There is nothing like a shocking headline to garner attention and create fear, uncertainty and doubt (FUD). In our sound-bite driven society, headlines are often misleading and designed by spin doctors merely to advance an agenda.
Is the headline of my article true? Technically, yes. However, it is both true and yet deliberately misleading.
It is true that the IRS has placed tax preparer fraud among its “Dirty Dozen list of tax scams”. So…public beware! Your tax preparer could be a devious criminal, committing fraudulent acts. So says the IRS.
How should you respond to this “Dirty Dozen” listing? Should you be gripped with fear? Should you distrust CPAs and tax preparers in general? Should you avoid using them? Obviously, any of these would be absurd reactions. Instead, simply do as the IRS recommends and exercise a proper due diligence before hiring a preparer.
The same is true when it comes to captive insurance companies, which were likewise placed on the IRS’s “Dirty Dozen” list for this year. Several trade and business publications ran stories with the headline, “IRS places 831(b) captives on its “dirty dozen” list.” And, some have concluded that doing an 831(b) captive insurance company is improper as a result. But, as we have shown, it’s no more improper than using a tax preparer.
A properly structured captive has more layers of oversight than an annual tax return, because it is reviewed by a captive manager, captive attorney, actuaries and domicile regulators. Business owners who work with reputable captive managers and captive attorneys to properly set-up and operate captive insurance companies have as little to fear over the Dirty Dozen listing as when working with a reputable tax preparer.
Don’t let the FUD (fear, uncertainty and doubt) caused by misleading headlines keep your business from enjoying the benefits of a properly managed captive insurance company.