As an MGA, you have a lot on your plate. From managing underwriting and claims to building relationships with carriers and agents, your time is valuable. Managing taxes for excess and surplus lines (E&S) poses a potential labyrinth of regulations and deadlines. These taxes can be complex and time-consuming, but there are ways to simplify the process and improve tax efficiency. Here are the top four ways to simplify your E&S taxes as an MGA.
1. Implement a robust data management system:
Safeguarding documentation and storing data throughout the year is crucial for seamless reporting. Access to data ensures you have the information you need when it is time to file annuals and zero reports. It is essential to identify which licensees require zero reports, as failure to file these can result in significant penalties.
Moreover, various states may impose additional taxes, such as Illinois' Annual State Fire Marshal tax or Kentucky's municipality taxes. By implementing a meticulous data collection and storage system, you mitigate a multitude of compliance risks in the future.
2. Stay informed about regulatory changes:
The surplus lines tax landscape is challenging, with each state and territory crafting its own set of rules and regulations. Keeping up-to-date with these nuances is crucial to avoid significant financial and legal pitfalls. Subscribe to alerts and industry news. The Wholesale & Specialty Insurance Association (WSIA) and the Securities and Insurance Licensing Association (SILA) are great resources.
Other than that, your best bet would be to frequently scan state websites and refer to stamping offices for news, updates, and changes to forms and documentation.
3. Develop a deadline tracking system
Navigating the various deadlines across different states requires a structured approach to deadline tracking. Policy filing deadlines vary between 30, 60, or 90 days and can change at the drop of a hat. Reporting and payment dates move at seemingly random schedules. You must pay very close attention and track tasks diligently. In some states, being just a single day late can result in substantial fines. For example, in New York, there is a $25 fine per policy for each day late. In Kentucky, failure to pay the $5 filing fee constitutes a violation that could result in a civil penalty of up to $10,000.
Clearly, managing your E&S taxes can be a daunting task but these tips should help you get started.
4. Alternatively, using surplus lines tax software and services can provide MGAs with valuable time and resources to focus on what matters most: growing your business.
Whether through strategic processes or innovative software solutions, simplifying surplus lines tax processes is achievable for MGAs. See how InsCipher’s surplus lines tax software and services can streamline your operations and enhance tax efficiency.