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Category Archives: criminal tax law

2 TC Case Find That Captive Insurance is Did Not Qualify as Insurance


As we pointed out on May 10, 2023 in our post IRS Dirty Dozen List Targets 3 Schemes With International Elements the IRS has been targeting 
Foreign Captive Insurance as noncompliant with US tax rules.

In these transactions, U.S. business owners of closely held entities participate in a purported insurance arrangement with a Puerto Rican or other foreign corporation in which the U.S. business owner has a financial interest. The U.S. business owner (or a related entity) claims a deduction for amounts paid as premiums for “insurance coverage” provided by a fronting carrier, which reinsures the “coverage” with the Puerto Rican or other foreign corporation. Despite being labeled as insurance, these arrangements lack many of the attributes of legitimate insurance. The characteristics of the purported insurance arrangements typically will include one or more of the following: implausible risks covered (or duplicative coverage of risks already covered by commercial insurance), excessive premiums indicative of non-arm’s length pricing and a lack of business purpose for entering the arrangement.

Where appropriate, the IRS will challenge the purported tax benefits from these types of transactions and impose penalties. The IRS Criminal Investigation Division is always on the lookout for promoters and participants of these types of schemes. Taxpayers should think twice before including questionable arrangements like this on their tax returns. After all, taxpayers are legally responsible for what's on their return, not a promoter making promises and charging high fees. Taxpayers can help stop these arrangements by relying on reputable tax professionals they know and trust.


Now tax courts are green with the IRS and into recent holdings Jones et al. v. Commissioner, docket numbers 17165-19, 17169-19, 17177-19, 17178-19, 17187-19, 17201-19, 17205-19 and 17206-19, in the U.S. Tax Court and Farmers and Merchants Bancshares Inc. & Subsidiaries v. Commissioner, docket number 3394-25, in the U.S. Tax Court the Tax Court has held that the arrangements did not qualify as insurance.

In Jones, the court held that Shareholders in a California company cannot deduct their premium payments for insurance coverage from a captive insurer, the U.S. Tax Court ruled Tuesday, saying the arrangement did not constitute insurance for federal tax purposes. 

The ruling turned on whether the arrangement passed muster as insurance, the court said. Despite Sani-Tech's effort to meet the required risk distribution by pooling its risks with other, unrelated captives, the court found Clear Sky did not achieve risk distribution. There was a circular flow of money and the policies were not arm's-length contracts, the court said. Furthermore, Clear Sky was not operated as an insurance company, some of its policies were likely invalid and the premiums were unreasonable, the court said. 

In Farmers and Merchants Bancshares Inc. the court disallowed two years' worth of tax deductions tied to a reinsurance captive finding that the arrangement had no economic purpose other than tax avoidance.

The IRS warns anyone thinking about using one of these schemes – or similar ones – that the agency continues to improve investigation and enforcement in these areas by utilizing new and evolving data analytic tools and enhanced document matching.

Whether anchored offshore or in the U.S., abusive transactions and schemes remain a high priority for the IRS. 

The IRS also created the Office of Fraud Enforcement (OFE) and Office of Promoter Investigations (OPI) to coordinate service-wide enforcement activities against taxpayers committing tax fraud and promoters marketing and selling abusive tax avoidance transactions and schemes to effectuate tax evasion.

Have One of These IRS Tax Problems?


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 Contact the Tax Lawyers at

Marini & Associates, P.A. 

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or 
Toll Free at 888 8TAXAID (888-882-9243) 

Read more at: Tax Times blog

The IRS ‘Reinstated’ 7,000 Workers, But They Are Not Returning To Work ?

On March 14, 2025 we posted Courts Order 6,700 IRS Employees to Be Rehired But They Can Still Be Properly Fired by May 15, where we discussed that two judges ordered federal agencies on February 14, 2025 to reinstate tens of thousands of workers with probationary status who had been fired across 19 agencies as part of President Trump’s government-gutting initiative. 

