New Non-Tax Reporting Requirement for Many Businesses

A new requirement for 2024 is that all new and most existing businesses will be required to report the “beneficial ownership” of their businesses to FinCEN (Financial Crimes Enforcement Network), the agency who brought you the Form 114 to report foreign bank accounts to the government. 

The penalties for not filing are HUGE.  Reports filed late, incorrect or incomplete are subject to an unlimited $500 per day penalty.

This new requirement encompasses any business organization which is required to register with a state regulatory authority for its formation, such as LLCs, LLPs, Corps, S-Corps, LPs, etc., unless the entity is specifically exempt from reporting.  Reporting applies to single member or shareholders as well.

The requirements give only a short window for new entities to file the required information with FinCEN.  For existing entities as of 12/31/2023 who are required to report, the first reports are due by 12/31/2025.  Reporting errors can be corrected within 90 days of the original filing without penalty.

There are limited exceptions to filing.  Excluded entities include:

  • Publicly traded companies
  • Large companies with at least 20 full time employees (at least 30 hours a week), a US office, and US gross receipts reported on the prior year tax return of $5 million or more.
  • CPAs, companies such as security dealers, investment companies registered with the SEC
  • Various other types including inactive entities

The exemptions are generally for highly regulated entities who have already provided the information to the government in other filings.

In general, the information to be provided is the personal information of the 25% or more owners, including their residential address, as well as anyone else with “substantial control” of the company regardless of ownership percentage.  Examples would be a 25% owner who is a “silent partner” as well as a 0% owner who is CFO of the company.  “Beneficial ownership” under the attribution rules has not yet been provided. Until final instructions are published, we recommend the broadest ownership attribution rules apply.

In lieu of providing the specific beneficial owner’s detailed information, the beneficial owner can provide their “FinCEN Identifier”.  This avoids providing the personal information.  It also removes the responsibility of reporting changes in the personal information (a move, a divorce) from the company and leaves the responsibility with the individual who already has a FinCEN Identifier Number to report their changes.

Any changes in information provided must be updated with FinCEN within 30 days of the change, including transfers of ownership of a reportable beneficial interest, changes in responsible parties, address changes, deaths, etc.  The same penalties that apply to late or incorrect/incomplete filings will apply to late, incorrect or incomplete updates. This is a serious responsibility for all owners of business entities.  While there is still time to figure out how to ensure compliance with these rules, now is the time to determine and implement the new reporting requirements before deadlines and the penalties kick in.  Call us for more details.

Bay Area Green Business Best Accounting Firm to Work For Award North Bay Business Journal Best Places to Work

Join our Mailing List Pay my Bills