In 2004, Congress enacted Section 6707A of the Internal Revenue Code authorizing the imposition of penalties for failure to provide the IRS information with respect to "reportable transactions."1 The penalties apply not only to taxpayers, but also material advisors (i.e., those that assist taxpayers such as attorneys, accountants, etc.). Penalty amounts for noncompliance can be severe – up to $200,000 as well as criminal prosecution.
In late 2016, the IRS published Notice 2016-66 (Notice), which identified certain micro-captive transactions as "transactions of interest," a type of reportable transactions. Stated simply, micro-captive transactions are a form of self-insurance through a related (or "captive") party. In the Notice, the IRS explained that such transactions have a potential for tax avoidance or evasion. Characterizing micro-captive transactions as transactions of interest triggered the reporting requirement for taxpayers and their material advisors under Section 6707A.
In 2004, Congress enacted Section 6707A of the Internal Revenue Code authorizing the imposition of penalties for failure to provide the IRS information with respect to "reportable transactions."1 The penalties apply not only to taxpayers, but also material advisors (i.e., those that assist taxpayers such as attorneys, accountants, etc.). Penalty amounts for noncompliance can be severe – up to $200,000 as well as criminal prosecution.
ReplyDeleteIn late 2016, the IRS published Notice 2016-66 (Notice), which identified certain micro-captive transactions as "transactions of interest," a type of reportable transactions. Stated simply, micro-captive transactions are a form of self-insurance through a related (or "captive") party. In the Notice, the IRS explained that such transactions have a potential for tax avoidance or evasion. Characterizing micro-captive transactions as transactions of interest triggered the reporting requirement for taxpayers and their material advisors under Section 6707A.