Navigating New Beneficial Ownership Rules

Roger and Annie kick off the 2024 tax season by explaining the new beneficial ownership reporting requirements under the Corporate Transparency Act. They detail who must comply, what information must be disclosed, and the tight deadlines and penalties involved. They also discuss whether accountants should assist clients with these complex filings or refer them to attorneys. Additionally, Annie provides an update on navigating ERC claims during the current filing season and Roger warns listeners to pay attention to potential last-minute tax law changes from Congress.

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• (00:00) - Welcome To Federal Tax Updates Episode 25
• (01:11) - The 2024 Tax Season
• (01:57) - Beneficial Ownership Interest Reporting
• (02:58) - Understanding the Rules and Implications
• (03:41) - Exploring the Corporate Transparency Act
• (04:20) - Impact on Small Businesses
• (07:12) - Challenges and Concerns with the New Law
• (08:21) - Defining Beneficial Owners
• (10:30) - Understanding the Reporting Process
• (12:33) - Discussion on the Challenges of Compliance
• (15:52) - Advice for Navigating the New Law
• (23:10) - What Should People Be Doing Right Now?
• (40:05) - Updates on the Employee Retention Credit
• (44:23) - Final Thoughts and Thanks For Listening

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Creators & Guests

Host

Annie Schwab, CPA

Franchisee Operations Manager at Padgett Business Services

Host

Roger Harris, EA

President at Padgett Business Services

What is Federal Tax Updates?

CPAs, Enrolled Agents, and Tax Preparers can keep up-to-date with the latest federal tax information while earning NASBA approved CPE credits and IRS approved CE credits by listening to the bi-weekly Federal Tax Updates podcast. The hosts Roger Harris and Annie Schwab have over 75 years of tax experience between them, which has been featured in various media outlets including Wall Street Journal, USA Today, The Morning Business Report, Bloomberg Business News, and Accounting Today.

Warning: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Roger Harris: Hello everybody. It's Roger and Annie. It's the federal tax updates podcast. It's 2024. Annie, how are you today?

Annie Schwab: I'm doing pretty good. Tax season kicked off. So I think everyone is certainly busy. A lot going on. Um, new year, new tax season. But we're [00:00:30] here, we're here.

Roger Harris: New set of challenges. Absolutely. We're gonna, I guess, what we're talking, first of all, what we're going to talk about today, the IRS has nothing to do with. So that is true. Don't get mad at them. They've got nothing to do with it. Uh, it's an issue that we've talked about, but it's actually in place as we recall. Now, we don't record these the day that you see them. So. Or hear them, there's potentially something could change. But as we record this, the beneficial [00:01:00] ownership interest reporting started January 1st of 2024. Um, um, it's in place. It's a law. It's there to be, uh, complied with. There's still a lot of questions. And who does it cover and why and why are we doing this and how do we do this? And should we do this and all those questions. And so we're going to talk a little bit about what the rules are. In case you there's still I think Annie, you correct [00:01:30] me if you think I'm wrong. I still think there's a huge lack of understanding or awareness about this.

Annie Schwab: I think there's a huge information gap. Um, and it's been around like this. This legislation is not something that was pulled together right at the end of the year. Anything it's been around since, I think 2020, 20, 21 or something. And it's just that it does begin in effect, um, with the start of the 2024 tax year. And it's been called the new era of disclosure and transparency [00:02:00] for businesses. I mean, that that's a bold statement right there. Um, and unfortunately, it's not just for really large companies. It's going to affect a lot of business owners, and they're still barely aware of what's going on. Um, and like you said, this is not part of the IRS. This is something as a result of FinCEN. Um, and we'll go into a little bit about what that is. But just so you know, the goal of this, the goal of it, um, is geared [00:02:30] toward financial crimes and enhancing national security. Um, but it does, like I said, have significant implications for small business owners. So again, it's called the Corporate Transparency Act. Um, it's commonly, you know, CTA, um, which will explore what beneficial ownership information reporting is, the details of it, the timing of it, some exemptions from it, um, and how you file and you do that through the FinCEN [00:03:00] portal and the portal is open. Um, right. It is it is open.

