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5 July 2021Accounting & tax analysis

Micro-captives back on the IRS Dirty Dozen list after a one year hiatus


Abusive micro-captive insurance arrangements have found themselves on the Internal Revenue Service’s Dirty Dozen list of tax scams, yet again.

The IRS publishes an annual list of the 12 worst tax scams, which it calls the "Dirty Dozen". Micro-captives had been on the list for the five consecutive years to 2019, but were left off in 2020.  The industry continued to feel the heat of the IRS’ focus, however, and few will be surprised that micro-captives are back on the list.

The IRS warned people to be on guard against “promoters who peddle false hopes of large tax deductions from abusive arrangements.” It warned: “If it sounds too good to be true, it probably is.”

The IRS recently created the Office of Promoter Investigations to focus on participants and the promoters of abusive tax avoidance transactions and coordinate service-wide enforcement activities.

Other abusive arrangements on the IRS's annual Dirty Dozen list included syndicated conservation easements; the potentially abusive use of the US-Malta tax treaty; improper claims of business credits; and improper monetized installment sales.

IRS Commissioner Chuck Rettig said the IRS is stepping up its enforcement efforts more broadly. "Don't be lulled into these shady deals,” he warned. “The IRS recommends that anyone who participated in one of these abusive arrangements should consult independent counsel about coming into compliance."


More on this story

article
20 July 2020   Micro captives have been left off the IRS’s annual report for the first time in five years – but the sector has not been forgotten.
article
26 July 2021   An Internal Revenue Service’s summons sent to the Delaware Department of Insurance seeking information related to a micro-captive investigation should be granted, according to a magistrate judge.

More on this story

article
20 July 2020   Micro captives have been left off the IRS’s annual report for the first time in five years – but the sector has not been forgotten.
article
26 July 2021   An Internal Revenue Service’s summons sent to the Delaware Department of Insurance seeking information related to a micro-captive investigation should be granted, according to a magistrate judge.