Ask the Expert: Reinsurance FAQs for 2022

Q. In preparing for tax filing season, with regards to my reinsurance company, what information should be provided to my CPA in order to properly complete my 2021 individual tax return?

A. During tax filing season, I speak with a number of our Dealers' tax preparers with regards to their reinsurance companies. As a general rule, you should provide you tax preparer with the following information:

• Copies of the year-end reinsurance statements provided to you by your Administrator or Captive Manager.
• 1099s, check stubs or other information (NCFCs are not generally required to issue 1099s) regarding distributions received from your reinsurance company.
• Specific to CFCs, you should provide your tax preparer a clear understanding as to whether your Administrator or Captive Manager has filed form 8886, Reportable Transaction Disclosure Statement, with regards to your participation in a CFC electing Small Insurance Company status under Internal Revenue Code Section 831(b). Please note that many CFC transactions will not require the filing of this disclosure. If, however, your Administrator or Captive Manager has filed or will be filing IRS Form 8886 with regards to your Company, you should be sure to obtain a copy and provide it to your preparer.
• For NCFCs, you should provide your tax preparer with all of the information necessary to file IRS Form 8938, Statement of Specified Foreign Financial Assets. Such information includes, but may not be limited to, the highest value of all positions owned in the NCFC at any point during the year, distributions made during the reporting year and numbers of shares at beginning and end of reporting period.