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There is a new information report required for businesses called the Beneficial Ownership Information (BOI) Report. This post contains general information applicable to small business owners to notify them and help them understand this new reporting requirement. Filing the report online on the US Treasury’s website is free, easy, and straightforward (it should take less than 10 minutes to complete), but if you require any assistance, please contact me.

Why do businesses need to file this?

To comply with federal law and avoid significant penalties, businesses are required to file this report with the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Treasury. According to the FinCEN’s FAQ on the BOI Report, the reports will be used to “make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.”

What is Reported?

1. The business’ name, address, state of formation, and federal tax ID number.
2. Each beneficial owner’s name, date of birth, address, driver’s license or other ID number, and a photo of the ID. This applies to anyone with 25% or greater ownership or substantial control over the business.

Reporting Frequency:

Beneficial ownership information reporting is not an annual requirement. Unless a company needs to update or correct information, a report only needs to be submitted once.

Note that a change in beneficial ownership, or any relevant beneficial ownership information, such as a change to a reporting business’ address or an owner’s address requires an updated report. Similarly, if the beneficial owner’s driver’s license or other ID number changes, it requires updating the report.

Who Has to Report?

1. Corporations,
2. Limited Liability Companies, and
3. Other entities created by filing a document with a secretary of state,

Unless an exception applies…

Who is Exempt From Reporting?

1. Sole proprietorships (note that LLCs taxed as sole proprietors are required to file the report).
2. A business that meets an exemption on PDF page 11 of the Small Entity Compliance Guide. The next 10 pages of the linked guide provide clarifying details on who qualifies for the exemption.

How to Report:

File for free online at: https://boiefiling.fincen.gov/

It’s easy and straightforward to file. As indicated above, it requests basic information about the business and beneficial owners and should take less than 10 minutes.

Due Dates:

If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025 to file a BOI report.

If your company is created or registered in 2024, you must file a BOI report within 90 calendar days after receiving actual or public notice that your company’s creation or registration is effective, whichever is earlier.

If your company is created or registered on or after January 1, 2025, you must file a BOI report within 30 calendar days after receiving actual or public notice that its creation or registration is effective.

Any updates or corrections to beneficial ownership information that you previously filed with FinCEN must be submitted within 30 days.

Additional Resources:

1. Brochure on the BOI Report from the US Treasury:

https://fincen.gov/sites/default/files/shared/BOI%20Informational%20Brochure%20508C.pdf

2. FAQ on the BOI Report from the US Treasury:

https://www.fincen.gov/boi-faqs

3. Small Entity Compliance Guide on the BOI Report from the US Treasury:

https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf

As a reminder, estimated tax payments for the 4th quarter of 2023 are due January 16, 2024 (typically Jan 15, but pushed back due to the holiday).

Set Up Annual Recurring Calendar Reminders in Advance of these Federal Due Dates:

April 15 – First quarter estimated tax payments are due

June 15 – Second quarter estimated tax payments are due

September 15 – Third quarter estimated tax payments are due

January 15 – Fourth quarter estimated tax payments are due (15 days after year-end)

How to Pay:

I have instructions for making personal estimated tax payments for federal and states on my website here: https://jsuttoncpa.com/estimated-tax-payments/

Unscrupulous individuals search public business listings to find business owners to scam. They will send you letters that, at first glance, appear to be official forms from your state, but are actually solicitations. Often these scams include offering state issued documents you may not need, including various certificates, for fees that are marked up significantly from what the state would charge you.

The secret to identifying what is legitimate and what is a scam?

Read the letter.

The letters will often include text saying that it is a solicitation from a private, for-profit business that is not affiliated with any state agency.

Another give away is they want to you make a check payable to an entity other than a state agency that you are familiar with. They will choose a name for their business that is vague and generic (Example: Corporate Processing Service) and hope you don’t recognize that it’s not a state agency.

Not sure if a letter you received is a scam?

Try searching online for the supposed document they’re offering as well as other information on the letter. Is the document something your state offers at a lower fee? Is it a document you actually need? Often states are aware of these scams and will include warnings on their websites to help you tell legitimate communications from the state apart from scams.

