Navigating the New FinCEN Requirements: Essential Insights for Business Owners
By Allan J Rolnick,
December 2023
As we approach the new year, there’s a significant update that every business owner should be aware of. Starting January 1, 2024, the Corporate Transparency Act (CTA) kicks in, bringing with it new federal filing obligations for most corporations, LLCs, and limited partnerships. Here’s what you need to know to stay compliant and avoid hefty penalties.
Understanding the BOI Report
By December 31, 2024, all non-exempt businesses must submit a Beneficial Owner Information (BOI) report to FinCEN. This report requires detailed information about your business’s beneficial owners — those who either own a significant portion of the company or have substantial control over it. You’ll need to provide names, birth dates, addresses, and identification details for each owner.
FinCEN’s new BOSS (Beneficial Ownership Secure System) database will house this information, aiding law enforcement in preventing illegal activities like money laundering. However, this information won’t be public.
Who’s Exempt?
Not all businesses are subject to the CTA. Larger companies with more than 20 employees and over $5 million in revenue, as well as certain regulated entities like banks and non-profits, are exempt. Sole proprietors and general partnerships generally don’t need to worry about this, but it does apply to single-member LLCs.
Updating Your BOI Report
Once filed, your initial BOI report doesn’t expire, but you must update FinCEN within 30 days of any changes. Failing to comply can lead to severe penalties, including monetary fines and prison time.
Beating the Net Investment Income Tax
For those grappling with the net investment income tax (NIIT), understanding its triggers — your net investment income or your MAGI — is crucial. Strategies like investing in tax-exempt municipal bonds, donating appreciated assets, and utilizing Section 1031 exchanges can help reduce your NIIT burden.
Tax Tips for Rental Property Start-Ups
If you’re venturing into the rental property market, be mindful of your start-up expenses. While the cost of acquiring a property isn’t considered a start-up expense, investigatory and pre-opening costs are. You can deduct up to $5,000 of these expenses in your first year and amortize the rest over 180 months.
Remember, the IRS limits these deductions to activities within your existing rental business’s geographic area. Expanding into a new location? That’s a new start-up venture in the eyes of the tax law.
Final Thoughts
Staying informed and prepared is key to navigating these new regulations and tax strategies. As always, consult with a tax professional to ensure you’re making the best choices for your business’s unique situation.
