court cases, the IRS said it has decided to offer settlements to 200 taxpayers who are currently under exam. The IRS began mailing out time-limited settlement offers spell out specific settlement terms. Taxpayers who don’t receive a letter aren’t eligible for this resolution, the IRS pointed out.

“The IRS noted that it has consistently disallowed the tax benefits claimed by taxpayers in abusive micro-captive structures. While some taxpayers have challenged the IRS position in court, none have been successful to date. The IRS said it would continue to disallow the tax benefits claimed in abusive micro-captive transactions and continue to defend its position in court. The IRS has decided, though, to offer to resolve some of the cases.”

What this means is that there are probably 1000s of these situations out there, but that only a few of them have been audited. Still fewer have been taken to court.

The famous “Son of Boss” resulted in 1,165 tax cases. The IRS is apparently attempting to clear out the individual cases by offering deals. The real target of this effort is to find the advisrrs pushing the illegal schemes & prosecute them. In ‘Son of Boss’ tax fraud case, KPMG pled guilty to tax fraud.

Taxpayers are unlikely to go to prison, but their advisers are likely to.

 

Some tax scams:

KPMG partner David Middendorf

Three former KPMG partners

Son of Boss

IRS Dirty Dozen

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