Beginning in 2024, US tax filers will have new obligations to report personal information to the Financial Crimes Enforcement Network of the Department of the Treasury (“FinCEN”), regarding certain closely held businesses. Failure to report could result in civil and criminal penalties, so it’s important to know if you’re subject to FinCEN’s Beneficial Ownership Information Reporting Rule.
Corporate Transparency Act (“CTA”)
Congress enacted the CTA in 2021 to combat financial crimes and prevent misuse of the US financial system. Effective January 1, 2024, the FinCEN’s Reporting Rule will be implemented, requiring certain legal entities such as LLCs, LPs and corporations (a “Reporting Company”) to provide beneficial ownership information (“BOI”) for the Reporting Company’s individual owners and applicants. Companies report the BOI via FinCEN’s secure electronic filing system, which safeguards the BOI collected in a federal government database.
Who Must Report
Domestic and foreign entities created by filing a document with a Secretary of State or similar office (e.g., Florida Division of Corporations, AZ Corporation Commission) are deemed a “Reporting Company” subject to the Reporting Rule.
What Must Be Reported
Companies must disclose the entity’s information along with each beneficial owner and applicant. A beneficial owner is any individual owning or controlling at least 25 percent of the company. An “Applicant” is the person who directly files the documents creating the company; however, companies created prior to January 1, 2024, are not required to disclose applicant information.
Reporting Deadlines
Companies existing prior to January 1, 2024, have until January 1, 2025, to disclose the required information in a BOI Return with FinCEN. Companies formed after January 1, 2024, however, only have 90 days from formation date to comply.
How to Ensure Compliance
Navigating the Reporting Rule can be incredibly nuanced, so we strongly advise conducting a thorough review of existing business structures, estate plans and investments. Engaging your estate planning attorney or accountant may be necessary for more complex estate plans and investment structures, and as always, your FineMark Private Wealth Advisor is here to assist you.
New Federal Beneficial Ownership Reporting Requirements in 2024
By Lindsey A. Jackson, J.D.
Vice President & Private Wealth Advisor, Trust
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