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When it comes to complying with FinCEN’s Beneficial Ownership Information (BOI) reporting requirements, understanding the specific taxpayer identification numbers (TINs) that need to be reported can be challenging, especially for disregarded entities. So, what are the reporting considerations for tax-disregarded entities? Disregarded entities, often structured for tax efficiency, still bear the responsibility of reporting their beneficial ownership information if they meet the criteria of a reporting company.
This article will cover the types of TINs that disregarded entities should report to FinCEN.
What is a Disregarded Entity?
A disregarded entity is a business entity with a single owner that is not considered as separate from its owner for federal tax purposes. Common examples include single-member limited liability companies (LLCs) and certain types of trusts. Despite their special tax status, disregarded entities are not by default exempt from BOI reporting requirements, even if they may not be required to file any income tax returns.
TINs for Disregarded Entities
FinCEN requires reporting companies to submit their taxpayer identification number (TIN) if one has been issued, as part of their BOI report. The applicable TINs that may be reported include:
- Employer Identification Number (EIN)
- Social Security Number (SSN)
- Individual Taxpayer Identification Number (ITIN)
Special Foreign Entity Rule
For foreign reporting companies that have not been issued a TIN, they must provide a tax identification number issued by a foreign jurisdiction along with the name of that jurisdiction.
Reporting Considerations for Tax-Disregarded Entities: Scenarios
Let’s explore several scenarios to understand which TIN should be reported:
- Disregarded Entity with its Own EIN
If the disregarded entity has an EIN, it can report this number as its own TIN. This is straightforward and aligns the entity’s reporting with its federal tax identification.
- Disregarded Entity Without EIN – Owned by an Individual
For a single-member LLC or other disregarded entity with only one owner who is an individual, the entity may report the owner’s SSN or ITIN. The downside of this approach is that it reports a sensitive SSN on the BOI report.
- Planning Point
Consider having a disregarded entity obtain an EIN prior to filing the BOI report, if not previously on file. This will eliminate the owner’s SSN from being reported on the company’s BOI report.
- Disregarded Entity Without EIN – Owned by a U.S. Entity
If a disregarded entity is owned by a U.S. entity with an EIN, the disregarded entity can report its’ owner’s EIN as the TIN on its BOI report.
- Chain of Disregarded Entities Without EIN
In cases where a disregarded entity is part of a chain of disregarded entities that don’t have an EIN, it can report the TIN of the first owner up the ownership chain that has its own TIN.
Compliance is Key
Understanding the proper TIN to report is crucial for compliance with FinCEN’s BOI requirements. Disregarded entities must carefully assess their structure and identify the appropriate TIN to ensure accurate reporting. Failure to comply can result in significant penalties and increased scrutiny from regulatory authorities.
Conclusion
Navigating the BOI reporting requirements can be complex, especially for disregarded entities. However, by understanding the types of TINs that can be reported and the specific scenarios that apply, these entities can fulfill their reporting obligations with confidence. Whether using an EIN, SSN, ITIN, or a foreign-issued tax identification number, accurate reporting is paramount in maintaining compliance and supporting the broader goals of financial transparency and accountability.
