If you have been watching the news over the past year, you may have seen references to a new measure passed by Congress called the Corporate Transparency Act (CTA). This measure, meant to deter financial crimes, instituted a new business reporting requirement called the Beneficial Ownership Information report (or BOI for short).
The information collected through BOI reporting is information already provided on federal tax returns and to state divisions of corporations when establishing an entity of any kind. So, a new mechanism to consolidate that information is a bit baffling to me. But the insanity of BOI reporting goes much further than simply creating a new federal database of small businesses.
This new law, which purports to be a solution to financial crimes, specifically exempts not only large businesses (those generating over $5M/year in sales and having more than 21 full-time employees), but also those who operate directly in the financial space: banks, credit unions, broker & security dealers, investment advisors, large accounting firms, money service businesses, etc.!
Beyond that craziness, the fines associated with neglecting to file are onerous and, frankly a bit out of control! $591 per day in fines and up to 2 years in prison! If you were one of the lucky business owners who actually was aware of and complied with this new filing requirement, you would be spared the draconian and over-the-top fines. But there are estimated millions of small business owners who simply do not know about this new filing requirement and ignorance of the law is not an excuse from the penalties of breaking it.
To add even more layers of crazy to this whole BOI saga, the law has been challenged in court by pro-business organizations on the grounds of onerous burdens to business taxpayers. The courts have bounced the case around with all the grace of a wrecking ball – vacillating between enforcing the order and deferring it until the case is resolved. After panic-instilling deadlines of December 31st were extended to January 13th, the 5th circuit court in Texas has finally made a determination that mandatory BOI reporting is indefinitely paused until the case is resolved.
While business owners can breathe a sigh of relief that there is no longer this penalty-backed deadline staring them in the face, they should also be aware that, if this case has taught us anything, it is that BOI reporting may be back in the future. The back-and-forth nature of the proceedings has left many scrambling to report and then frustrated that they did when mandatory reporting was paused. It has cost business owners hard-earned dollars, wasted precious time, and sparked national debate on the merits of a federal database for the common small business owner who is just trying to earn a few bucks to support his family.
I stand committed to following the law, even when I don’t agree with it. (Is my disapproval of the whole concept of BOI reporting showing yet?). But I do not recommend voluntarily filing BOI reports for no reason. Wait for the courts to finalize this case and know that this may become a requirement in the future. In the meantime, keep working hard to provide an excellent product or service and relish in the relative freedom we do enjoy in America to conduct a worthy enterprise.
If you’ve read this article and still want to voluntarily file a BOI report, know that the information required is not different from or more than what is already reported on your tax return. We are happy to help you file your BOI report if you choose to go that route. Just let us know and we’ll send over the engagement letter and invoice!
Tell me – what are your thoughts on BOI reporting? Is this new information for you or are you well versed in the BOI saga?
