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The U.S. Treasury Department and Internal Revenue Service announced their intention to impose stricter regulations on life insurance and annuity contracts that are often used as a tool for tax evasion on investment earnings, according to the Wall Street Journal article.

At present, taxes on hedge funds investments and investments in similar products are often avoided by purchasing the investments through a life insurance or annuity contract, which both enjoy favorable tax treatment.

The taxpayers will no longer be able to hide their income from hedge fund investments behind these tax shields as the new rules aim to end the abusive policy of using the life insurance and annuities as tax evasion schemes, the article said.