pogosian: what advisors miss in risk management | the concierge cpa

a former irs agent breaks down the red flags, revenue thresholds, and compliance work that advisors can’t ignore.

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the concierge cpa
with jackie meyer
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the concierge cpa hosts a deep dive into captive insurance planning this week, as host dr. jackie meyer, cpa, and guest vardan pogosian, cpa, unpack both the risk-management foundations and tax-planning implications of small captive insurance companies. the episode clarifies a strategy that many tax professionals find complex or intimidating, with actionable guidance on identifying suitable clients and avoiding compliance risks.

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captive insurance — typically formed under internal revenue code section 831(b) — allows businesses to establish their own insurance company to cover risks that may be difficult or costly to insure through commercial carriers. under the provision, small qualifying captives can elect alternative tax treatment, in which premiums paid into the captive are tax-deductible to the operating business but not immediately recognized as income by the captive. tax is generally deferred until the captive is dissolved, at which point capital gains tax applies.

pogosian, a former irs revenue agent who now advises firms on captive implementation, emphasizes that the strategy should be viewed first as business risk management, with tax benefits being secondary. “every business has risks,” he says. “this is a risk-first strategy.” he points to pandemic-era business interruption as one of the most common risks now seen across industries that traditional insurers may not cover effectively.

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meyer echoes that positioning, noting many accountants are wary of discussing captives because of perceived complexity, audit risk, and uncertainty about client suitability. pogosian recommends a straightforward pre-qualification process — focusing initially on revenue and profitability — to identify clients best positioned to benefit without undue risk.

for many practices, he suggests, this means revenues of several million dollars and sufficient profits to support annual premium contributions — roughly $150,000 or more — that the business could reasonably afford while still generating meaningful tax deductions.

pogosian and meyer walk through a recent case involving a physician with a successful practice and a large supplement business. after establishing a captive and paying more than $1 million in annual premiums, the client used the captive to cover a legitimate claim for lost inventory when climate control failed at a warehouse. the captive’s claims department processed the loss, illustrating the underlying insurance purpose of the arrangement, pogosian notes.

over time, the captive’s assets also generated investment returns. “he has over $5 million in his captive,” pogosian says, with roughly 11% annual returns managed by a financial advisor. when accounting for both tax-deferred growth and the difference between ordinary income tax rates and eventual capital gains tax upon dissolution, the strategy can produce substantial savings and growth potential. meyer quantifies the tax benefits: at a 37% marginal rate, $1 million annual premium deductions could save about $370,000 in taxes per year, or nearly $4 million over a decade; capital gains tax at roughly a 20% rate on $10 million could add almost $2 million in tax arbitrage advantages.

while some captive arrangements have faced irs scrutiny in the past — particularly those lacking genuine risk transfer or distribution — pogosian notes that recent industry practices and court decisions have helped distinguish compliant structures from abusive listed transactions. he advises that captives be designed around real, documented risks with proper loss documentation to meet irs expectations.

meyer and pogosian also tackle common misconceptions: captives are not illegal tax shelters; they cannot insure frivolous or implausible risks; and they require ongoing compliance and annual tax filings. pogosian notes that client cpas would not need to file captive returns themselves, as service providers such as captive managers or insurers typically handle those filings.

toward the episode’s end, pogosian encourages accountants to bring up captive planning in routine tax planning conversations: reviewing client profitability and risk exposures can open doors to strategic discussions without pressure.

12 key takeaways

1. captive insurance is a risk-management strategy first—not a tax play. section 831(b) works only when the captive covers real, insurable business risks with proper risk transfer and documentation.
2. post-pandemic business interruption risk has changed the conversation. risks that commercial insurers won’t cover—especially business interruption—now make captives viable for far more businesses than before covid-19.
3. not every profitable client is a fit. strong candidates typically have multimillion-dollar revenues, meaningful profits, and enough cash flow to support annual premiums of at least $150,000 without creating operating losses.
4. pre-qualification doesn’t require captive expertise. advisors can screen clients using basic indicators—profits, revenues, and uncovered risks—before bringing in a captive specialist.
5. the irs problem isn’t captives—it’s abusive captives. historical abuse created the stigma, but compliant captives with real risks, appropriate loss ratios, and no policyholder loans fall outside listed-transaction concerns.
6. tax deferral drives long-term value. premiums are deductible today, investment growth compounds inside the captive, and taxes are deferred until liquidation—often at capital gains rates.
7. arbitrage can create permanent tax savings. the spread between ordinary income tax rates on deductions and lower capital gains rates at exit can result in seven-figure savings over time.
8. captives must operate like real insurance companies. legitimate claims, third-party administration, annual filings, and ongoing compliance are non-negotiable.
9. there is no “set it and forget it” option. captives require ongoing oversight, annual tax filings, and continuous risk evaluation to remain defensible.
10. advisors don’t have to do everything themselves. referring clients to qualified captive specialists still positions cpas as strategic advisors—and often strengthens client trust.
11. year-end planning meetings are the right entry point. reviewing profits, risk exposure, and uncovered losses during q4 tax planning naturally opens the door to captive conversations.
12. advisory, not compliance, is the future. as ai reshapes tax preparation, proactive planning strategies like captives reinforce the cpa’s role as a trusted advisor—not just a form-filler.

posted on january 5, 2026