Written by: Melanie Lauridsen, AICPA, Senior Manager, Tax Advocacy & Policy

There are new beneficial ownership information (BOI) reporting requirements that are little known yet have steep penalties on businesses, impacting small businesses in particular. Preparing small businesses in advance of the required filings or in advance of a business formation is important.

BOI reporting, required under the Corporate Transparency Act (CTA), is intended to bring transparency into the ownership of shell and front companies. By collecting BOI from businesses and sharing the information with law enforcement and financial institutions, the U.S. will more effectively combat money laundering activities.

Effective January 1, 2024, existing companies, companies created or registered before January 1, 2024, will have one year, through January 1, 2025, to file their initial BOI reports. New companies, companies created or registered on or after January 1, 2024, will have 30 days to file their initial BOI reports. If there are inaccuracies in the initial BOI report filed or companies have a change in information, such as change in residential address or percentage of ownership, they will have 30 days to report changes or correct the inaccuracies.

FinCEN expects 32.6 million entities to file in the first year of implementation and five to six million filings every year thereafter. In other words, most businesses will need to file. The CTA does allow for 23 types of entities to be exempt from the BOI reporting requirement – many of which are already regulated by federal or state governments and already have BOI filing requirements. For example, companies with more than 20 employees, gross revenue over $5 million and a physical presence in the U.S. are exempt. .

Willfully not complying with the BOI reporting requirements can result in civil penalties of $500 per day for as long as a violation exists up to $10,000 and criminal penalties up to two years of prison time.

To add complexity to the issue, there are circumstances when businesses will need professional advice to determine required information to complete the BOI requirement. There is debate around how accounting and finance professionals providing advice to a business on such determinations could be considered unauthorized practice of law. However, it is these professionals who often help businesses legally establish themselves and have the most readily available information to complete the BOI filing requirements. Taxpayers will undoubtedly turn to these professionals for assistance with these filings. We encourage non-attorney professionals to contact their state regulators, insurance carriers and/or legal counsel to further discuss this issue.

The AICPA has supported H.R. 4035, the Protecting Small Business Information Act of 2023, to delay the effective date of the BOI requirements until all rules required under the CTA have been issued and are final. However, as the implementation date approaches and, as taxpayers seek professional advice, it is not only important to become educated and have resources on the BOI reporting requirements but also to educate small business clients. For questions, please contact Melanie Lauridsen, melanie.lauridsen@aicpa-cima.com or Megan Kueck, megan.kueck@aicpa-cima.com .