BOI Reporting Made Easy: A Step-by-Step Guide for Businesses—Explains new 2024 requirements, who must file, exemptions, IRS compliance tips.
To control corrupt and illicit business activities run by shell companies, organizations are required to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN) from January 1, 2024. In this article, “BOI Reporting Made Simple: Step-by-Step Guide for Businesses,” we will break down the essentials, new updates, and detailed steps to ensure your business complies seamlessly.
Understanding BOI Reporting Requirements
The process of reporting information of a person holding either ownership (direct or indirect) or control over a company is considered as BOI reporting. It normally aims to promote transparency and, in a way, check instances of illegal activities such as money laundering or evasion of taxes. The information received through the BOI reporting enables regulatory agencies like the Financial Crimes Enforcement Network (FinCEN), the Securities and Exchange Commission (SEC), and the Internal Revenue Service (IRS) to maintain a closer watch over business activities.
Note: Beneficial ownership information reporting is not an annual requirement. Unless a company needs to update or correct information, a report only needs to be submitted once.
What is BOI Reporting?
In 2021, with bipartisan support, Congress enacted the Corporate Transparency Act. This law mandates the reporting of beneficial ownership information to prevent bad actors from using shell companies or hidden ownership structures to hide or benefit from their illicit gains.
Under BOI reporting, information on the beneficial owners must be provided by businesses. Beneficial owners are usually the individuals holding 25% or more in equity/voting rights in the company. Although, exact reporting thresholds vary across country jurisdictions.
FinCEN’s Small Entity Compliance Guide provides checklists and examples that may assist in identifying beneficial owners.
New BOI Reporting Requirements 2024
New rules under the Corporate Transparency Act (CTA) now require many corporations, limited liability companies and other entities to report beneficial ownership and other information to the Financial Crimes Enforcement Network (FinCEN).
Revised reporting requirements to the BOI for enhanced transparency were placed into effect in 2024. Increase measures are targeted at bringing jurisdictions in line with international standards on anti-money laundering and enhancing its effectiveness. Enterprises are warned to take note to avoid penalties by ensuring compliance with such changes in their practice.
IRS BOI Reporting Requirements
The IRS has specific BOI reporting requirements that businesses must follow. These requirements include detailed information about each beneficial owner, such as:
- Full name
- Date of birth
- Address
- Social Security Number (or an equivalent identification number)
- Ownership details (percentage and type of ownership)
Step-by-Step Guide to BOI Reporting
To help businesses navigate the BOI reporting, follow:
Preparation:
Identifying the Beneficial Owners under BOI reporting.
The very first step involves identifying the individuals for being Beneficial owners under the BOI reporting. A review of ownership structures is being done to determine this- the individual or individuals holding a significant amount of control or ownership stakes in the company.
Keep the required information handy
After identification of the beneficial owners, take appropriate information on every person. Make sure all provided information is correct, such as names, addresses, dates of birth, and identification numbers. Verify all the information provided so as to prevent errors during the BOI reporting process.
Using the gathered information, complete the BOI report as per the IRS guidelines. The report should include all relevant details of each beneficial owner. Most jurisdictions provide a standardized form or an online portal for BOI reporting. You can use eFiling platforms like Tax1099 to file your BOI Report. All you need to do is go to Tax1099’s dashboard, select BOI Reporting, and click on file BOI.
Step 1: Enter Reporting Company Details
Here, you also have an option to request and receive your FinCEN Id for Free.
Step 2: Start Filling Information
Choose “Initial Report” for first-time reporting or “Correct/Update Prior Report” for revisions. Enter the Legal Name, TIN, Country/ Jurisdiction, Date, etc.
Step 3: Company Application(s)
Enter the required information from beneficial owners and company applicants (if applicable), such as Name, DOB, and Address.
Step 4: Review the Information
Verify all the details mentioned in the BOI form.
Step 5: Submit the Report
Put the finished report under the regulatory authority where it should be. For those companies with operations within the United States, this basically translates to reporting to the IRS. Be sure to report it before the deadline to avoid penalties.
BOI reporting is not a one-time task. Businesses must update their records regularly and report any changes in beneficial ownership. This includes new owners, changes in ownership percentages, or any other significant alterations.
Who is Required to File a BOI Report?
All types of businesses, whether it’s a corporation, limited liability company (LLC), or partnership.
BOI Reporting Requirements and Exemptions
While many businesses must comply with BOI reporting requirements, some exemptions exist. These exemptions typically apply to entities that are already subject to rigorous reporting standards under other regulatory frameworks. Businesses should be mindful of such exemptions while reviewing the reporting obligations. Some entities, may be exempt from reporting, includes the following 23 categories:
1) Securities reporting issuer
2) Governmental authority
3) Bank
4) Credit union
5) Depository institution holding company
6) Money services business
7) Broker or dealer in securities
8) Securities exchange or clearing agency
9) Other Exchange Act registered entity
10) Investment company or investment adviser
11) Venture capital fund adviser
12) Insurance company
13) State-licensed insurance producer
14) Commodity Exchange Act registered entity
15) Accounting firm
16) Public utility
17) Financial market utility
18) Pooled investment vehicle
19) Tax-exempt entity
20) Entity assisting a tax-exempt entity
21) Large operating company
22) Subsidiary of certain exempt entities
23) Inactive entity
Understanding who is required to file a BOI report is crucial to ensure compliance and avoid unnecessary reporting.
Conclusion
Every business will, therefore, be required to learn about BOI reporting requirements, get updated on the new BOI reporting requirements in 2024, and strictly adhere to the following detailed steps included herein to ensure compliance.
Such correct reporting to the BOI not only serves to ensure compliance but further contributes toward a transparent and honestly competitive business atmosphere. For more detailed information and specific guidance, businesses should consult with legal or compliance professionals familiar with the latest regulations and IRS BOI reporting requirements.
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