“The Court has read news reports that, in at least one agency, probationary employees are being rehired but then placed on administrative leave en masse,” the order said. “This is not allowed by the preliminary injunction, for it would not restore the services the preliminary injunction intends to restore.” Both judges ordered that the agencies offer to reinstate any probationary employees who had improperly been terminated. Neither order was a final decision in the case.  

Now according to The Tax Adviser,  the federal government will pay about 7,000 IRS probationary employees, who were laid off less than a month ago, not to work while lawsuits over layoffs wind their way through the court system, the agency said in an email.

Acting IRS Commissioner Melanie Krause said in the email sent to all IRS employees that the probationary workers, who were laid off Feb. 20, would be reinstated and placed on administrative leave until further notice.

The Email Sent To Probationary Workers Advised
Them “Not [To] Report To Duty Or Perform Any Work
Until Receiving Further Guidance.”

The email cited an order from a U.S. District Court judge in Maryland that 18 federal agencies, including Treasury, reinstate “certain probationary workers” at least temporarily.

Probationary employees who sought details about the administrative leave received a second email that said the workers will receive back pay and that all benefits, such as life insurance and health, vision, and dental coverage, will be reinstated. Meanwhile, other job losses loom at the IRS, Krause’s email said.

The Trump administration wants to cut the IRS workforce by 20% by May 15, including those who have already left or were fired.

Officials at the Elon Musk-led group advising the administration want Acting IRS Commissioner Melanie Krause to eliminate 18,141 jobs across the agency. This includes the roughly 12,000 employees terminated as part of new-hire layoffs.

 Have an IRS Tax Problem?


     Contact the Tax Lawyers at

Marini & Associates, P.A. 


for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or 
Toll Free at 888 8TAXAID (888-882-9243)



Read more at: Tax Times blog

TC Determines That Taxpayer’s Debt Was ‘Seriously Delinquent’ Even after He Paid Tax to Reduce Balance below $50,000


A Florida man's tax debt was property certified by the 
Internal Revenue Service as "seriously delinquent" and reported to the U.S. secretary of state to bar him from obtaining or renewing a passport, the U.S. Tax Court said on March 18, 2025.

Drew J. Pfirrman filed his 2018 federal income tax return, on which he reported no tax due. 


The IRS later concluded that he had received $367,628 in unreported income stemming from dividends and the disposition of certain securities. In late 2020 the IRS sent a Notice CP2000 to Mr. Pfirrman that proposed an income tax adjustment of $111,460, as well as an accuracy -related penalty of $22,292 and statutory interest of $10,124. These amounts were assessed on February 15, 2021.

In March 2023 the IRS sent Mr. Pfirrman, at his last known address, a Notice CP508C, Notice of Certification of Your Seriously Delinquent Federal Tax Debt to the U.S. Department of State (Notice of Certification). At that point Mr. Pfirrman's assessed liability totaled $182,687. 

The Notice of Certification advised Mr. Pfirrman that the IRS had made a section 7345 certification with respect to his unpaid 2018 tax liability, that the State Department had been notified of the section 7345 certification, and that the State Department could revoke his passport or refuse to issue him a new passport based on the section 7345 certification.  Mr. Pfirrman petitioned this Court under section 7345(e).


On the record at the time of certification Mr. Pfirrman's liabilities met the statutory definition of "seriously delinquent tax debt." Mr. Pfirrman has not claimed that either of the statutory exceptions apply. See Adams II, 122 F.4th at 434. It is uncontested that the IRS served Mr. Pfirrman with notice of its collection actions and his administrative rights over multiple years. 

Mr. Pfirrman took no action to timely contest the tax liens or underlying deficiency determinations. 

Only Much Later, after His Passport Was In Jeopardy,
Did He Attempt To Dispute The IRS Collection
And Enforcement Actions.


Section 7345 plainly forecloses such an eleventh-hour collateral attack on a person's underlying tax liabilities. Mr. Pfirrman's Remaining Argument, in addition to questioning his underlying tax liability. 

Mr Pfirrman Also Suggests That He Has Made
Payments That Have Dropped The Liability
"Below The Threshold of This Court Review."


Mr. Pfirrman misunderstands the statutory structure. 

