The Beneficial Ownership Information (BOI) filing requirement is relatively new, and failing to meet the deadline can lead to potential consequences, including fines. The penalties vary based on the duration of non-compliance and the circumstances, but here are the general guidelines:
Penalties for Not Filing BOI Before the Deadline
The Financial Crimes Enforcement Network (FinCEN) has outlined penalties for those who fail to file BOI information on time:
1. Initial Failure to File
- If a business does not file its BOI report by the deadline, FinCEN has the authority to impose a civil penalty of $500 per day for each day the report is late.
- This daily fine can accumulate until the required BOI information is filed or corrected.
2. Willful Failure or Intentional False Filing
- If a business willfully fails to file the BOI report, or intentionally provides false or fraudulent information, the fines can escalate significantly.
- The civil penalty for willful violations can be up to $10,000.
- Additionally, in severe cases, criminal penalties may apply, leading to potential imprisonment of up to two years.
Deadlines to Keep in Mind
- New businesses: You have 30 days from the date of registration to file your BOI report.
- Existing entities: All businesses that were already in existence before January 1, 2024, are required to file the BOI report by January 1, 2025.
- Changes in information: If there are updates or changes to the beneficial ownership, businesses are required to file an updated report within 30 days of the change.
What is BOI and Why Does It Matter?
The BOI requirement is part of the Corporate Transparency Act (CTA), which was implemented to curb illegal activities such as money laundering, tax evasion, and other financial crimes. By collecting beneficial ownership data, the government aims to increase transparency and ensure businesses are compliant with anti-money laundering standards.
Who Must File?
Most small businesses, LLCs, corporations, and other similar entities are required to file a BOI report with FinCEN. However, there are a few exceptions, including larger, publicly traded companies and regulated entities like banks. If you’re unsure whether your business needs to file, it’s wise to consult with a legal or accounting professional.
Avoiding Penalties
To avoid fines, it’s essential to:
- Understand if you are required to file the BOI report based on your business type.
- Meet the filing deadline by ensuring you have the correct beneficial ownership information.
- File timely updates if there’s a change in ownership or other relevant details.
How to File BOI
Here are some practical steps to file your BOI and avoid penalties:
- Gather Necessary Information: This includes names, addresses, dates of birth, and unique identifying numbers (like a driver’s license or passport number) for each beneficial owner.
- Register an Account with FinCEN: Filing is expected to be through an online portal managed by FinCEN, which should provide guidance on how to submit your information.
- Submit Your Information: Make sure all the details are accurate, as incorrect information could also lead to penalties.
- Track Deadlines: Keep a calendar reminder for your initial filing and any required updates.
Grace Periods and Compliance
FinCEN has indicated it may not immediately enforce penalties in the first months after the initial deadline, especially if a business is making a good faith effort to comply. However, relying on grace periods can be risky, and timely compliance is the safest approach.
What if I Miss the Deadline?
If you realize you’ve missed the deadline:
- Act Quickly: The sooner you file, the less the accumulated daily fines will be.
- Contact FinCEN: If you have a reasonable explanation for missing the deadline, it’s worth contacting FinCEN. They may be more lenient if they believe non-compliance was not intentional.
- Seek Professional Help: An accountant or legal advisor can help you navigate the situation and minimize potential fines.
Steps to Ensure Compliance Going Forward
- Create a Checklist: Have a compliance checklist to ensure you’ve gathered all necessary information.
- Use Reminders: Set up automated reminders for the initial filing and any updates to avoid missing deadlines.
- Document Everything: Keep records of all communications and filings related to BOI. This will be helpful in case of any disputes or questions from FinCEN.
- Consult a Professional: If you’re unsure about the process or want to avoid potential pitfalls, consult with a tax advisor or compliance expert.
Final Thoughts
The BOI filing is a new requirement, and while it may seem like just another compliance task, the penalties for non-compliance are significant and can add up quickly. It’s best to prioritize meeting the deadlines and staying on top of any changes to avoid fines that could affect your business’s financial health.
Staying compliant not only saves your business from potential fines but also contributes to a safer and more transparent financial environment.