Navigating the Corporate Transparency Act: Mastering BOI Compliance Before the Deadline
May 10, 2024
FileForms
Discover the critical intersections of business compliance and the evolving Corporate Transparency Act as I, Frank Tuminello, team up with Eric Green from Tax Rep Network. We navigate the tumultuous legal seas that businesses are currently facing, including a case from Alabama that could reshape the landscape of corporate reporting. As the clock ticks towards the December 31st BOI filing deadline, we dissect the urgent steps businesses need to take to avoid hefty penalties. Eric, with his unparalleled expertise, brings clarity to the complex scenarios unfolding from the DOJ and FinCEN's latest moves, providing a beacon for entities grappling with these new regulatory demands.
Transform the headache of Beneficial Ownership Information reporting into a strategic advantage with our latest episode. We peel back the layers of our innovative referral program designed for accountants, CPAs, and legal professionals that turns a challenging process into a lucrative one. Through our discussion, Eric and I reveal the benefits of partnering with a third-party e-filer, with direct integration to FinCEN through their secure API, to streamline this imperative task. Our episode doesn't just stop at compliance; it extends into the realm of proactive client management with tools that keep you ahead of the 30-day update requirement. Tune in for essential insights and take advantage of the resources we've shared to secure your business's future in an ever-changing regulatory environment.
Beneficial Ownership Information Reporting is Now Required in the US File your BOI Report quickly and easily with our state-of-the-art software. Designed by licensed attorneys and CPAs, FileForms provides security you can rely on, unmatched support, and solutions tailored to your needs.
Discover the critical intersections of business compliance and the evolving Corporate Transparency Act as I, Frank Tuminello, team up with Eric Green from Tax Rep Network. We navigate the tumultuous legal seas that businesses are currently facing, including a case from Alabama that could reshape the landscape of corporate reporting. As the clock ticks towards the December 31st BOI filing deadline, we dissect the urgent steps businesses need to take to avoid hefty penalties. Eric, with his unparalleled expertise, brings clarity to the complex scenarios unfolding from the DOJ and FinCEN's latest moves, providing a beacon for entities grappling with these new regulatory demands.
Transform the headache of Beneficial Ownership Information reporting into a strategic advantage with our latest episode. We peel back the layers of our innovative referral program designed for accountants, CPAs, and legal professionals that turns a challenging process into a lucrative one. Through our discussion, Eric and I reveal the benefits of partnering with a third-party e-filer, with direct integration to FinCEN through their secure API, to streamline this imperative task. Our episode doesn't just stop at compliance; it extends into the realm of proactive client management with tools that keep you ahead of the 30-day update requirement. Tune in for essential insights and take advantage of the resources we've shared to secure your business's future in an ever-changing regulatory environment.
Beneficial Ownership Information Reporting is Now Required in the US File your BOI Report quickly and easily with our state-of-the-art software. Designed by licensed attorneys and CPAs, FileForms provides security you can rely on, unmatched support, and solutions tailored to your needs.
Welcome to the Fileforms Business Compliance Podcast, where we help business owners and their professional advisors stay on track and aware of all their compliance needs while running a business in the United States. I'm your host, frank Tuminello, ceo and co-founder of Fileforms, an industry-leading government-approved software compliance platform used by thousands of businesses and their professional service providers nationwide. Thank you for joining and let's get started with this week's episode. Welcome to this week's episode of the Fileforms Business Compliance Podcast. It's another exciting week in the world of business compliance.
Speaker 1:
On this week's episode, we share a recent discussion where we sit down with Eric Green of Tax Rep Network to discuss the evolving DOI reporting and CTA compliance landscape. For background, eric is an attorney in the state of Connecticut and founder of Tax Rep Network, which is an organization focused on training and education for accountants, cpas and tax professionals. On training and education for accountants, cpas and tax professionals, trn helps its members to become a certified tax representation consultant and improve their practice by taking it to the next level with tax revolution services. Fileforms is a proud partner of Tax Rep Network, who works with thousands of tax professionals nationwide. As a reminder, join Eric and I again on May 16th at 1 pm for our next webinar where we will continue the discussion around file forms and how we can provide your firm a BOI reporting solution this filing season. Thank you for joining and let's jump right in.
Speaker 2:
Hey everyone, thank you for joining us for this week's Tax Rep Network podcast. I'm Eric Green. Joining us again from Fileforms is Frank Tumalio we. I think this is an important topic, frank, and there's a lot going on. But the Corporate Transparency Act I know everyone who's listening. We've talked to you about Fileforms. Frank's been on before. I think Kenny was on when we were talking about the ERC, but you know there's been a case out of Alabama questioning the constitutionality of it, and so I've been getting bombarded with well, eric, what do I do?
