Investigators at the U.S. Government Accountability Office have come up with a list of federal tax forms and other data sources that could help government agencies track the use of offshore life insurance arrangements.
The GAO developed the list in connection with a report on IRS oversight of micro-captive insurers. The report was prepared for Sen. Charles Grassley, R-Iowa, who is the highest-ranking Republican on the Senate Judiciary Committee.
The GAO concluded that the data sources listed probably could not help the IRS come up with a micro-captive owner audit list.
What It Means
Even though the GAO thinks the data sources are inadequate for micro-captive auditors' needs, the list in the report could be useful to insurance agents, financial planners, retirement planners and others who want to see how information about clients' non-U.S. life insurance and annuity arrangements could flow to the IRS.
The Forms
In additional to general personal, corporate and life insurance company tax forms, some of the forms on the GAO offshore insurance data source list include:
IRS Form 8938, Statement of Specified Foreign Financial Assets. Filers use this form to provide information about filers' non-U.S. cash-value life insurance and annuity accounts.
IRS Form 8966, FATCA Report. Financial institutions use this form to report information about customers' cash-value life and annuity contracts.
IRS Form 720, Quarterly Federal Excise Tax Return. Filers use this form to report on the premiums paid for non-U.S. life insurance.
FinCEN Form 114, Report of Foreign Bank and Financial Accounts. Filers use this form to report information about non-U.S. insurance accounts to the Financial Crimes Enforcement Network — the federal agency in charge of detecting and tracking criminals' use of U.S. financial institutions.
Micro-Captive Basics
A captive insurance company is an entity that a company, individual or association forms to provide insurance coverage solely for the owners.
Taxpayers of all kinds use captive insurers for many purposes. Life insurers often use large captive insurers to provide reinsurance.
