Postponement Urged and BBB Issues Scam Warning as Corporate Transparency Act Reporting Looms

Date: 15 Dec 2023

Citywealth

CTA Update: A major national accounting group calls for postponing reporting requirements for another year, and scammers begin to appear. Written by Alicea Castellanos, CEO of Global Taxes.

The American Institute of Certified Public Accountants (AICPA) has called on the Financial Crimes Enforcement Network (FinCEN) to extend the filing deadline for certain ownership information reports.

Starting Jan. 1, the U.S. Corporate Transparency Act (CTA) will mandate that many companies must disclose information about their “beneficial owners” to FinCEN in the U.S. Treasury Department. The CTA looks to collect Beneficial Ownership Information (BOI) to enhance financial transparency and combat money laundering and other crimes.

All domestic and foreign entities formed or registered to do business in the U.S. must file the BOI report unless they qualify as exempt. BOI reporting requires entities to identify beneficial owners and company applicants, among other information.

Generally, a beneficial owner is anyone who directly or indirectly either exercises substantial control over a company or owns or controls at least 25% of the ownership interests. An “applicant” is either the individual who directly files the document that creates the entity, or in the case of a foreign reporting company, the document that first registers the entity to do business in the United States” or “the individual who is primarily responsible for directing or controlling the filing of the relevant document by another.”

The problem, said the AICPA, is that the proposed rulemaking is “extremely limited in scope and offers relief to a limited number of filers in the first year of implementation of the new filing requirement.”

Potentially large burden

Observers have said that the new reporting will be, at least initially, onerous for many companies. FinCEN estimates there will be some 32.6 million filings, with stiff penalties for willful non-compliance: $500 per day up to $10,000, and criminal penalties up to two years’ prison.

With 2024 suddenly near, delay has been discussed. In September, FinCEN proposed to amend the BOI reporting rule to extend the filing deadline for entities created or registered during 2024 from 30 days to 90 days to give those entities additional time to understand their new obligation and gather the information.

“To achieve compliance of any policy, there needs to be equity and fairness, certainty, simplicity and transparency. The proposed rulemaking to extend the filing requirement from 30 days to 90 days for only entities created in 2024 does not embody these concepts,” the Institute said in a letter to FinCEN on Oct. 30. “We recommend that FinCEN extend the deadline to one year and expand the applicability of the deadline to include not only new entities created in 2024 but all entities created thereafter as well as entities making updates or corrections to their original filings.

“Penalties should exist for the purpose of encouraging voluntary compliance and not to punish the slightest misunderstanding of reporting requirements,” the AICPA added. “Given the comprehensive scope of filers, awareness of the BOI reporting requirement is critical, yet most businesses are in the dark about the existence of this filing.

“Without awareness, businesses, and in particular small businesses, are bound to miss the deadline for their BOI filing requirement,” the AICPA said. “FinCEN should give all businesses a fair time frame to gain awareness and a reasonable time frame to comply with the BOI requirements.”

Scam warning

Businesses may not know about the BOI requirement but scammers do, according to a recent warning by the Better Business Bureau.

The BBB said in an announcement that it’s been informed of letters from scammers looking to steal owners’ information. The letters claim to come from the “United States Business Regulations Department, Corporate Transparency Act Division, Process and Filing Center.” The letters are addressed to the recipient business and has “a notice ID number.”

Scammers combine personal information collected from data breaches with official-looking seals and watermarks to make the correspondence seem legitimate, the BBB said. 

The letter informs business owners that they have “reporting obligations under the Corporate Transparency Act” and must report ownership information to the Financial Crimes Enforcement Network. The letter asks recipients to visit a website or scan a QR code to report owners’ information.

If you receive this letter, report it to BBB Scam Tracker and disregard it, the BBB cautioned. “Verify correspondence with government agencies. If you receive a piece of mail or a call that seems suspicious, take a step back and ensure it’s legitimate before taking action. Call the government office directly, using the official phone number (and not the one on any scammer communication) to verify the communications are real.”

We’ll have more CTA and BOI updates as this new business-reporting requirement continues to develop.

Your tax specialist needs to stay on top of this and many other issues of wealth, foreign income and tax enforcement. If we can help, please let us know.

About the Author

Alicea Castellanos is the CEO and Founder of Global Taxes LLC. Alicea provides personalized U.S. tax advisory and compliance services to high-net-worth families and their advisors.

Alicea has more than 20 years of experience. Prior to forming Global Taxes, Alicea founded and oversaw operations at a boutique tax firm, worked at a prestigious global law firm and CPA firm.

Alicea specializes in U.S. tax planning and compliance for non-U.S. families with global wealth and asset protection structures which include non-U.S. trusts, estates and foundations that have a U.S. connection.

Alicea also specializes in foreign investment in U.S. real estate property, and other U.S. assets, pre-immigration tax planning, U.S. expatriation matters, U.S. persons in receipt of foreign gifts and inheritances, foreign accounts and assets compliance, offshore voluntary disclosures/tax amnesties, FATCA registration, and foreign companies wanting to do business in the U.S.

Alicea is fluent in Spanish and has a working knowledge of Portuguese.

Alicea is an active member of the Society of Trusts & Estates Practitioners (STEP), the New York State Society of Certified Public Accountants (NYSSCPAs), the American Institute of Certified Public Accountants (AICPA), the International Fiscal Association (IFA), a member of Clarkson Hyde Global, a world-wide association of accountants, auditors, tax specialists and business advisors and the Global Referral Network (GRN).

Distinctly, in 2020, Alicea was awarded with a prestigious NYSSCPA Forty Under 40 Award. She was selected as someone that has notable skills and is visibly making a difference in the accounting profession.

In 2021 and 2022, Alicea was the Gold and Silver Winner, respectively, of Citywealth’s Powerwomen Awards in the category USA – Woman of the Year – Business Growth (Boutique). In 2023, she continued her winning streak by receiving the Gold award for Company of the Year Female Leadership (Boutique), and Silver award for Accountancy Firm of the Year at the Magic Circle Awards. Furthermore, Alicea is currently listed in the Global Elite Directory 2023, which is an annual exclusive directory of the world’s elite lawyers and outstanding wealth advisors advising ultra-high net-worth clients.

View Alicea’s profile on our Leaders List here.

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