Speaker 2:
So, both from my own clients, but from accountants who their clients, have read about this or they're hearing it on the Internet. Now, what do I have to do? Or should I do anything? So we have a lot to cover, but certainly, yeah, no. So, frank, do you want to just give everyone a quick 30 seconds on this case out of Alabama?
Speaker 1:
Yeah, certainly, and it's good to be speaking with everyone today. Alabama yeah, certainly, and it's good to be speaking with everyone today. My name is Frank Tuminello. I'm CEO and co-founder of FileForms. We're a beneficial ownership information reporting solution. We work with accountants, lawyers, family offices, real estate professionals and directly with small businesses to efficiently file the beneficial ownership information reports, the Beneficial Ownership Information Reports. Many folks should certainly have this top of mind because it is new.
Speaker 1:
Not a lot of information until recently has really come out on the law in general. But to Eric's point, as of recently there's been some uh in the state of Alabama that ultimately uh led uh based off of a summary judgment that the CTA uh could be deemed unconstitutional. So, um, you know FinCEN uh, who is the regulator of of this new law uh, and we'll be collecting the beneficial ownership information reports. Uh, you know they were very quick to issue not only a response the Monday after the ruling that was, on Friday March 1st but ultimately the DOJ was quick to send a notice of appeals that following Monday, I believe it was and ultimately they said this was a narrow judgment.
Speaker 1:
The plaintiff, which was the NSBA, which is a nonprofit Ohio-based business association they have 65,000 members. It's believed about 40,000 of those members are actually reporting companies. So the plaintiffs have been deemed exempt for the time being, until the case runs its official course and ultimately FinCEN believes everyone else is filing as usual. So, eric, as you recall, that's 30 to 40 million businesses in the United States. It's interesting as well. There's probably two to three times as many corporate tax returns I'm sorry, two to three times more BOI reports will be filed this year than corporate tax returns. So it just kind of gives you the breadth of how many folks and businesses will be impacted turns. So it just kind of gives you the breadth of how many folks and businesses will be impacted, but certainly around these newer entities that formed in 2024,.
Speaker 2:
those are the ones that really need to be paying attention right now.
Speaker 2:
Yeah, and my take on it for the folks listening first of all, this was a summary judgment motion and I can tell you right now the appeals court is going to really look at it with what we refer to as a jaundiced eye, because they don't like there's a prejudice against a judge just making a decision without hearing everything. So motion for summary judgment is pretty extreme. I expect it'll get remanded, is my thought is they're going to overturn it and remand it back. You've got to have the whole hearing. You can't just make a motion, summary judgment. Even if it is upheld, it will go to the Supreme Court because it's too big. And what I really think ultimately is if the law needs to get tweaked, I expect Congress will move pretty quickly to tweak it. I don't think they're going to let this go.
Speaker 2:
But what I've been telling my clients and there are two different aspects of this there's everyone who was set up prior to 2024.
Speaker 2:
Those entities have to get the BOI filings done by December 31st. So what my clients who've been emailing saying because we sent out, of course, an alert, we got to deal with this what we've been telling them is look, if you really want to kind of wait and see, that's fine, but by October 1st, by fourth quarter. I wouldn't wait much longer. The downside the penalties for not doing this are too severe and it's not like you're paying a tax with this, it's just providing the information. So I'm inclined myself and what we've been telling our clients is, if you want to wait, by the way we're filing, but if you want to really wait, let's wait till October 1st, but I wouldn't go much past that. Let's wait till October 1st, but I wouldn't go much past that. Anyone who sets up an entity Frank and we should talk about this in 2024, as a reminder to everyone, they have 90 days to get this filed and Frank. The penalty is, I think what?
Speaker 1:
$7,500 for failing. It's $591 per day. $591 per day, so if you set up an entity on January 1 of this year, your 90 day window expired effectively at the first of April and ultimately, you'd be 15 days into your penalties here at April 15. So, yeah, that math does map out to about 7,500 bucks. Um, which that's? That's not a drop in the bucket for, uh, especially for a newly formed entity. Right, we're talking about a business at its most, you know, purest form of of infancy. Uh, yeah, every dollar counts at that stage. So listen, uh, I can tell you right now new llc's.
Speaker 2:
You know when, um when, just, and for those folks listening in new york, you know, here we'll set up a new llc, like you know, with a basic operating agreement. You know, 1500, 2 000, 2500 bucks, depending if it's multi-member. It gets a little more complicated because now we're negotiating stuff In New York. There's a $2,400 publication fee on top of that, clients go nuts about that Now.
