As the year-end deadline for millions of initial Beneficial Ownership Information (BOI) reports passes, accountants and attorneys are transitioning to a new phase of compliance. The focus now shifts to ongoing considerations, including updates to existing reports and initial filings for newly formed entities. With these changes, professionals must evaluate how post-deadline BOI reporting and compliance integrates into their daily operations and how they plan to advise their clients.

Key Post-Deadline BOI Reporting Considerations for Professionals

1. Onboarding New Clients:

   When taking on new clients, determining whether to request their BOI report transcripts should be a top priority. This step ensures that the client has complied with the filing requirements, and the information filed aligns with other entity documentation that is provided. If a client cannot provide their BOI transcript, it may signal non-compliance and the need for guidance.

2. Engaging Existing Clients:

   Professionals should decide whether to proactively ask existing clients for copies of their BOI reports. While many have already taken the necessary steps to inform clients of their obligations, not all are offering services. If they are, there’s a possibility not all clients asked for assistance.

   Following up on whether they have filed their reports and asking for a copy of the transcript opens the door to conversations about potential discrepancies or corrections that might be needed. Also, having the most recent transcript will help professionals keep an eye on when updates are needed. Another possibility is, they have changed beneficial ownership, but failed to tell you about that change that will affect their taxes.

3. Handling Incorrect BOI Information:

   If a client provides a BOI report with incorrect or outdated information, professionals must decide how to proceed. Key steps might include:

   • Identifying the errors and advising the client on exactly what needs to be corrected.
   • Determining whether to handle the corrections in-house or refer the client to another specialist.

If planning to offer advice to clients, consider entering into formal engagements that explicitly define the scope of services and reduce liability.

4. Formalizing BOI Services:

   As BOI compliance becomes a regular part of entity management, firms may consider offering dedicated BOI services. These might include preparing and submitting initial and updated BOI reports, reviewing BOI data with other filings, and providing ongoing compliance monitoring and reminders for clients. While the original plan was not to enter the BOI reporting space, reevaluating the offer of these services may reduce administrative burdens, keep clients out of legal trouble, and can generate additional revenue while addressing unavoidable client need. Don’t forget to charge accordingly for these additional services!

Looking Ahead

As compliance requirements evolve, BOI reporting might become a standard part of due diligence for entities and their advisors. By thinking ahead, accountants, attorneys, and other advisors can integrate BOI compliance into their practice, safeguard their clients, and position themselves as trusted advisors in this area.

The question is not only whether to assist clients with BOI compliance, the realistic question is are you prepared to adapt?

The CTA requires certain entities to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). While this initiative aims to increase transparency, it introduces new complexities for tax professionals and their clients, especially during tax season. Will the CTA affect tax season processes? Here’s how tax professionals can adapt.

Asking Clients for Beneficial Ownership Information Reports

As a tax professional, you may not have been involved in filing these reports, but obtaining copies from your clients could become an essential part of your process. Including a section on your tax organizers that explicitly asks whether clients have filed their BOI reports is a proactive way to streamline this communication. Consider adding prompts like:

• Have you filed your Beneficial Ownership Information (BOI) report with FinCEN?
• Please list all the entities you filed a BOI report for.
• Please list all the entities you were reported as a beneficial owner on its BOI report.
• Please provide a copy of your BOI report(s) for our records for any entities that you manage compliance for.

This approach ensures you have the necessary documentation to assist with compliance-related advisory and potential tax implications or planning opportunities.

Identifying Changes That Trigger Updates

The CTA requires updates to BOI be reported within 30 days of a change in ownership or company structure. During tax season, as you review financial documents and company structures, you may notice changes that necessitate an updated BOI filing (clients moved to a new address, the business has a new CFO, etc.). Implementing a policy to remind clients about these updates is a valuable service that ensures they remain compliant. For example:

• If you spot changes in ownership percentages or new entities, flag these for clients and remind them of the 30-day filing window.
• Develop a standardized process for notifying clients about potential filing obligations, including templates for email reminders or advisory notices.

Internal Policies for Interdepartmental Updates

Collaboration between departments like payroll, bookkeeping, and tax is critical under the CTA. Changes in company structure or ownership often come to light during routine bookkeeping or payroll tasks. Establishing an internal policy for sharing this information ensures that all departments are aligned and proactive. Key steps include:

• Training staff to recognize changes that trigger BOI updates.
• Creating a centralized communication system for flagging and sharing changes internally.
• Pick a team member that will receive BOI changes and execute internal procedures efficiently.

