Article by Phil Karter, Scot Kirkpatrick and Pat McCann on “IRS Letter 6336: To Respond or Not to Respond, That Is the Question”
In an article published on June 1, 2020 in Tax Notes Federal, Phil Karter, Scot Kirkpatrick and Pat McCann discuss how taxpayers engaged in microcaptive transactions should respond to an IRS Letter 6336, part of a new enforcement initiative.
“For taxpayers engaged in microcaptive transactions, the IRS’s long-standing effort to clamp down on what it considers abusive microcaptive arrangements has spawned a new, unwelcome outreach that could require taxpayers ’to take arms against a sea of troubles’,” explain Karter, Kirkpatrick and McCann. “In the past month, tens of thousands of taxpayers engaged in small captive arrangements who had already disclosed their participation in those transactions have received an IRS Letter 6336, which appears to be a byproduct of this new enforcement initiative.”
Karter, Kirkpatrick and McCann further explain that, “Although common sense suggests that Letter 6336 was intended for taxpayers who have not yet been subject to a microcaptive audit, and whose identities were learned from their Form 8886, the letter was sent to many taxpayers already under captive audits, including those with cases pending in the Tax Court. But for microcaptive taxpayers who have not yet been subject to an audit examination, more questions about what to do are warranted because you are clearly on the IRS’s radar.”
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