Speaker 1:
so now we're talking four grand.
Speaker 2:
My client's not going to be happy if they get whacked another 7,500 for their new entity because we didn't tell them. Oh, by the way, there's this form that's got to be filed within 90 days. So I think if, for those of you listening, if you have clients that set up new entities, I would not hold out in the hopes that this law gets you know, becomes unconstitutional, I would get that filed because yeah, I mean becomes unconstitutional.
Speaker 1:
I would get that filed. Yeah, I mean, at a certain point, it's harder to run away from it than to just do the work. That's what we'd guide folks. And, granted, those are the new formations, and I think a lot of folks might be surprised by this stat, but there's about 500,000 new formations every single month. So we're talking about big chunks of businesses that probably are not reading the law daily. They're envisioning what their business strategy is going to be, they're forming the business and, ultimately, leaning on their advisors to get them all set up. So it's the last thing that's going to be on folks' mind when they're just starting off their business, and I think a lot of folks don't really appreciate that. Really, since COVID, there has been a huge uptick in the amount of folks starting businesses. It's it's. 2023 was a record breaking year. There were 5.5 million businesses created in 2023.
Speaker 2:
Well, I and I mean there's a lot to unpack there. I mean, I think first of all. So I was at a talk years ago at NYU and it was the future state of the digital workforce and they were predicting that the world would become more like LinkedIn. In other words, this day and age, I don't want to take commercial space, I don't want to pay for it, I don't want the benefits and the overhead. So you know what? I'm going to set my IRS rep practice up. But I don't need the old days of a pyramid right, all the staff with the money, why I can go out and say you know what? Hey, frank, can you come work on this project with me? Frank, you're your own business. You come in, I can pull together my dream team. We do the project and everyone's off on their own. I'm not paying for space benefits overtime, all that other stuff. So the prediction is more and more where they were going with this is that people are going to have to become their own business. I'm going to do my own marketing, my own books and records. I'm going to be you know what is it? A cook, chef, you know, bottle washer and janitor or whatever. So, yeah, I'm not surprised more and more entities are being formed as people start doing more stuff on their own side hustles, whatever.
Speaker 2:
The other thing I've been telling folks is on the accounting side. If you have folks who are making money and they're a sole proprietor, set up that entity, convert to an S-corp. I do a lot with RC reports. You can run the report beforehand and really save your client a lot of money, which is all great, and I know a lot of accountants are like I can do this. We don't need to go get a lawyer, it's a single member LLC, I'll do it myself. Now we're getting into dangerous need to go get a lawyer. It's a single member LLC, I'll do it myself. Now we're getting into dangerous waters because of this BOI. There's no lawyer involved to say oh, by the way, we got to do this. There are a lot of accountants who are aware the malpractice carriers will not cover this. They view it as legal work, which is why to bring this full circle why I've been so hype on file forms.
Speaker 2:
The accountant said call me are members I'm like go to file forms. They have attorneys on staff. Send your client over there, Let them do it, Because one you can't charge enough, honestly, I think, to make a living at this. Two, it's one more headache For the accountants. They're better off focusing on what they do best making sure the client is covered and making sure it gets done right. Again, we're using file forms and we are lawyers, so if that gives you any indication, this is not going to become like a whole industry for us. It's something we need to do for our clients, but I'm sending them over there, which brings me to the next thing, Frank, how do the accountants work with you guys? I mean, I know we covered it. If you want to go, listen to the earlier podcast, but if a CPA contacts you, look, I've got two new entities. Help.
Speaker 1:
Yeah, certainly. We offer a variety of solutions for accountants, cpas, legal professionals and the like. Ultimately, everyone's approaching BOI a little bit differently. Like we said, it's new and it's complex. People have different levels of comfortability with how they want to approach this. Some view it as an amazing revenue opportunity. Some folks don't want to touch it with a 10-foot pole, so we provide solutions for both.
