There are a lot of people out there who invest in bonds because they’re a safe investment. They’re not the kind of investment that are going to turn huge profits in a short period of time, like an investment in a company the day before it gets acquired will, but they’re steady, they’re low-risk, and they’re profitable over the long term. They’re also tax-advantaged, which means that the profits that people earn off of them aren’t taxed at the same rates that other types of earnings are. If you’re someone with money that you’re looking to invest, bonds are a smart way to make that investment.
However, there are pretty strict guidelines and IRS regulations regarding what you can do with the money that you make off of those bonds. If you want to take your bond profits and turn around and invest that money into a higher-risk, but potentially higher-yielding, type of investment, you’re engaging in something known as arbitrage, and there are a lot of rules and regulations regarding arbitrage. At the end of each year if you’ve engaged in this kind of financial transaction, you’re required by the IRS to calculate your arbitrage rebate, and then you have to do the things that the laws and regulations require.
As you might have been able to guess considering how complicated arbitrage might seem to you, arbitrage rebate is equally complex. It’s not easy for someone who isn’t a CPA to read through the rules and regulations regarding arbitrage rebate, and it’s equally complex for the layperson to calculate what the rebate figure actually is. Thus, if you’ve been engaging in this type of arbitrage and you’re pretty sure that you need to do some arbitrage rebate calculation, you would be wise to hire a professional to do it for you. There are specific CPAs and accounting firms out there that specialize in this type of financial transaction, and they’ll be able to walk you through the process and calculate your arbitrage rebate for you. These firms understand the myriad of rules and regulations, they stay up-to-date on changes in them over time, and they’ll get your arbitrage rebate calculation right.
The penalty for not calculating your arbitrage rebate and not alerting the federal government is severe. It’s quite possible that the IRS could take you to court to force you to pay the money you owe, and there could be heavy fines associated with this. Thus, if you’re engaging in any type of arbitrage, you need to hire a firm like Arbitrage Compliance Specialists to calculate your arbitrage rebate for you. This is not the kind of thing that you want to get wrong. You need to hire a firm that knows what they’re doing, that has a strong track record of success, that has defended their clients successfully against the IRS, and that understands and stays abreast of the changes in the regulatory framework. You need a firm like Arbitrage Compliance Specialists with decades of experience in the arbitrage industry.