Advising Clients on Internal CTA Policies

For many clients, the CTA is unfamiliar territory. Offering advisory services to help them understand and implement compliance processes is a natural extension of your role. Ask your clients:

• Do you have a Corporate Transparency Act (CTA) compliance policy in place?
• Would you like assistance in educating your team or setting up processes for BOI reporting?

These conversations can position you as a trusted advisor, helping clients navigate the complexities of compliance while building long-term relationships.

Preparing for the CTA’s Long-Term Impact

The CTA is not just a one-time consideration; it introduces ongoing compliance obligations that will affect businesses for years to come. Tax professionals can stay ahead by:

• Offering webinars or educational materials about the CTA to clients.
• Keeping clients informed about updates to the law and FinCEN’s enforcement practices.
• Developing checklists and resources that integrate CTA compliance into tax preparation workflows.

The CTA represents a significant shift in regulatory expectations, and tax professionals are uniquely positioned to help clients adapt. By integrating BOI compliance into your tax season processes and/or offering advisory services, you can ensure that both your practice and your clients remain compliant and well-prepared.

Under the Corporate Transparency Act (CTA) regulations, reporting companies are required to file Beneficial Ownership Information (BOI) reports to the Financial Crimes Enforcement Network (FinCEN). Currently, the CTA mandates that entities file updated BOI reports within 30 days of any change in information about the entity or its beneficial owners.

While this approach is designed to ensure up-to-date records for law enforcement and regulatory purposes, it raises questions about practicality and efficiency. Would transitioning to an annual BOI reports make more sense?

The Burden of 30-Day Updates

The 30-day update requirement might be challenging for businesses to meet, especially those with multiple beneficial owners or frequent organizational changes. Consider the following scenarios:

• Address Changes: If a beneficial owner moves to a new residence, the entity must file an update within 30 days.
• Leadership Changes: A company hiring a new Chief Financial Officer (CFO) would trigger another required update.
• Other Changes: Updates might also be needed for changes in entity address or registering a DBA.

Depending on the entity, changes could occur multiple times a year or once every few years. Monitoring these changes continuously and filing timely updates can place a significant administrative burden on companies. Small businesses and those with limited resources may find it particularly difficult to comply, increasing their risk of incurring penalties.

Advantages of Annual BOI Reports

An annual reporting system might alleviate some of these challenges. Here are some key benefits:

1. Simplified Compliance: Filing a single report annually allows entities to review and consolidate all changes at once, reducing the likelihood of missing deadlines.
2. Easier Integration: Professionals, such as accountants and attorneys, could incorporate BOI reporting into their clients’ broader annual service plans.
3. Reduced Penalty Risks: The steep penalties for non-compliance under the current system—$591 per day—make it critical for entities to meet deadlines. An annual deadline would be easier to manage and less likely to result in inadvertent violations.

Potential Drawbacks of Annual BOI Reports

While annual reporting offers clear advantages, there are valid concerns:

1. Delayed Updates: The purpose of the CTA is to provide law enforcement with timely and accurate information. Annual reporting could delay critical updates, potentially undermining the Act’s objectives.
2. Increased Volume: Tens of millions of entities would be filing annual reports, resulting in an overwhelming volume of data for FinCEN to process and store. This could strain resources and reduce the efficiency of the reporting system.
3. Redundancy for Static Entities: Many entities may experience no changes in their BOI information for years, if ever. Annual reporting for such entities could create unnecessary administrative overhead without adding value.

_{Would Annual BOI Reports Make More Sense?}

The current 30-day update requirement ensures timely information but places significant demands on businesses. Transitioning to an annual BOI reporting system could simplify compliance and reduce risks for entities, particularly those with frequent changes. However, the potential trade-offs in data timeliness and administrative feasibility for regulators are valid points to consider.

Whether through annual reporting or updates-as-needed, the goal should be a balanced system that meets the needs of both businesses and regulators.

As the year-end approaches, businesses across the United States are racing against time to comply with the Corporate Transparency Act (CTA). With less than 34 days left until the CTA deadline, business owners and accountants need to understand the requirements and take immediate action to avoid significant fines and penalties.  

Here’s what you need to know to ensure compliance with the CTA. 

What is the Corporate Transparency Act (CTA)?

The CTA mandates that most U.S.-based businesses, including LLCs, corporations, and limited partnerships, submit a Beneficial Ownership Information (BOI) report to the Financial Crimes Enforcement Network (FinCEN). This report identifies individuals who own or control the company, known as beneficial owners.  

The purpose of this legislation is to enhance transparency and combat illegal activities such as money laundering, tax evasion, and the misuse of shell companies. 