Speaker 1:
One solution that we do provide and I'll lead with it because it's our easiest solution to get started with is our referral program. Our referral program allows you to monetize the BOI opportunity, but without assuming any of the risk whatsoever. So effectively, what file forms can do is provide you with the ability to completely outsource BOI and collect, if you're interested, a revenue share on the work that we do and get that for referring us, the clients. So we can white label a landing page that will allow you to have a trusted source to direct your clients, ultimately seeing your logo next to our logo, or even just your logo or no logo, depending if you're in the other camp of wanting very little to do with VOI reporting. But that link that we provide our accounting partners effectively allows them to spread education, spread awareness and ultimately provide a solution so that clients can get this work out of the way. I'm not sure if folks on the call or on the podcast are aware, but FinCEN estimates that a typical BOI report coming in cold will take two to three hours per report. So that's quite a bit of time for a business owner. It's certainly a lot of time for a legal professional who may be charging hourly. So to take that two to three hours down to 10 minutes, which is what our platform provides allowing folks to file directly with the government in that amount of time is obviously a huge time savings. And I might add as well that we were one of the first government approved e-filers third party e-filers of BOI reports. So we now have a direct integration with FinCEN's database through their API, have a direct integration with Vincennes database through their API. Not a lot of folks in the industry were benefits of that integration and because we were one of the first in this industry, we were very proud to be able to get that access. So our referral partner program is terrific. Then we also provide a pro solution. So if you're like, wow, boi is broad reaching. It's going to impact 40 million businesses this year.
Speaker 1:
I know my client base well.
Speaker 1:
We work with thousands of entities.
Speaker 1:
I mean, over the course of building this business we have met these real estate clients who have thousands of entities and it's remarkable how many of them are managing this work in Excel spreadsheets and relying on their legal professionals to have the share drive updated with the operating agreements and the AINs handy.
Speaker 1:
They don't have a system in place for BOI until they meet file forms and ultimately our pro solution allows accountants to actually have multi-user access into a single instance of file form so that the firm can all access the information on the clients, manage the information on behalf of the clients, send invitations to clients that might have the ability to manage the process on their own you know, might have the ability to manage the process on their own. So we provide a lot of configuration custom ability in the workflow so that ultimately, depending on how you want to provide VOI services at your firm, you can do so or at least educate your clients on the opportunity, because, along with becoming a partner of Fileforms, we also provide a good amount of educational services, such as marketing, collateral graphics, different tools, webinars Also if folks have an issue where they don't know if it needs to be filed.
Speaker 2:
For instance, one of my very first members who got on board with Fileforms actually called me and said look, I have a client, they have an LLC, there are two individual owners, but then there's a trust and the trust actually has other beneficiaries. Do I need to file for them? And we were to start researching it. Folks that come to you, you guys do have attorneys who can make those calls right. I mean, it's a different level of service, obviously, and the client your client's going to pay for it.
Speaker 1:
Yeah, we are. We are a technology company at our core but at the same time we, we, we know this is new, this is complicated and you know many times there there isn't a way of providing a technology for every situation that exists, because we anticipated that need. There are CPAs, attorneys on staff at file forms that effectively can provide that more hands-on service. Private equity firms, family offices, sophisticated portfolios of businesses with complex legal structures do need that level of service to get things right. And then, with what we call our premium offering, which includes those consultations and legal opinions from our team, we do get the information correct into our platform. So then going forward, the monitoring services that we provide of the data, because, remember, this is a 30-day reporting requirement if there is a change of information.
Speaker 1:
So if you think there are entities in a portfolio of one of your clients that has multiple owners on it, which is quite popular, has multiple owners on it, which is quite popular having a tool that actually monitors the information is critical, because within 30 days of a change you need to refile a BOI report and, unfortunately, on the FinCEN portal you're not able to store any of your information.
Speaker 1:
So you really do need a technology solution that's going to be able to monitor, provide reminders to your owners, to your clients hey, did your ID expire? Hey, was there a change of address? Was there a change of name? Have you hired or fired a C-suite executive? All of these different things happen regularly in a business. You can count on it and to have a solution that's reminding you and monitoring, say, for example, when an ID is going to expire, and then give you the easy ability to make a single change, as opposed to having to start on a blank form with FinCEN single change refile a few clicks of the mouse, saving a ton of time and mitigating a ton of risk.
Speaker 2:
And so, for everyone, we're going to be doing a webinar on this topic on May 16th. I'll put a link in the description below. It's free. You can join us. We're going to walk through this Also. I mean, fileforms has great resources. I'm going to actually create a handout from some of those, so you'll get that when you register, but this is going to be a hot topic for a long time.
Speaker 1:
Yeah, we just want to want to help businesses become aware as much as we can. We appreciate that accountants, lawyers they're very busy especially this time of year and maybe differentiate themselves from other providers our clients might be working with. I think there's a huge opportunity to establish trust within your client base by serving their BOI needs and, as Eric mentioned, we do a variety of different services foreign bank account reporting. We work with a lot of partners on new formations and annual reports and registered agent services. So ultimately we feel like there's a void in this new formation slash BOI, slash all non-tax compliance and we feel like we can really help and serve the practitioners who need resources there. So certainly want to be helpful on the new formations in the near term and spreading education to all those legacy businesses that ultimately will need to file by the end of the year.
