Navigating the New IRS Requirement: Business Ownership Reporting

As of January 1, 2024, the United States Internal Revenue Service (IRS) has implemented a new requirement for business owners to report their beneficial ownership information. This new rule, known as the Beneficial Ownership Information (BOI) reporting requirement, aims to combat financial crimes and enhance transparency within the corporate landscape.

Who Needs to Report?

The BOI reporting requirement applies to domestic reporting companies, which are defined as corporations, limited liability companies (LLCs), and other entities created or registered to do business in the United States. These entities must report information about their beneficial owners, individuals who ultimately own or control 25% or more of the company or have the ability to exercise substantial control over the company's management or assets.

What Information is Required?

The BOI reporting requirement necessitates the collection and disclosure of various details about beneficial owners, including their name, date of birth, address, and Social Security number or tax identification number. Additionally, companies must report the nature and extent of each beneficial owner's ownership interest and control.

How to Report

The BOI reporting requirement mandates that companies file a report with FinCEN, the Financial Crimes Enforcement Network, through an electronic portal. The reporting deadline for domestic reporting companies created or registered on or after January 1, 2024, is 30 days from the earlier of the date of creation or registration with their governing jurisdiction. For companies existing prior to January 1, 2024, the reporting deadline is January 1, 2025.

Penalties for Non-Compliance

Failure to comply with the BOI reporting requirement can result in significant penalties, including civil penalties of up to $10,000 per violation and even criminal penalties for repeated or willful non-compliance.

Seeking Professional Guidance

Given the complexities of the BOI reporting requirement, it is advisable for businesses to seek guidance from experienced accounting or legal professionals to ensure compliance and avoid potential penalties. Contact one of our professionals, who can assist in identifying and verifying beneficial owners, preparing the required reports, and navigating the filing process.

Conclusion

The new IRS requirement for business ownership reporting is a critical step towards combating financial crimes and enhancing transparency in the corporate world. By understanding the scope of the requirement, gathering the necessary information, and seeking professional assistance, businesses can effectively comply with this new regulation and ensure their continued success.