Warning: BOI Hazard

By Janet C. Hagy, CPA-Austin

 

Beneficial ownership information (BOI) reporting to FinCEN is unlike other compliance reporting that accountants are permitted to prepare for our clients. For the reasons discussed below, TXCPA and AICPA have issued extensive information on their websites. (See TXCPA BOI resources, AICPA BOI resources.) FinCEN has also published guides, forms and instructions for BOI reporting.

 

The primary concern for CPAs is whether preparation of the new FinCEN BOI form constitutes the practice of law. Accountants have been specifically granted authority to prepare other FinCEN forms, for example Form 114, commonly referred to as FBAR, because the filing of this form is under the jurisdiction of the IRS. BOI reports are filed directly with FinCEN. For this reason, many professional liability insurance carriers are advising CPAs that they are not covering preparation or consulting services related to BOI reporting. 

 

For companies created or registered after Jan. 1, 2024, the filing deadline is 90 days after creation or registration. For companies existing before Jan. 1, 2024, the filing deadline is Jan. 1, 2025, to file an initial report. For companies created on or after Jan. 1, 2025, the filing deadline is 30 days after creation or registration. Updates to previously reported information are due within 30 days of the change. These deadlines are tight and do not correspond to the normal cycle of business most CPAs experience with their clients.  

 

The penalties for failure to timely file initial and ownership change reports are astounding. Willful failure to complete or update BOI forms can cause a company or its senior officers to be penalized up to $591 per day with possible criminal penalties including imprisonment of up to two years and/or a fine of up to $10,000.

 

Companies that typically stand in as registered agents in other states like CT Corporation are offering to prepare BOI reports for their customers. Fortunately, we have an option to refer our clients to these services.

 

Although the summary of exemptions from BOI reporting states that accounting firms are exempt, only accounting firms registered in accordance with Section 102 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7212) (PCBOA) are exempt.

 

Whether to advise your clients about the reporting requirement or accept engagements to prepare forms, and what to include or not include in engagement letters, are crucial topics to discuss with your attorney and professional liability insurance carrier as soon as possible.

 

Beneficial Ownership Information Reporting FAQ| FinCEN.gov

Comments

[Janet Hagy]

Hi, Larry.

You are correct. Sole proprietorships are generally not required to file a BOI report. See C.6. in the FAQs (https://www.fincen.gov/boi-faqs#C_2) for the limited exceptions to this exemption for sole proprietorships. Disregarded LLCs are not exempt and are subject to BOI reporting just as they are subject to FBAR reporting (https://www.fincen.gov/who-united-states-person).
Accounting firms registered in accordance with Section 102 of the Sarbanes-Oxley Act of 2002 (U.S.C. 7212) are exempt. https://www.ecfr.gov/current/title-31/part-1010/section-1010.380#p-1010.380(c)(2)(xv)
Large reporting entities (defined in the final rules 31 CFR Sec. 1010.380 (c)(2)(xxi) https://www.ecfr.gov/current/title-31/part-1010/section-1010.380#p-1010.380(c)(2)(xxi)) with more than 20 US based full-time employees, that have a US physical office, and have US source gross receipts in excess of $5M for the previous year are also exempt from filing. So, it appears that an accounting firm may also qualify for exemption from filing BOI reports under the large operating group filing exemption even if it is not registered under the Sarbanes-Oxley Act of 2002.

Sincerely,
Janet

[Larry Lentz]

So the only accounting firms that are exempt from BOI reporting are those that are already registered in accordance with Section 102 of the Sarbanes-Oxley Act of 2002 and sole proprietor not operating under a LLC that is a disregarded entity. Is this right?