Speaker 1:
One of the most interesting stats, which is the FinCEN estimate, which might, I add, I believe their methodology for calculating that is flawed. It's dramatically understated, but nonetheless say we were going to go with the $32.6 million number. That is barely 4%, I think just under 4% of total reports that need to be filed. So call it 97% of the reports that will need to be filed by the end of the year, still have not yet been filed. So what does that tell us? It means no one knows this is happening. At least that's what it means to me.
Speaker 2:
Well, you have no idea, and I can say this as an attorney we do estate planning and we have people come to us and we'll say do you have any entities? And they'll say I have an LLC. Do you have the documents? I haven't spoken to their attorney in a decade since they went and got it. Set up Corporations. Do you have your minutes?
Speaker 2:
No, and so it is an opportunity for the accountants you know, trusted advisor to say, hey, there's this issue, because I can tell you right now there are a lot of people like, well, why didn't my lawyer tell me about this? There are a lot of attorneys who will set up an entity, but they're not corporate lawyers. You know, they're the general run of the I don't want to say run of the mill, but you know what I mean General practitioners who, yeah, I'll set up a single LLC. They're not on top of this, they're not thinking about it, they're certainly not contacting those clients from 15 years ago, certainly not contacting those clients from 15 years ago. And so, no, it's an opportunity for the accountants to get involved in this, and file forms allows you to do this without getting involved in the practice of law.
Speaker 2:
I don't really know that it's the practice of law. I understand why the malpractice carries are concerned. Remember we were talking about making a legal judgment about who needs to be, you know, on the boi form, um, so I kind of get that. But either way, knowing my practice, carries aren't going to carry it, aren't going to cover this. Um, file forms is a way to do this. Get paid and outsource the thing. Help your client, get paid and don't put yourself at risk. So, yeah, so in the description what I'm going to do, I'll put a link to file forms for those of you who've not checked it out to go do that. I'm also going to put a link to the webinar. It's free May 16th. We're going to spend a lot more time going through this and what this looks like. And yeah, frank, any final thoughts?
Speaker 1:
I just want to add in terms of, in terms of opportunity and how to think about BOI, just in closing here you know, in Thin Sense, final rule they estimated that the total cost of this new law would be approximately twenty two.7 billion in the first year. So think of that for everyone on the podcast as your total addressable market in the next eight months $22.7 billion opportunity by proactively serving your clients' needs, by educating them on something they need to do. I couldn't think of a better way of serving our clients in 2024 and beyond, because, for that matter, it's here to stay. This is, this is, a perpetual filing need.
Speaker 1:
You know where the government's doing their, their best approach to elevating the reporting standards of the United States, ultimately to prevent, you know, terrorism and money laundering and a lot of the illicit, illicit crimes that go on as a result of of you know these shell entities that do exist, these shell entities that do exist. But just to couple that statistic with another, they also anticipate that BOI reporting will consume 126.3 million hours worth of time. So why waste time when you can be participating in the $22.7 billion opportunity? Remember we take this filing process down to 10 minutes versus three hours. We really tried to create a situation where everyone can win and you know we want to help you win for your clients and allow them to get back to running their business successfully.
Speaker 2:
Yep, no, and we actually created a letter for our tax rep members to send out to their clients alerting them to this. Contact us and you know they can get those folks over to file forms again. Get paid. The clients are taken care of, no malpractice risk. So, frank, listen, thank you for taking the time. Everyone, thank you for listening in. Go check out the links again. One you can go out check out file forms. May 16th we're doing that webinar and you know, listen, I'm glad everyone's done with tax season and take a, you know, take a breath and now look at a new opportunity to add some revenue.
Speaker 1:
You know, I know that a lot of accountants are going to be probably, you know getting ready for their vacation, as it's well earned, over the next week or so, you know, maybe if you're sitting on a beach somewhere enjoying yourself, start reading up a little bit on BOI and the opportunity that will hopefully take care of your next beach vacation. So, yeah, we're more than happy to schedule times to you know, spend one-on-one with you all and show you our product. There's a lot of great resources on our website and, at a minimum, we want to be a trusted source of information and education, and if you choose to partner with us, all the better. But post-tax season, there's a lot of compliance forms that need to get done, and we're here to help. So BOI is just another one that we'll be adding to the list and we're looking forward to being as helpful as we can. So, thanks again, Eric. Always a pleasure and looking forward to working with you all.
Speaker 2:
No, thank you, frank, and thanks everyone for listening in. Go check out those links and see you next week on the podcast. Have a great week Take care.