Author: AlisaNaCPA

After years of delays, the first stage of the Corporate Transparency Act (CTA) goes into effect on January 1, 2024. It imposes a new federal filing requirement for most corporations and limited liability companies (LLCs) formed in 2024 and later.

The CTA’s purpose is to prevent the use of anonymous shell companies for money laundering, tax evasion, and other illegal purposes. But it applies to honest business owners as well as criminals.

The CTA does not apply to all new businesses. It applies only to entities such as corporations, LLCs, and others formed by filing a document with a state secretary of state or similar official. It doesn’t apply to sole proprietors.

Our firm is sending you this communication to provide you with some general information regarding the new reporting rules as well as initial steps you should take to address the implications of the CTA to your organization.

What entities are subject to the new CTA reporting requirements?

Entities required to comply with the CTA (“Reporting Companies”) include corporations, limited liability companies (LLCs), and other types of companies that are created by a filing with a Secretary of State (“SOS”) or equivalent official.

The rule identifies two types of reporting companies: domestic and foreign.

A domestic reporting company is a corporation, limited liability company (LLC), or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.

A foreign reporting company is a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office.

Under the rule, and in keeping with the CTA, twenty-three types of entities are exempt from the definition of “reporting company.”

Exemption

The Reporting Rule exempts twenty-three (23) specific types of entities from the reporting requirements, including

• large businesses—businesses with more than 20 full-time employees and $5 million in receipts on their prior-year tax return,
• certain businesses already heavily regulated by the government, such as banks and insurance companies,
• Inactive entity – entity existed on or before January 1, 2020 and not engaged in active business. Entity is not owned by a foreign person and no changes in ownership and no funds sent or received in the preceding twelve (12) month period. We highly recommend to file Articles of dissolution with Secretary of State to properly end the entity’s existence.
• nonprofits, and
• several others.

Who is a beneficial owner of my company?

If your company is a reporting company, your next step is to identify its beneficial owners. A beneficial owner is any individual who, directly or indirectly:

• Exercises substantial control over a reporting company;
• OR
• Owns or controls at least 25 percent of the ownership interests of a reporting company.

An individual might be a beneficial owner through substantial control, ownership interests, or both. Reporting companies are not required to report the reason (i.e., substantial control or ownership interests) that an individual is a beneficial owner.

When do I need to file a report?

• Reports will be accepted starting on January 1, 2024.
• Reporting companies created or registered to do business before January 1, 2024, will have additional time — until January 1, 2025 — to file their initial BOI reports.
• Reporting companies created or registered on or after January 1, 2024, will have 30 days after receiving notice of their company’s creation or registration to file their initial BOI reports.

What happens if my company does not report BOI in the required timeframe?

The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure.

Additionally, a person may be subject to civil and/or criminal penalties for willfully causing a company not to file a required BOI report or to report incomplete or false beneficial ownership information to FinCEN.

Beneficial Ownership Information Reports

When filing BOI reports with FinCEN, the rule requires a reporting company to identify itself and report four pieces of information about each of its beneficial owners: name, birthdate, address, and a unique identifying number and issuing jurisdiction from an acceptable identification document (and the image of such document). Additionally, the rule requires that reporting companies created after January 1, 2024, provide the four pieces of information and document image for company applicants.

If an individual provides their four pieces of information to FinCEN directly, the individual may obtain a “FinCEN identifier,” which can then be provided to FinCEN on a BOI report in lieu of the required information about the individual.

What should I do if previously reported information changes?

In addition to filing an initial BOI report, reporting companies must also update and correct information in their previously filed BOI reports. Individuals who obtain FinCEN identifiers must also update and correct information previously reported to FinCEN. The company must file an updated BOI report no later than 30 days after the date on which the change occurred. The same 30-day timeline applies to changes in information submitted by an individual in order to obtain a FinCEN identifier. A reporting company is not required to file an updated report for any changes to previously reported personal information about a company applicant

Please visit the website below for additional information about the Reporting Rule and guidance materials:

Beneficial Ownership Information Reporting | FinCEN.gov

If you have questions, be sure to reach out to us. Our entire team is here to support and guide you.

This is to inform all Restaurant Revitalization Fund (RRF) Awardees on possible SBA’s review on the use of funds and importance on retaining all RRF related records for 3 years. 

Post Award Report Acceptance and Record  

If you completed RRF Post Award Report by December 31, 2021, you should have received Post Award Report Acceptance email from SBA with Confirmation ID. The SBA reserves the right to request supplemental documentation needed to validate the certification.  

The business must retain all records necessary to prove compliance with Restaurant Revitalization Fund Program Rules for 3 years. If documentation is requested, you will be notified via email through the inbox.  

Eligible Uses of Funds  

The SBA and IRS share financial information from the tax return and look for transactions such as big withdrawal from business account to personal account. 

The following expenses are eligible if incurred between February 15, 2020 and March 11, 2023:   

• Business payroll costs, including sick leave and costs related to the continuation of group health care, life, disability, vision, or dental benefits during periods of paid sick, medical, or family leave, and group health care, life, disability, vision, or dental insurance premiums.  
• Payments on any business mortgage obligation (both principal and interest; note: this does not include any prepayment of principal on a mortgage obligation). 
• Business rent payments, including rent under a lease agreement (note: this does not include any prepayment of rent).  
• Business debt service (both principal and interest; note: this does not include any prepayment of principal or interest). 
• Business utility payments for the distribution of electricity, gas, water, telephone, or internet access, or any other utility that is used in the ordinary course of business for which service began before March 11, 2021. 
• Business maintenance expenses including maintenance on walls, floors, deck surfaces, furniture, fixtures, and equipment.  
• Construction of outdoor seating.  
• Business supplies, including protective equipment and cleaning materials.  
• Business food and beverage expenses, including raw materials for beer, wine, or spirits.  
• Covered supplier costs, which is an expenditure made by the eligible entity to a supplier of goods for the supply of goods that are essential to the operations of the entity at the time at which the expenditure is made and is made pursuant to a contract, order, or purchase order in effect at any time before the receipt of Restaurant Revitalization funds; or with respect to perishable goods, a contract, order, or purchase order in effect before or at any time during the covered period. 
• Business operating expenses, which is defined as business expenses incurred through normal business operations that are necessary and mandatory for the business (e.g. rent, equipment, supplies, inventory, accounting, training, legal, marketing, insurance, licenses, fees). Business operating expenses do not include expenses that occur outside of a company’s day-to-day activities.  

Note: Past-due expenses are eligible if they were incurred beginning on February 15, 2020 and ending on March 11, 2023.  

Business owners can make withdrawals for reimbursement on valid expenses spent from February 15, 2020 to present. 

If you have questions, be sure to reach out to us. Our entire team is here to support and guide you.  

We would like to remind you that we require you to have your supporting tax documents uploaded to our secure portal by dates below to prepare your tax filing.   

	Complete Source Provide by	IRS Filing Due Date
Individual Form 1040	3/15/2022	4/18/2022
Individual Form 1040 with FinCen or FBAR	3/15/2022	4/15/2022
Partnership Form 1065	2/28/2022	3/15/2022
S corporation Form 1120S	2/28/2022	3/15/2022
C Corporation Form 1120	3/15/2022	4/15/2022

If you are unable to get your documents uploaded by the above dates, please contact our office to request an extension.   

Please note late payment penalty and interest may accrue from the original due date if there is any tax liability.