Why the CTA Deadline Matters

Despite its broad impact, many businesses remain unaware of the CTA’s filing requirements. Non-compliance can result in substantial fines, up to $591 per day. With about 80% of businesses yet to submit their BOI reports, the risk of penalties is significant. 

Accountants and CPAs have also been slow to act, often due to uncertainty about the law’s enforcement. However, with the deadline fast approaching, it is imperative for accountants to assist their clients in meeting the requirements in time. 

What You Need to Know About BOI Reporting

The BOI report requires detailed information about the company and its beneficial owners, including personal identification numbers, such as a Driver’s License or passport, images of IDs, birthdates, and home addresses. For many business owners, this level of detailed reporting is unprecedented. 

For accountants, the task of collecting and managing this sensitive data can be overwhelming, particularly for those handling multiple clients. Additionally, any changes in beneficial ownership must be reported to FinCEN within 30 days, adding another layer of complexity. 

FinCEN’s Role in Educating Businesses

Throughout the year, FinCEN has attempted to raise awareness about the CTA and BOI reporting requirements, although many believe it isn’t enough. They have hosted live events, attended major industry conferences, and launched national marketing campaigns to inform businesses. Despite these efforts, many businesses still lack awareness of the new law and its implications. 

Practical Steps to Ensure Compliance

1. Educate Yourself and Your Team:
   Understand the BOI reporting requirements and educate your team about the importance of compliance. 

2. Gather Necessary Information:
   Collect the required details of beneficial owners well in advance of the deadline. 

3. Utilize Technology:
   Consider using compliance software to streamline the reporting process and ensure data security.  

The Importance of Filing Even If Details Are Missing

If a beneficial owner is uncooperative or delays providing information, it’s still advisable to file the report by the CTA deadline. You can always submit a corrected report once the necessary information is obtained. Filing on time demonstrates your commitment to compliance and may mitigate the risk of penalties. 

Additionally, if an individual willfully fails to provide the required information, the responsibility and potential penalties are likely to fall on the non-compliant individual, not the reporting company per FinCEN FAQs. 

Conclusion

With the CTA deadline rapidly approaching, it’s essential for business owners, legal professionals, and accountants to act now. Understand the requirements, gather the necessary information, and utilize technology to streamline the process. By ensuring timely compliance, you can avoid hefty fines and contribute to a more transparent business environment. 

Complying with Beneficial Ownership Information (BOI) reporting requirements is essential for transparency and regulatory adherence. However, it can be challenging when beneficial owners are uncooperative.  

This blog explores strategies to handle uncooperative beneficial owners, ensuring compliance and mitigating potential risks. 

Understanding the Challenges

Beneficial owners – individuals who have significant control over or benefit from a company – are vital in BOI reporting. However, some may hesitate or refuse to provide the necessary information due to privacy concerns, misunderstanding the requirements, or general unresponsiveness or unwillingness to comply. 

Strategies for Dealing with Uncooperative Beneficial Owners

Clear Communication 

Start by educating beneficial owners about the importance of BOI reporting and the legal requirements. Provide clear, concise information on why cooperation is crucial. Be transparent about how their information will be used and protected. Address any concerns they may have about privacy and data security. 

Incentivize Compliance 

Highlight the benefits of compliance, such as avoiding astronomical penalties and contributing to corporate transparency. Send regular reminders about upcoming deadlines to ensure they understand the urgency of providing their information. 

Escalation Procedures 

If initial attempts at communication fail, escalate the matter within your organization. Involve higher management or legal advisors to emphasize the seriousness of the issue. Consider seeking external mediation or legal advice if the owner continues to be uncooperative. 

File the Report Regardless 

If an owner does not provide the required information by the end of the due date for the entity, it is advisable to file the report anyway with the information that is assessable. Once the owner cooperates, you can always file a corrected report to include the information.  

Consequences for Non-Compliance 

Inform uncooperative beneficial owners about the legal consequences of non-compliance. Emphasize that the responsibility and potential penalties will likely fall on the unresponsive individual rather than the reporting company. Keep thorough records of all communication and efforts made to obtain the necessary information. This documentation can serve as evidence of your proactive approach in case of an audit or legal inquiry. 

Attacking Compliance Head-On 

Dealing with uncooperative beneficial owners can be challenging, but with the right strategies, it is possible to ensure compliance and mitigate risks. Clear communication, incentivizing compliance, and understanding the legal implications are essential steps in this process. Remember, it may be better to file an incomplete report and update it later than to miss the deadline entirely. Stay proactive and keep detailed records of your efforts to demonstrate your commitment to regulatory compliance.