There are two different types of fees for Delaware captive insurance companies. The first is a one-time application fee of $200 and an application processing fee of $3,000. Both of these fees are due upon the submission of the application to the Delaware Commissioner of Insurance. The second type is an annual license renewal fee of $300 which is due annually on March 1st along with the filing of the annual Premium Tax and Fees Report.
A captive insurance company does not pay income taxes in the State of Delaware. They do, however, pay premium taxes, which are due annually on March 1st along with the filing of the Annual Premium Tax and Fees Report. Premium taxes are calculated on gross written premiums during the calendar year less any dividends returned to policyholders. The direct premium tax is based on 2/10 of 1% and the assumed reinsurance premium tax is based on 1/10 of 1% of the total taxable premiums. The minimum annual premium tax is $5,000 and the maximum is $200,000 per captive insurance company.
In addition to the taxes and fees noted here, all Delaware corporations must file an annual Franchise Tax Report. For captive insurance companies, there is no franchise tax due, but there is a $50 filing fee for the filing of the annual Franchise Tax Report.
For more information concerning the calculation of the premium tax or regarding the filing of any of the reports noted here, you can visit the State of Delaware’s Captive Insurance home page or you can contact Jan Snow at jsnow@coverrossiter.com.
Cover & Rossiter is one of the area's oldest and most respected certified public accounting and advisory firms. Focused on being the best rather than the biggest, we assembled an outstanding team with a wide range of skills. It is our goal to provide our clients with innovative services designed to maximize profitability and minimize tax burden. Our advice is current… our client focus timeless.
Monday, February 27, 2012
Friday, February 17, 2012
What is Next for the Payroll Tax Cut?
At the last minute in 2011, Congress passed a 2-month extension of the payroll tax cut, which reduces the American worker’s social security tax to 4.2% from 6.2%. Less publicized, the extension also extended federal unemployment benefits for the long-term unemployed AND temporarily forestalled a deep cut in doctors’ Medicare fees that would make it harder for the elderly to find doctors who would treat them. The cost of the 2-month extension will be paid for by increasing the fees charged to mortgage lenders by Government Sponsored Entities like Fannie Mae and Freddie Mac. Thus, the same middle income families who are helped by the payroll tax cut will pay for the cut in increased mortgage fees.
Now, the two sides need to figure out how to extend all three measures through the end of 2012 at a $160 billion cost. How quickly will an extension be reached, if at all? We predict the law will be extended, but probably not until just before the February 29 expiration date. Why? The Democrats believe that, if the talks take a long time, this will damage the Republicans, who have already been criticized for wanting to increase taxes on 160 million workers while standing firm on not increasing taxes on the wealthiest of taxpayers. Meanwhile the Republicans insist that the cost of the extension be covered by revenue increases; however, they object to the Democratic proposal to cover the cost with a millionaire surtax or a limit on tax deductions for the very wealthy.
On February 3, Democratic leaders announced they have a backup plan to cover the cost of the continuation of the payroll tax cut and the related provisions. No details have been revealed, however.
What does this mean for the average taxpayer? The payroll tax cut lowers the amount of social security funds available for the checks paid out to the nation’s seniors. Monies coming in from social security taxes generally go right out in payments to retirees. So, let’s look at strategies to alleviate dependence on social security:
Now, the two sides need to figure out how to extend all three measures through the end of 2012 at a $160 billion cost. How quickly will an extension be reached, if at all? We predict the law will be extended, but probably not until just before the February 29 expiration date. Why? The Democrats believe that, if the talks take a long time, this will damage the Republicans, who have already been criticized for wanting to increase taxes on 160 million workers while standing firm on not increasing taxes on the wealthiest of taxpayers. Meanwhile the Republicans insist that the cost of the extension be covered by revenue increases; however, they object to the Democratic proposal to cover the cost with a millionaire surtax or a limit on tax deductions for the very wealthy.
On February 3, Democratic leaders announced they have a backup plan to cover the cost of the continuation of the payroll tax cut and the related provisions. No details have been revealed, however.
What does this mean for the average taxpayer? The payroll tax cut lowers the amount of social security funds available for the checks paid out to the nation’s seniors. Monies coming in from social security taxes generally go right out in payments to retirees. So, let’s look at strategies to alleviate dependence on social security:
- Use your employer 401(k) or retirement plan matching – a $150 monthly contribution can be a $300 contribution with the employer match
- Have your HR department deposit a small, say 5%, percentage of your paycheck into a savings account that charges no fees
- Fund an IRA before 4/15/12 – you can contribute up to $5,000 and potentially reduce your taxes too!
