Salt Lake City, Utah - In my last Blog I discussed what I call the “Holy Grail” that most ERC Companies use to achieve ERC eligibility. Most ERC Mills couple the Supplier-Based Partial Suspension with the OSHA Position. Today I want to discuss “ERC Insurance”.
There are certain insurance companies that are willing to underwrite what is called “Tax Insurance”. Not surprisingly, a taxpayer who makes a claim for the ERC can also obtain Tax Insurance so that if the taxpayer has a tax problem with the ERC, the insurance company will cover the tax risk. In a nutshell, Tax Insurance is:
Designed to transfer a known but uncertain tax risk arising in a transaction or business to an insurance company. If the insurance company is willing to underwrite that tax risk, then the insurance company agrees to indemnify the policyholder for the possible financial loss arising from a successful challenge from a tax authority.
Here is the general cost associated with the Tax Insurance:
- Premium: 3% to 10% of the ERC
- Underwriting Fee: $25 - $60k
- Retention/Deductible: 5% to 6%
- Underwriting Time: 1 to 2 weeks
- Binding Time: 1 to 2 weeks
- Coverage Period 7 years
The risks covered by the ERC Insurance would be for partial suspension – did the taxpayer meet and properly substantiate the existence of a “more than nominal portion” of their business. Did the taxpayer meet and properly substantiate “more than nominal effect”?
Which taxpayers may not be eligible for coverage:
- Taxpayers with smaller credits – meaning credits of less than $500,000
- Taxpayers who made a claim based on “Supply Chain Disruption”
- Taxpayers who either “self-claimed” or used an ERC Mill
If you feel that you may need ERC Insurance feel free to contact me directly and I can pass on the names and contact information for several ERC Insurance Companies.
Tax problems are legal problems, and we solve both. If you or someone you know has an issue with paying their federal or state taxes and needs help to end their IRS nightmare, please contact Kent Brown at Strong & Hanni by either phone at (801) 532-7080 or email at: kbrown@strongandhanni.com or go to https://activerain.com/profile/kbrowndad for additional information, or my personal Strong & Hanni webpage at: https://strongandhanni.com/attorneys/attorney-kent-brown/
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