By Janet Hagy, CPA-Austin
If you have not heard about the Corporate Transparency Act and FinCEN 2024 reporting requirements for compliance, buckle up and read the BOI Small Business Compliance Guide or other resources at this website.
Due by Jan. 1, 2025, entities that existed prior to Jan. 1, 2024, will be required to file ownership information reports showing details of who or what entity owns the business entity. In addition, any changes in ownership during the year will need to be updated within 30 days after the ownership change.
Entities created after Dec. 31, 2023, will need to file their initial report within 90 days after formation during 2024. Beginning in 2025, the initial report will be due within 30 days.
For all entities, any changes in previously reported information, including corrections or actual ownership changes, must be filed within 30 days. There are significant penalties for failure to timely file as required. Fortunately, this is not an annual filing. After the initial report is filed, only changes or corrections are required to be reported.
Since beneficial ownership determination seems like a legal matter, one might assume that a CPA could be cited for practicing law if responsibility for filing these reports is accepted. But based on B.7 of FinCEN FAQs, either an attorney or a CPA can assist a client in preparing the ownership report. When considering whether to offer this service, CPAs should consult their professional liability insurance carrier.
Since CPAs generally have more ongoing annual engagements with clients for tax, audit or accounting projects, clients may see the reporting burden as a task for their accountant. This raises serious liability issues for the accountant for a failure to timely report changes or corrections as required. Many clients only meet with their accountant for annual tax preparation and report entity changes at that time. Meeting the 30-day rules will be challenging. I do not foresee legal or accounting professionals contacting all business entity clients every 30 days to see if ownership changes have occurred. The responsibility to prepare the filing or to timely notify the professional of any changes must be assumed by the client.
Therefore, it is imperative that CPAs educate their clients about this new reporting requirement and whether the firm will or will not prepare the reporting forms. FinCEN does not seem inclined to further postpone these filing requirements. Engagement letter language to protect the CPA from either perceived responsibility for filing the forms or from any penalties for late notice about changes needs to be included in the 2024 engagement letter. AICPA Tax Section members have access to sample engagement letter language regarding this issue (page 3) or consult your attorney for assistance in drafting appropriate engagement letter language.