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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
Educate Yourself and Your Team:
Understand the BOI reporting requirements and educate your team about the importance of compliance.Gather Necessary Information:
Collect the required details of beneficial owners well in advance of the deadline.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.
