Small businesses are one the most ignored financial sectors in the country’s economy. Government agencies such as the Internal Revenue Service (IRS) and the Securities Exchange Commission (SEC) often come up with regulations that target only large corporations. Due to constant tendencies to overlook this vital sector of the economy, there is increasing levels of business malpractices, especially in the small business insurance platform.
New Measures from the IRS
In what could be an unprecedented attempt to control the sector, IRS recently came up with new stringent measures to tame the rogue small business owners. The agency is targeting small business insurance providers who take advantage of its leniency to engage in schemes designed to evade taxes.The agency came up with the new rules amid an ongoing investigation where an in-house insurance provider, which provides micro captive insurance, unknowingly fell into the trap of abusive tax evasion schemes. Such companies are highly prone to malicious programs formed by small business owners to shelter themselves from paying taxes.
These programs can accumulate deferred taxes, unlike conventional insurance quotes. Small businesses can protect their products from risks that are costly for traditional insurance companies. In the process, the companies enjoy tax-free limits set by IRS.
What the New Rules Mean for Businesses
IRS announced that it is making the rules more unfriendly based on increased cases of tax evasion resulting from the questionable transactions recorded by micro captive providers. However, there is a brewing legal tussle between IRS and interested parties. Those against the new rules claim that IRS acted without considering the possible outcome of an ongoing tax case known as Avraham v Commissioner, which is at an advanced stage in the court. Most of them feel that the agency acted too soon.
The Current State of Insurance for Small Businesses
Many insurance companies provide small business insurance policies ranging from liability insurance to disaster and health insurance. However, insurance companies treat small business insurance policies like any other cover. They do not consider the scope of service delivery or the business portfolio of the company at stake. As a result, most small businesses opt for unconventional insurance covers such as micro captives. With the increasing difficulty to do business due to fierce completion from well-established companies, small businesses go for cheaper alternatives to help them cut costs, especially in risk mitigation.
How Small Businesses Can Be Insured
Through captive insurance, small businesses can insure themselves at incredibly lower prices. Many businesses prefer this type of insurance because of the planning advantages that come with it. Before a particular business qualifies for the advantages, it must produce a detailed document showing the risks insured.
History of Captive Insurance
Micro captive insurance was started in the 1950s. Today, more than 500 companies have at least one captive policy. Through the policy, many small businesses can now avoid the volatility of the insurance market through self-insurance. According to financial analysts, insurance for small business will never get better without captive insurance in it. Visit TruShield Insurance and learn more from their online resources.