IRS to Audit Thousands of Potential Insurance Tax Shelters

The IRS plans to audit thousands of taxpayers involved in insurance schemes suspected of being used to dodge taxes.

The investigations focus on arrangements involving small insurers, known as “micro-captives,” that can choose to pay tax only on their investment income under a perk in the tax code.

The IRS has increased scrutiny of the arrangements in recent years, saying that in some cases promoters, accountants, or wealth planners persuade owners of closely held businesses to participate in schemes that lack the attributes of genuine insurance.

• The IRS will establish 12 new teams of auditors to carry ...