For an accountant, you may be hired by a person or a company to handle their accounting and taxes while others will be hiring you because of the things you can do for them. If it is the second one, then they will most likely be curious about what you can suggest they do in order for them to grow their finances. These businesses are mostly trying to find ways in order to get through the yearly audit without hassle through a skilled accountant that is covered with CRA audit protection.
As an accountant, you may have a client that is covered by a large insurance policy. Good examples are malpractice insurance for doctors and medical personnel or construction contractors that has liability concerns. They may inquire about the possibility of creating a captive insurance company.
For an expert, it is known that captives are considered as something that can either get you risks or reap you rewards. The reward one will be getting ones the taxpayers practice have ended will be through premium payments in the captive insurance. This is in comparison to the usual premium payments that are easily lost. These are legit and can be deducted as an expense by the business but are not as good as an investment vehicle. All the money that is paid into the captive insurance will only be claimed ones the company is dissolved.
The risk that comes with captive insurance companies is that the IRS is quite skeptical with these types of companies because individuals and companies are able to abuse the usage of such company. It has been listed by the IRS, for three consecutive years, as Dirty Dozen that can be abused when it comes to taxes. Taking this route is risky for you and your client.
When you create a captive insurance company, you might be facing risk since the IRS recently announced the list of strategies that are commonly used for tax avoidance. If you choose to do captive and process it correctly then you might be able to save yourself from the audit and earn your rewards in the end if the client is true to their words.Nevertheless, for an accountant, it is important to have CRA audit protection to protect their profession and clients at the same time.