Episode 43: In this episode, Timalyn discusses the Corporate Transparency Act (CTA), which is not necessarily tax related, but US Treasury Department is in charge of the CTA. It's a topic many will approach their tax professionals for explanations and advice. Timalyn will explain what it is, who's in charge of it and who it affects.
The Corporate Transparency Act was passed in 2021. It's currently scheduled to go into effect on January 1, 2024. There is pressure to delay the date, but as of now, it remains set for January.
What is the Corporate Transparency Act?
The Corporate Transparency Act is a law to enhance the transparency of entities and entity structure. Over the years, people have chosen to start businesses in certain states to shield specific information from the general public or other considerations. This concept is used for good purposes, and unfortunately it can be used for bad purposes (some of which may even be illegal).
The Corporate Transparency Act requires that companies must provide the government information about the owners and beneficiaries of the business. It's an effort to reduce potential illicit activities.
Who Is Responsible for Enforcing the CTA?
The Financial Crime Enforcement Network (FinCEN) is who will be enforcing the reporting requirements under the Corporate Transparency Act. FinCEN is housed within the Treasury Department, along with the IRS. This is one reason that individuals will think that this is a tax issue.
If you have overseas bank accounts or are in a business that has them, you may already be familiar with FinCEN. Timalyn explains that organizations or individuals having $10,000 or more in cash or other assets must submit an annual report to FinCen. This form is known as the FBAR.
The Corporate Transparency Act reporting requirement is actually a legal issue, not a tax issue. For this reason, Timalyn advises you to reach out to an attorney for advice, especially if you don't know if you have to comply with the CTA reporting requirements.
Who Needs to Comply with the Corporate Transparency Act?
Almost all legal entities will fall under the Corporate Transparency Act reporting requirements. If you registered a business as a corporation, LLC or an LLP, you are required to file the Beneficial Ownership Information report (BOI). The BOI information that is to be reported includes:
● Full Legal Name of the Beneficial Owner
● Date of Birth
● Social Security Number
● Government Picture ID
● Current Address of the Individual
● Address of the Business Entity
Who is a Beneficial Owner?
Timalyn explains they are people who exercise substantial control over the entity, either directly or indirectly. You would also be considered a beneficial owner if you own over 25% of the company.
It's usually people who are responsible for major decisions related to the company. The same person may also work in the day to day operations.
Are there Exemptions for Certain People or Types of Organizations?
Yes. In fact, there are currently 23 exemptions. For information on these, subscribe to Tax Tips with Timalyn. As more information becomes available, Timalyn will post it on this blog, along with other useful information for business owners
Here Are 5 Entities Exempt from the BOI Filing Requirement
● Governmental Authorities
● Banks
● Credit Unions
● Tax-Exempt Entities
● Accounting Firm
If you are an accountant, Timalyn recommends you subscribe to her blog, at www.AmericasFavoriteEA.com. You'll find plenty of useful information for accounting and tax professionals.
What is the Deadline for Filing the Beneficial Ownership Information Report?
As of the recording of this episode, if your entity is formed after 01/01/24, you have 90 days to after the official start of your business file with FinCEN. If your business was open prior to 01/01/24, you have the full year to gather and submit the information for the beneficial owner(s).
Please don't procrastinate on filing the BOI. If you already have the required information, go ahead and file it. Remember, this doesn't get filed with your tax return. You'll file the BOI on the FinCEN website.
What if I'm Late in Filing the BOI?
There is a $500/day civil penalty if you are late in filing your report. If you are found to be engaged in fraudulent or illegal activity by FinCEN, you will be subject to up to 2 years in prison and/or up to $10,000 in a criminal penalty.
If you have trouble filing the report, Timalyn advises you to reach out to an attorney.
Please consider sharing this episode with your friends and family. There are many people dealing with tax issues, and you may not know about it. This information might be helpful to someone who really needs it. After all, back taxes shouldn't ruin their life either.
As we conclude Episode 43, we encourage you to connect with Timalyn on social media. You'll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.
Remember, Timalyn Bowens is America's Favorite EA and she's here to fill the tax literacy gap, one taxpayer at a time. Thanks for listening to today's episode.
For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .
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Disclaimer: This podcast is for informational and educational purposes only. It provides a framework and possible solutions for solving your tax problems, but it is not legally binding. Please consult your tax professional regarding your specific tax situation.
