Hauser Insurance Answers: “Tax Liability Insurance, What Is It?”

 


Anytime they hear the word “taxes” or “insurance,” most people want to run for the hills. However, the two combined can be confusing for some people. So what exactly is tax liability insurance? Liability experts at Hauser Insurance recently answered this question.

Tax liability insurance, also known as TOL, is a type of insurance that shields taxpayers against the fallout of a tax position in connection with an accounting treatment, transaction, reorganization or any kind of taxable event. In other words, it covers losses one might incur if the IRS or other taxing authority deems they have a greater tax liability than what they have claimed.

What Limitations Does it Have?

Tax liability insurance policy usually ignores four types of losses from coverage:

        The insured’s misrepresentations or fraud of any kind

        Revised transaction documentation to the certified tax positions

        A change in applicable insurance law following the coverage’s effective date

        The insured’s filed tax returns containing positions inconsistent with the guaranteed tax positions

Based on specific insured tax positions, other coverage exclusions may apply.

What Value Does Tax Liability Insurance Have?

For individuals involved in a merger or acquisition transaction, also known as M&A, tax liability insurance can be of value to them. According to Hauser Insurance, since taxes are seen as a complicated subject, especially with a business transaction such as M&A, tax liability insurance can provide business owners with a solution to remove their exposure to a specific tax-related loss. The emphasis being that the potential tax issues are already known to the parties involved.

There are numerous benefits to having tax liability insurance under your belt:

        It takes away a questionable tax issue from talks during an acquisition.

        It brings peace of mind to business owners and individuals by allowing them not to be exposed to an adverse tax ruling

        Offer stability where tax authorities cannot provide advance rulings to taxpayers on certain known tax matters

        A negative order does not have an unfavorable financial impact on the individuals within the transaction

        Cover the unknowns as a reaction from reorganizing and restructuring a group

About Hauser Insurance

Hauser Insurance Group is a privately held insurance company, with headquarters in Cincinnati, Ohio. Hauser Insurance maintains a strong focus on private equity firms, their respective portfolio companies and their targeted acquisition subjects. reorganization or any kind of taxable event. In other words, it covers losses one might incur if the IRS or other taxing authority deems they have a greater tax liability than what they have claimed. tax liability insurance can provide business owners with a solution to remove their exposure to a specific tax-related loss. The emphasis being that the potential tax issues are already known to the parties involved.

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