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How much errors and omissions insurance do you have?
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I take it that you haven't done your AML or at least didn't pay attention.
How is he going to pay for the policy, you said he doesn't believe in the banking system, does he have a bank account? If not, the insurance company is not going to accept 20k a year in premium in cash or money orders. How he earns his income is irrelevant. If it is not reported and he is not paying taxes on it, then it currently isn't part of the legitimate money stream. He will have to get it back into it and you would be a part of it through the insurance policy. You will be opening yourself up to liability here and E&O isn't going to do a thing in this situation.
If he does have a bank account, then his troubles with the IRS are just that. They aren't yours. However, you are still probably going to have problems with the financials. 500k in face amount won't raise any eyebrows, but 20-36k in annual premium will. You could just hope they don't ask for financials and tax returns to back them up.
Whatever you do, you should make sure you have no notes that you suggested this as a method to park his money and avoid any issues with the IRS or taxes.
I don't think many companies will worry too much about financials on that case. At least in my experience I haven't seen it.However, you are still probably going to have problems with the financials. 500k in face amount won't raise any eyebrows, but 20-36k in annual premium will. You could just hope they don't ask for financials and tax returns to back them up.
He should be more concerned about spending 10 years+ in prison. He will have huge penalties and interest in addition to tax once he is found out. Can not discharge in bankruptcy but may able to do a Settlement Agreement but probably ONLY if he comes forward himself without being found. If found almost certain prison time.
Any transaction that generates a 1099 or tax reporting could trigger the IRS computers finding him. IRS will take all assets and that of wife if married with joint return. Home will have a tax lien. Your professional advice should be to immediately file all back returns which if done voluntarily may avoid prison.