You don’t have to be a tax attorney to know that the US tax code is complex. According to the National Taxpayer Advocate, there were about four million words in the US tax code in 2012. That’s an incredible number, and it helps to explain why the majority of Americans hire a certified public accountant to help them file their taxes. The more assets you own, the more investments you have, the more children you have, the more money you make, and the more deductions you want to claim, the more complicated your taxes are and the more opportunities you have to make mistakes. If you make a mistake on your taxes and you get audited by the IRS, you could end up paying a fine. At the very least, you’ll have to pay them what you owe (the difference between what you paid and what you actually should have paid).
If you have numerous revenue streams, a high number of deductions, and a significant number of assets, then it’s critically important that you hire a tax professional to help you file your taxes each year. This is especially true if you think you might owe an arbitrage rebate. An arbitrage rebate is a payment that a person makes to the federal government in regards to tax-advantaged bonds that they hold. When a person makes money off of a tax-advantaged bond and then they invest that money into a higher-risk but also higher-yielding investment, the profits they turn from that investment is what’s known as arbitrage. As you might expect, the IRS has very specific guidelines about this kind of investing. The federal government issues bonds that are either tax-exempt or tax-advantaged. These bonds grow over time and the person borrowing them is able to make money off of them, but because they’re tax-advantaged and generally low-yielding, there are specific laws about how the profits from these types of investments can be used. The government essentially doesn’t want people taking advantage of low-risk, low-yielding bonds by putting the money they make from these bonds into riskier investments. Thus, when a person does this, they’re engaging in arbitrage, and there are specific regulations about how the money they’re making has to be claimed to the IRS.
If you’ve engaged in arbitrage and you think you might owe an arbitrage rebate, you need to make sure you hire an arbitrage services firm that never makes mistakes. You want to hire an arbitrage services firm that can help you calculate what your arbitrage rebate is so that you know what you need to pay the federal government. If the firm you hire makes a mistake and doesn’t get the figure right, you could end up paying a fine down the road if you’re ever audited. To avoid this fine, you need to hire a firm like Arbitrage Compliance Specialists that can guarantee you that they’ll calculate your arbitrage rebate accurately. Calculating arbitrage rebates is complex, so work with the firm that hasn’t made a single error since 1986. That way, you know you’re paying precisely what you should be paying to the federal government.