Tax preparers must advise some clients on beneficial owner information (BOI) reporting. Let’s discuss the new reporting requirements and how to guide companies through the process.
The IRS defines beneficial owners as individuals who ultimately own or control a company.
Businesses may be required to report certain information on beneficial owners to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Certain types of corporations, limited liability companies, and other similar entities must report information about their beneficial owners.
In 2021, Congress passed the Corporate Transparency Act. This law creates a new beneficial ownership information reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.
Clients may ask tax preparers if a BOI report filing is required, what information is needed to file the report, and how the data is submitted to FinCEN.
Recent changes in BOI filing requirements may confuse taxpayers. The 2025 tax law change is complex, and clients need a tax preparer’s help to understand the requirements and protect the company’s data from potential scams.
A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company (senior company officers, for example), or (2) owns or controls at least 25% of the reporting company’s ownership interests.
Company management may mistakenly believe that legal entities are beneficial owners. However, because beneficial owners must be individuals (i.e., natural persons), trusts, corporations, or other legal entities are not considered to be beneficial owners.
Company applicants may or may not be beneficial owners.
A company applicant is the individual who directly filed the creation of the first registration document for the reporting company with the Secretary of State or similar office.
All companies (domestic or foreign) that were created or registered on or after Janauary 1, 2024 must report company applicants. Those created before 2024 are exempt from reporting company applicants.
For each individual who is a company applicant, a reporting company will have to provide:
The reporting company will also provide an image of the identification document used to obtain the identifying number in item 4.
It is possible that a beneficial owner also files the registration document for the reporting company (as the company applicant).
All domestic reporting companies are required to file BOI reports under the Corporate Transparency Act unless they qualify for one of the 23 exemptions listed by FinCEN.
Foreign companies must report beneficial ownership information to FinCEN.
The 2025 FinCEN rule changes revise the definition of “reporting company” to mean only those entities formed under the law of a foreign country and that have registered to do business in any U.S. State or Tribal jurisdiction.
U.S. companies and U.S. persons are now exempt from the reporting requirements.
Reporting companies do not need to report BOI of any U.S. persons, and U.S. persons are exempt from having to provide BOI with respect to any reporting company for which they are a beneficial owner.
Some foreign-based publicly traded companies may also be exempt, due to the Securities Act of 1934 reporting requirements.
A reporting company will have to report:
For each individual who is a beneficial owner, a reporting company will have to provide:
The reporting company will also provide an image of the identification document used to obtain the identifying number in item 4.
Current rules require filing within 30 days of formation or registration, effective January 1, 2024, under 31 CFR § 1010.380.
If a business entity’s initial BOI report is accurate and no information filed in the report changes, the company does not have to submit any subsequent reports.
These types of changes require the reporting company to file an updated BOI report within 30 calendar days of the change:
BOI reports are filed electronically through a secure filing system available via FinCEN’s BOI E-Filing website.
FinCEN may impose both civil and criminal penalties for non-compliance.
Any person who fails to comply with the registration requirements may be liable for a civil penalty of up to $5,000 for each violation. Failure to comply includes the filing of false or materially incomplete information.
Each day a violation continues constitutes a separate violation. In addition, the Secretary of the Treasury may bring a civil action to enjoin the violation.
It is unlawful to do business without complying with the registration requirements. A criminal fine and/or imprisonment for up to 5 years may be imposed.
Tax preparers must keep current on BOI report requirements and communicate changes to affected clients. Preparing a compliance checklist for clients also makes reporting compliance easier.
CPAs owe a fiduciary duty to act in their client’s best interests. A CPA must secure all client data and provide guidance based on current laws and regulations. If you suspect that a third party is attempting to access client data fraudulently, immediately inform your client and ask them to contact legal counsel.
BOI-related scams are similar to other illegal attempts to gather data or induce a business to submit payments:
Encourage clients to pause before responding to these inquiries. Before taking action, they should confirm the request is legitimate.
Filing a BOI report can feel overwhelming for clients. A tax preparer can make the process easier by explaining current regulatory requirements and using professional tax software.
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