Before the end of the year, it’s a good idea to review your pay stubs to make sure everything appears to be accurate. It’s always easier to fix things before year-end payroll reports are filed and W-2 forms are issued. There’s still time left in the year to make changes and avoid issues.

Some common areas to review include:

-Make sure your address is up-to-date

-Make sure your employer is withholding state and local taxes for the correct jurisdictions

-See if you’re on track to max-out retirement plan contributions and other benefits your employer offers

-Ensure wage & withholding amounts are accurate and there aren’t any glaring errors

Contact me to discuss this topic in further detail

Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.

All taxpayers are required to pay taxes throughout the calendar year to avoid paying Underpayment Penalties.

Most employees have income taxes withheld from their wages to help pay in these taxes throughout the year, but depending on your overall tax situation, these payments may not be sufficient to avoid the underpayment penalty.

For self-employed individuals, if you’re not paid wages from your business, you don’t have the option of having income tax withheld from your income. Instead, you pay in your taxes by making quarterly estimated tax payments.

Step-by-step instructions for making individual federal and most state quarterly estimated tax payments can be found on my website here: How to Make Quarterly Estimated Tax Payments

There are two major guidelines to help determine how much you should pay in throughout the year. To avoid penalties, you should pay the lessor of:

Pay at least 90% of your current year’s tax liability

This requires you to know or estimate your current year tax liability. You can work with your accountant to determine how much your current year’s tax liability will be and/or use your prior year’s taxes as a guide.

Safe Harbor

Using this method you would determine how much you’re required to pay in for the current year using amounts from your prior year’s taxes. Depending on your income and filing status, you would pay either 100% or 110% of your prior year’s total tax amount towards your current year’s tax liability. This rule is common referred to as Safe Harbor.

Any remaining tax is due with your tax return by April 15th. An extension to file your tax return does not extend the due date for paying any tax due with your return.

Contact me to discuss this topic in further detail

Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.

A major tax benefit available to self-employed individuals and business owners are retirement plan contributions. Contributions to retirement plans can save a significant amount of tax and allow you to save and invest for your retirement. Employer retirement plans have significantly higher contribution limits than traditional and Roth IRA accounts.

If the business has other full-time employees, the owners’ retirement plan contributions may be limited by the extent other employees participate in the retirement plan. Additionally, employer retirement plan contributions must be made on behalf of all eligible employees, not just the owners.

Common employer retirement plan options include 401k plans and SEP IRA accounts.

The amount and timing of contributions varies depending on a number of factors including how the business is taxed, wages to owners and other employees, and the net income of the business.

Contact me to discuss this topic in further detail

Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.

For the 2021 tax year, taxpayers are able to deduct up to $300 of cash charitable donations ($600 if married filing jointly) even when taking the standard deduction.

Prior to 2020, taxpayers were only able to deduct charitable donations if they itemized their deductions. As a result of the increased standard deduction amounts, fewer taxpayers benefit from itemizing their deductions and are less incentivized to contribute to charities. To help incentivize taxpayers, even while taking the standard deduction you’re able to deduct a limited amount of cash charitable donations for the 2020 and 2021 tax years.

Cash charitable donations include donations via cash, check, credit card, or electronic payment methods to qualified charities.

Additional Reading: IRS Newsroom Release

Contact me to discuss this topic in further detail

Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.

If you have a profitable business, it likely makes sense to work with an accountant for year-end tax planning. Your accountant can provide an estimate of the bottom-line numbers for your current year’s taxes before year-end to avoid surprises, plan accordingly, and discuss tax saving opportunities.

Some large end-of-year purchases and deductions that business owners often consider to help minimize their tax liabilities include:

–Vehicle Purchases – SUVs and trucks with a gross vehicle weight over 6,000 pounds may be deducted in full in the year of purchase, to the extent the vehicles are used for business based on mileage.

–Retirement Plan Contributions – view my post on retirement plans.

–Computer and other Equipment Purchases

–Furniture Purchases for a home office or office outside of your home.

Your accountant can model out these purchases and deductions in your business to help determine the tax savings to be realized from these types of investments.

With the exception of retirement plan contributions, these types of purchases and investments only make sense when you’re considering these investments in your business as the tax savings from these investments does not outweigh the cash required to make these purchases.

Contact me to discuss this topic in further detail

Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.