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As of January 23rd, 2024, the CTA reporting requirements are not enforceable due to a stay on the effective date of BOI reporting. The information in this article does not include considerations regarding the stay. Entities formed while the stay is in place should be prepared to file reports immediately if/when it is lifted (if the 30-day period has elapsed).
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.