Understanding the FinCEN Reporting Mandate
What Small Business Owners Need to Know
The year 2024 brings new federal reporting requirements for small businesses across the United States. This mandate, overseen by the Financial Crimes Enforcement Network, commonly referred to as FinCEN, a bureau of the U.S. Department of the Treasury, is aimed at combating financial crimes by collecting crucial ownership information. In this comprehensive guide, we break down what small business owners must know about these new reporting rules.
Who Needs to Comply?
Determining Your Business’s Eligibility
The first step is to determine if your business falls under the scope of these new reporting requirements. Any company registered in the United States, whether with a Secretary of State or a similar office under state or tribal laws, or foreign companies operating in the U.S., must adhere to these regulations. This includes a wide range of business types, such as C corporations, S corporations, partnerships, and LLCs, including single-member LLCs.
However, it’s essential to note that there are exemptions for certain business categories. Sole proprietors, accounting firms, insurance companies, banks, select large businesses, and tax-exempt entities are among those exempt from these reporting requirements.
Key Reporting Deadlines
Timing Is Everything
When it comes to compliance, understanding the deadlines is crucial. The reporting deadline varies based on when your business was created or registered:
1. Created before January 1, 2024: If your company existed before the start of this year, you must file your FinCEN report, commonly known as a Beneficial Ownership Information (BOI) report, by the end of this year, specifically before January 1, 2025.
2. Created in 2024: Companies formed during this year have a 90-day window to file their FinCEN BOI report after their creation or registration.
3. Created in 2025 and beyond: For businesses established in 2025 and beyond, the BOI report must be filed within 30 days of creation or registration.
Reporting Updates and Accuracy
Keeping Information Current
It’s not a one-and-done process. After your initial BOI report is filed, you must promptly report any changes in the information previously submitted to FinCEN. Additionally, any inaccuracies discovered in previously-filed reports must be corrected within 30 days.
The Why Behind the Reporting
Protecting National Security
Understanding why the federal government is keen on this information is essential. The goal is to safeguard national security by enhancing efforts to detect corruption, money laundering operations, tax evasion, and drug trafficking organizations. This information will be shared with approved agencies, including federal and state law enforcement and federal tax authorities, to achieve these objectives.
Consequences of Noncompliance
The Costs of Ignoring the Mandate
Noncompliance with these reporting requirements can lead to hefty penalties. Businesses may be held liable for fines of up to $5,000 or more for each defined violation, including non-compliance or providing false information. Additionally, daily fines may apply for potential errors and omissions.
Where to Get Started
Registering and Learning More
When it’s time to file, be prepared not only to identify your business’s owners and beneficial owners but also to provide visual proof of each owner’s identity, such as a driver’s license or passport. For more information and to begin the reporting process, visit FinCEN’s official website.
The Final Word
Don’t Delay, But Verify
In conclusion, existing companies have until the end of 2024 to complete their BOI report, and FinCEN recently launched the reporting system in early January 2024. While it’s essential not to procrastinate, you may want to wait briefly to ensure the reporting tool is functioning correctly. Compliance with these new federal reporting requirements is vital for the financial integrity of your business and the security of the nation.
Ensure that your business stays on the right side of the law and contributes to a safer financial environment in the United States by adhering to these reporting rules. It’s not just a legal requirement; it’s a step towards a more secure financial future for all. Nerds know- contact us for help!