Tuesday, February 7, 2012
Changes in the 2011 Tax Year
Filing your taxes can be a stressful thing; especially with all of the provisions that change from year-to-year. Today’s economy causes people to feel extra pressure to have their taxes filed properly and without any mistakes. That’s where the expertise at Cover & Rossiter comes in. You can rely on our team to help you stay updated on the tax provisions from one year to the next.
Below we have summarized the provisions that were extended for one year through 2011 and the provisions that became effective in 2011. We hope it will serve as a guide for you. They were compiled by Diane Burke, a very knowledgeable CPA and Director at Cover & Rossiter. For details on any of the provisions, you should speak with Diane, or one of the many CPAs at Cover & Rossiter, to gain a full understanding about the affects they could have on you. Diane can be reached at dburke@coverrossiter.com. All of the facts are supported by the IRS code section.
The following provisions were extended for one year through 2011:- The treatment of mortgage insurance premiums as deductible (Sec. 408 (d) (8))
- The deduction for tuition and related expenses (Sec. 222)
- The state and local sales tax deduction (Sec. 164)
- The deduction for elementary and secondary school teachers (Sec. 62(a) (2) (D))
- Employees of employers with more than 250 employees may see some new information on their Forms W-2 for 2011: The value of the employee’s health insurance coverage sponsored by the employer. This reporting is strictly informational the amount reported will not affect the individual’s tax liability.
- Over the counter medications are no longer reimbursable from health savings accounts (HSAs) Archer medical savings accounts (MSAs), health FSAs or health reimbursement arrangements.
- The additional tax on distributions from an HAS or an Archer MSA that were not used for qualified medical expenses was increased to 20% of the disbursed amount, effective for disbursements made during the tax years starting after Dec. 31, 2010 (Under prior law, the tax was 10% of the disbursed amount for HSAs and 15% for Archer MSAs.
- Property acquired and placed in service between Sept. 9, 2010, and Dec. 31, 2011 may be eligible for 100% depreciation.
- Form 1099 B has been expanded to include the cost or other basis of stock and mutual fund shares sold or exchanged during the year.
Important Deadlines of 2012 for Captive Insurance Companies in Delaware
So, you just formed a new captive in Delaware. Now what?
If you are like the numerous other companies who set up a new captive in 2011 in the State of Delaware, you are likely not aware of all of the filing requirements for your captive insurance company.
The first deadline you need to be concerned with is the Delaware Annual Statement, which is a form required by all State Insurance Departments as regulated by the NAIC (National Association of Insurance Commissioners). This form is the equivalent of an insurance company financial statement with disclosures. It is due March 1, 2012 for all calendar year entities.
Premium taxes and license fees are also due on March 1, 2012. There is only one form that needs to be completed to report and pay both of these fees (Premium Tax and Fees Report).
The Department of Insurance also requires each captive to obtain an outside audit opinion on the financial statements and an outside actuarial opinion on the reserves. Both of these reports are due on or before June 30, 2012 for a calendar year entity.
For more information including access to the forms, you can visit the State of Delaware’s Captive Insurance home page.
For specific questions about the forms or the requirements, please contact Joanne Shaver at JShaver@coverrossiter.com. Joanne oversees the captive insurance services group at Cover & Rossiter. Cover & Rossiter is a CPA firm providing audit and tax services to captive insurance companies operating in Delaware, Kentucky, Utah and the District of Columbia.
If you are like the numerous other companies who set up a new captive in 2011 in the State of Delaware, you are likely not aware of all of the filing requirements for your captive insurance company.
The first deadline you need to be concerned with is the Delaware Annual Statement, which is a form required by all State Insurance Departments as regulated by the NAIC (National Association of Insurance Commissioners). This form is the equivalent of an insurance company financial statement with disclosures. It is due March 1, 2012 for all calendar year entities.
Premium taxes and license fees are also due on March 1, 2012. There is only one form that needs to be completed to report and pay both of these fees (Premium Tax and Fees Report).
The Department of Insurance also requires each captive to obtain an outside audit opinion on the financial statements and an outside actuarial opinion on the reserves. Both of these reports are due on or before June 30, 2012 for a calendar year entity.
For more information including access to the forms, you can visit the State of Delaware’s Captive Insurance home page.
For specific questions about the forms or the requirements, please contact Joanne Shaver at JShaver@coverrossiter.com. Joanne oversees the captive insurance services group at Cover & Rossiter. Cover & Rossiter is a CPA firm providing audit and tax services to captive insurance companies operating in Delaware, Kentucky, Utah and the District of Columbia.
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