ZMF has extensive experience in captive insurance audit defense and compliance. Representation of captive insurance company owners and service providers nationwide gives ZMF a coordinated perspective on the issues and concerns regularly raised by the IRS in their examinations of taxpayers on this issue. IRS scrutiny of captive insurance gained substantial momentum in early 2014 as The Service launched a series of 6700 promoter examinations aimed at multiple captive management firms. In short order, these examinations led to informal documentation requests, and audits of captive insurance company owners nationwide. By 2015, The IRS listed captives on its Dirty Dozen List acknowledging that captives were legal when done properly, but including captive insurance among potential “tax scams,” along with identity theft, phishing, preparer fraud and offshore tax avoidance.

Highly coordinated, the audits of captive clients tend to involve voluminous documentation requests which occasionally include IRS summons/enforcement proceedings requiring experienced legal counsel with familiarity both in terms of the captive owner’s documentation, and also with the documentation of the relevant service provider. The IRS commonly requests interviews, which can be recorded, and taken under oath with participation by IRS counsel. ZMF works regularly with risk managers, CPA’s, captive owners, and captive managers. ZMF follows current case law closely, and is intimately familiar with captive insurance cases such as Avrahami, Syzygy, and Reserve Mechanical.

ZMF also regularly assists clients with independent third party compliance reviews aimed at shoring up captive companies, and insuring that the necessary substantiation is in place to ensure the best possible audit defense in the event of IRS scrutiny. Due to the firm’s experience, ZMF is able to review cases with a lens toward issues key in ongoing IRS examinations to provide real time advice on how to strengthen and improve documentation.

Read our article below for the latest on captive insurance news


California FTB Begins looking at Captive Insurance Companies

While states often lag behind the IRS in enforcement of IRS priority issues, the California Franchise Tax Board (FTB) has begun to show an interest in looking deeper into captives owned by California residents. While the FTB has made no formal pronouncements about its intention (unlike the IRS, which has classified certain microcaptive transactions as…

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