Barring a federal court intervention, the filing deadline for all businesses created prior to 2024 that are required to file a beneficial ownership information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) is Jan. 1, 2025. While an Arkansas federal judge has found the Corporate Transparency Act (CTA) to be unconstitutional and barred the enforcement of provisions requiring the filing of BOI reports, that decision only bars enforcement against members of the National Small Business Association, which filed the lawsuit.

The Arkansas decision has been appealed to the U.S. Court of Appeals for the 11th Circuit. Some have expected that the appeals court would find that FinCEN has no power to enforce the CTA’s BOI provisions before the reports are due (or at least postpone reporting), but the court has given no indication that it will act before the deadline. As a result, unless they have otherwise been exempted from the reporting requirements by the Arkansas court decision, all businesses that are required to file a report under the CTA should plan on doing do so by Jan. 1, 2025. The civil penalty for reporting violations can be as high as $591 per day.

Who must file a report?

The CTA mandates that BOI reports must be filed with FinCEN by entities created by filing with a secretary of state or similar office in the U.S. This includes S corporations, C corporations and limited liability companies. Sole proprietorships and general partnerships are usually not required to file BOI reports unless they were created by filing a document with the secretary of state or similar office. Foreign companies formed under the laws of other countries must file if they registered to do business in the U.S. by filing with a secretary of state or similar office.

All reporting businesses that were created or registered to do business prior to Jan. 1, 2024, must file a BOI report with FinCEN by Jan. 1, 2025. After the initial report has been filed, there is no annual reporting requirement. Reporting companies need only file additional BOI reports when the included information needs to be updated or corrected.

Companies that were created or registered during 2024 must file their initial BOI report with FinCEN within 90 calendar days of receiving actual or public notice that their registration is effective. Those reporting companies that were created or registered on or after Jan. 1, 2025, will have 30 days to file their report after receiving actual or public notice that their creation or registration is effective.

If you have any questions about which companies are required to file a report, FinCEN maintains an extensive list of FAQs that answer questions related to the filing requirements, including the situations in which entities like homeowners’ associations, nonprofits and business trusts must file.

What must be reported?

Companies that are subject to the CTA’s BOI reporting requirements must identify their beneficial owners whose information must be reported. Generally, reporting companies must provide the following information about their beneficial owner:

• Name
• Date of birth
• Address
• Identifying number and issuer from a U.S. driver’s license, U.S. passport or an identification document issued by a state, local government or Native American tribe. If the beneficial owner has none of those documents, an unexpired foreign passport may be used.

The reporting company must also provide information about itself, such as its name and address.

Who is a beneficial owner?

A beneficial owner must be an individual. The beneficial owner who must be named in a BOI report is a person who either directly or indirectly:

• Exercises substantial control over the reporting company
• Owners or controls at least 25% of the reporting company’s ownership interests

Legal entities, such as trusts or corporations, can’t be beneficial owners. However, in specific circumstances, information about an entity may be reported in lieu of information about the beneficial owner.

Beware of BOI reporting scams

FinCEN has issued an alert to notify the public that it has received reports of fraudulent attempts to solicit information from individuals and entities that may be subject to BOI reporting requirements. Reported scams include:

• Correspondence seeking payment. There are no fees for filing a BOI report directly with FinCEN and the agency does not send out correspondence requesting payment for filing a report.
• Emails or letters asking the recipient to click on a URL or scan a QR code. FinCEN is warning individuals that they should not click on any suspicious links or attachments on websites or unsolicited mailings.
• Correspondence referencing “Form 4022” or an important compliance notice. FinCEN does not have a Form 4022, and any forms included in this correspondence are fraudulent and should not be completed.
• Correspondence or other documents that reference the “U.S. Business Regulations Dept.” There is no government entity with that name.

Looking for more information on BOI reporting?

If you still have questions about BOI reporting, check out our on-demand webinar on the topic. The webinar is free to NATP’s premium members.

Most individuals who get involved with publicly traded partnerships (PTPs) do so because the investment was recommended by a broker. You, as the tax pro, need to know how to correctly report this information.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.   

Q: Should a person keep their Schedule K-1 each year to track adjustments?

A: There is no mandatory requirement, but yes, it’s a good way to track basis.

Q: Is the cumulative basis provided on the Schedule K-1?

A: It may be, but the taxpayer shouldn’t rely on it as accurate. The actual basis may have other adjustments that the partnership doesn’t account for.

Q: How can a taxpayer determine a good starting point for basis if they lack prior year information?

A: Unfortunately, without a starting point, it’s difficult. The taxpayer should try to obtain prior year information from the PTP or broker. PTPs often provide prior year details online. Another option is to request IRS transcripts.

Q: Can a taxpayer deduct part of the suspended loss if they don’t sell all of their units?

A: No. Due to passive activity limitations, a taxpayer cannot deduct any part of their suspended losses until they sell their entire PTP interest.

To learn more about selling a publicly traded partnership, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.

Question: Robert and Suzanne were married. Robert is aged 71 and Suzanne was 74 when she died in 2023 following a long-term illness. They each had their own traditional individual retirement arrangements (IRAs), and Robert inherited Suzanne’s IRA as the sole designated beneficiary. Prior to her death, Suzanne started taking her required minimum distributions (RMDs) from her IRA account. How should Robert treat this inherited account?

Answer: Robert may treat Suzanne’s IRA account in one of two ways: (1) withdraw funds as if it was his own (2) withdraw funds as a beneficiary based on either of their life expectancies.

To treat the inherited IRA as if it were his own, Robert can roll over the inherited IRA assets into his own eligible retirement plan, including his IRA, and treat those assets as his own [§ 402(c)(8)(B)]. Since he is over the age of 59½, he can withdraw these assets anytime without a penalty. For RMD purposes, since Robert has not reached age 73, this option enables him to delay taking RMDs until he reaches age 73 rather than continuing Suzzane’s RMDs.

Since he is the sole designated beneficiary of the account, Robert has another option. He can remove the RMDs from Suzanne’ account based on his life expectancy. Since Suzanne died after the year 2020 and her required beginning date (RBD), the RMD is calculated based on the longer of Robert’s life expectancy or the distribution method used at her date of death.

Under the SECURE 2.0 Act, beginning in 2023, the RBD is April 1 of the year following the year in which the account owner reached age 73 for individuals who turn 72 after Dec. 31, 2022. It is age 75 for individuals who reach age 74 after Dec. 31, 2032.

The surviving spouse must withdraw funds over their life using Table 1 - Single Life Expectancy, Appendix B, Publication 590-B, based on their age at the end of the applicable distribution calendar year and recalculated annually. Or, if longer, they can use the deceased owner’s single life expectancy calculated in the year of death and reduced by one each year thereafter. (For aged 71, life expectancy factor as 18.0, for 2024, then use factor of 17.0).