Once a certification of a seriously delinquent tax debt has been made, it may be reversed "if the debt with respect to such certification is fully satisfied." I.R.C§ 7345(c)(1) (emphasis added). 

Unless a taxpayer satisfies the section 7345(b)(2)(A) exception, a partial payment does not justify reversal of a certification or otherwise end the matter, even if the partial payment drops the amount of the unpaid, assessed, and legally enforceable liability below the 20 23 threshold for certification of a seriously delinquent tax debt. 

The Court held that the certification of Mr. Pfirrman as a taxpayer owing a "seriously delinquent tax debt" was not erroneous and granted summary judgment for the Commissioner.

    If You Have Serious Delinquent IRS Debt, You Should Consult with Experienced Tax Attorneys, As There Are Several Ways Taxpayers Can Avoid Having the IRS Request That the State Department Revoke Your Passport. 

  Want To Keep Your US Passport?
 
 
Contact the Tax Lawyers at 
Marini & Associates, P.A.

for a FREE Tax Consultation Contact us at:

or Toll Free at 888-8TaxAid (888)882-9243.


Read more at: Tax Times blog

Hialeah, Florida Tax Preparer Sentenced To Prison For $20M Fraud

According to Law360a Miami-area tax preparer was sentenced to nearly five years in prison after admitting to filing thousands of individual tax returns wrongly claiming energy credits, resulting in a $20 million loss for the Internal Revenue Service, according to the U.S. Attorney's Office for the Southern District of Florida.

Beatriz Toledo, 61, of Hialeah, Florida, received her sentence during an appearance before U.S. District Judge David S. Leibowitz in Miami federal court after previously pleading guilty to three counts of aiding and assisting in the preparation of false tax returns as part of a deal with federal prosecutors.

Southern District of Florida prosecutors said in a statement released Friday that a federal judge in 2010 issued a permanent injunction barring Toledo from similar conduct. In exchange for pleading guilty to the three charges in December, prosecutors agreed to dismiss 12 additional charges of preparing false tax returns and one contempt of court charge.

In the April 2024 indictment against Toledo, prosecutors said she resumed filing false tax returns through her company, Immigration and Tax Service Group LLC, despite the injunction. Between 2017 and 2021, Toledo allegedly prepared about 7,800 false tax returns that fraudulently claimed the residential energy credit, which gives taxpayers a credit for qualifying energy-saving expenses incurred from improvements to their homes. 

When preparing and filing the returns, Toledo listed her company as the official tax preparer, knowing that she was prohibited from filing false tax returns because of the injunction, prosecutors said.

A factual proffer filed in December said more than 10 individuals were interviewed by law enforcement and all said no energy-saving improvements were made to their homes and they had never spoken to Toledo about the credit. In addition, the individuals said "large sales tax and business expense deductions" listed on their returns were inconsistent with their actual finances, according to the proffer.

As a result of filing the false returns, Toledo made about $7.1 million that she took directly out of her clients' tax refunds.

The government filed a memorandum on March 13 urging the court to impose the high end of a sentencing range between 46 months and 57 months due to Toledo's "pervasive history of fraud" and the "sophistication or extensiveness" of her scheme.

Before her injunction, in the late 1990s, Toledo was tried for money laundering but was acquitted of all charges.

"If ever a case calls for it, this one does," said Will J. Rosenzweig of the U.S. Attorney's Office for the Southern District of Florida, representing the government, in his memo.

In her sentencing memo filed on Monday, Toledo acknowledged the injunction but "vehemently" denied preparing any fraudulent tax returns and also said it was improper for the government to use her money laundering trial to advocate for a harsher sentence.

Toledo also asked the court to go easy on her due to health reasons, citing significant health problems stemming from brain cancer years ago, no criminal history and a 93-year-old mother she resides with who depends on her. Toledo asked for probation with 12 months of home confinement.

 Have an IRS Tax Problem?


     Contact the Tax Lawyers at

Marini & Associates, P.A. 


for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or 
Toll Free at 888 8TAXAID (888-882-9243)

Read more at: Tax Times blog

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