News and Information
Saturday, January 13, 2024
2023 Individual Tax Preparation Information
Client organizers for 2023 have now been mailed. Please utilize this information as you plan for your 2023 tax preparation. We have included your 2023 tax engagement letter with that mailing that we will need returned to us in order to begin the tax preparation process.
Please review the bank information within your organizer and confirm that the data we have on file is correct. If changes are required, please provide us updated banking information.
If you need to send tax documents electronically, please contact our office so that we can coordinate communication through a secure shared portal instead of sending sensitive data through e-mail transmission.
In order to meet the filing deadline for your 2023 tax return, your completed organizer needs to be received by our office no later than March 15, 2024.
Information received after that date may require an extension of time to be filed for your return.
Thursday, January 11, 2024
RE: Corporate Transparency Act — Beneficial Ownership Information (BOI) Reporting Requirement
Dear Valued Client,
The Corporate Transparency Act (“CTA”) was enacted into law as part of the National Defense Act for Fiscal Year 2021. The CTA requires the disclosure of the beneficial ownership information (otherwise known as “BOI”) of certain entities from people who own or control a company.
It is anticipated that 32.6 million businesses will be required to comply with this reporting requirement. The intent of the BOI reporting requirement is to help US law enforcement combat money laundering, the financing of terrorism and other illicit activity.
The CTA is not a part of the tax code. Instead, it is a part of the Bank Secrecy Act, a set of federal laws that require record-keeping and report filing on certain types of financial transactions. Under the CTA, BOI reports will not be filed with the IRS, but with the Financial Crimes Enforcement Network (FinCEN), another agency of the Department of Treasury.
We wanted to send you this communication to put you on notice of this new requirement.
What entities are required to comply with the CTA’s BOI reporting requirement?
Entities organized both in the U.S. and outside the U.S. may be subject to the CTA’s reporting requirements. Domestic companies required to report include corporations, limited liability companies (LLCs) or any similar entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
Domestic entities that are not created by the filing of a document with a secretary of state or similar office are not required to report under the CTA.
Foreign companies required to report under the CTA include corporations, LLCs or any similar entity that is formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by filing a document with a secretary of state or any similar office.
Are there any exemptions from the filing requirements?
There are 23 categories of exemptions. Included in the exemptions list are publicly traded companies, banks and credit unions, securities brokers/dealers, public accounting firms, tax-exempt entities and certain inactive entities, among others. Please note these are not blanket exemptions and many of these entities are already heavily regulated by the government and thus already disclose their BOI to a government authority.
In addition, certain “large operating entities” are exempt from filing. To qualify for this exemption, the company must:
a) Employ more than 20 people in the U.S.;
b) Have reported gross revenue (or sales) of over $5M on the prior year’s tax return; and
c) Be physically present in the U.S.
Who is a beneficial owner?
Any individual who, directly or indirectly, either:
Exercises “substantial control” over a reporting company, or
Owns or controls at least 25 percent of the ownership interests of a reporting company
An individual has substantial control of a reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title or if they have no ownership interest in the reporting company.
The detailed CTA regulations define the terms “substantial control" and “ownership interest” further.
When must companies file?
There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the beneficial owner’s information.
New entities (created/registered after on or after January 1, 2024 and before January 1, 2025) — must file within 90 calendar days
New entities (created/registered after on or after January 1, 2025) — must file within 30 calendar days
Existing entities (created/registered before 1/1/24) — must file by 1/1/25
Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file within 30 days
What sort of information is required to be reported?
Companies must report the following information: full name of the reporting company, any trade name or doing business as (DBA) name, business address, state or Tribal jurisdiction of formation, and an IRS taxpayer identification number (TIN).
Additionally, information on the beneficial owners of the entity and for newly created entities, the company applicants of the entity is required. This information includes — name, birthdate, address, and unique identifying number and issuing jurisdiction from an acceptable identification document (e.g., a driver’s license or passport) and an image of such document.
On November 7, 2023, FinCEN issued a final rule that specifies the circumstances in which a reporting company may report an entity’s FinCEN identifier in lieu of information about an individual beneficial owner. A FinCEN identifier is a unique identifier to provide the required identifying information directly to FinCEN. The final rule is effective January 1, 2024 to align with the effective date of the BOI Reporting Rule.
Understand your reporting requirement.
Penalties for willfully not complying with the BOI reporting requirement can result in criminal and civil penalties of $500 per day and up to $10,000 with up to two years of jail time. While we wanted to inform you of this new requirement, it is important that you understand that our office is unable to assist you with the filing of the BOI as our office has all non-attorney CPAs and this reporting requirement is being viewed as legal in nature. We wanted to share this information so that you can coordinate with your attorney to meet the necessary filing requirements in a timely manner. As always, planning ahead can help you comply and understand your filing obligations. FinCEN announced a new Small Entity Compliance Guide to assist the small business community in learning about and complying with the beneficial ownership information (BOI) reporting rule. In addition, FinCEN has issued FAQs about the BOI reporting requirements that incorporate content from the Small Entity Compliance Guide. For further information, please visit FinCen’s BOI website at: https://www.fincen.gov/boi. We will also provide links to this information on our website for your convenience.
Sincerely,
Potts, Steele & White, P.A.