Roger Harris: You can do this today if you want to.

Annie Schwab: But sit tight. Don't do it yet. Yeah. Don't.

Roger Harris: Don't run.

Annie Schwab: Listen to us first. Yeah. You may just want to sit tight until the end of the year, but, um. But that's what we're here to talk about today. And, um. So where do you want to start, Roger?

Roger Harris: Well, you mentioned, in fact, small business. In fact, it targets small business. It does because, uh, I think a lot of us and again, we've we've referenced this before on other podcasts. So we're [00:03:30] going to repeat ourselves for those that maybe haven't heard about this or heard the other podcasts, uh, it is specifically targeting small companies with fewer than 20 employees and less than $5 million in sales. Uh, have to report their beneficial owners. And, um, the reasoning behind this, as best we can tell, is there must be significant money laundering happening in the small business [00:04:00] community. I'm sure our clients aren't part of it, but, uh, that doesn't mean we don't have kind of like we all have to take our shoes off when we go through the airport, even though we're not the ones that would blow up the plane or whatever, you know? So. Right. Uh, we're caught up in it. So it's a small business, uh, targeted program. Uh, it covers any small business. Like I said, fewer than 20 employees under 5 million. And there's some exceptions for industries, but don't focus on that. Um. That [00:04:30] is set up or registered with your state. So it's primarily our corporations and our LLCs, though if your entity is registered in your state, I don't know if a sole proprietor could be registered in some states. You know, if you're covered, if your state regulates you and registers you. So if that's the case. Which it sounds simple enough. You have to. Report your beneficial owners to FinCEN [00:05:00] on an online form through their portal. So, Annie, that's so simple. I was about to say you make it.

Annie Schwab: You make it sound so simple.

Roger Harris: Why? Why is this such a big deal if that's all that it requires?

Annie Schwab: Well, like you said, corporations, LLCs, all entities formed under state law, um, or similar ones formed. Formed under foreign law but registered to do business in the US. This does affect them. The problem is it. While it took effect in January [00:05:30] of 2024 for companies who have been in existence prior to that, you have until the end of the year to file this initial report. But if you start a business. And, uh, on January 1st or any time afterwards. That initial report is due within 90 days. If something changes, I don't know. A beneficial owner gets married, moves, um, duties in the business are reallocated [00:06:00] now someone else has substantial control or decision decision making, um, powers. Then that report needs to be updated within 30 days. I don't know about you, but my clients don't talk to me about significant changes in the ownership structure or what's going on with their their so-called beneficial owners within a 30 day time frame. So the timing and the reporting is one problem. The second problem I think you hit on Roger. Penalties are high. [00:06:30] It's $500 a day. There's even criminal imprisonment associated with this. So the stakes are high. The reporting timeline is is not very friendly, shall I say. Um, and we already mentioned there's a huge information gap. So there are so many small business owners who have no idea what this is and don't even know that they have a filing requirement. Um, so those are just three things that I can list off the top of my head of [00:07:00] why this is something we're talking about today, and why it's really important for you to start talking to your clients about it.

Roger Harris: Yeah. And it's like a lot of things, it's that on the surface, as I tried to do, you can make it sound like it's so simple, but you get into it and you alluded to it, you know, there's some things that are black and white. If you own 25% or more of a company, you're a beneficial owner by definition. So your information has to be disclosed. And he also referred to, uh, decision making authority, [00:07:30] banking authority, hiring and firing authority. So you could theoretically move into the definition of beneficial owner with with really no actual ownership, meaning you don't own 1% or anything of the company, but because you have these powers, you are considered a beneficial owner and you too must be disclosed. So, you know, that gets [00:08:00] into which I guess is there because they a lot of this fraudulent activity or money laundering activity, they're putting a shell person out front, right? The real decision makers in the background. And so I get that. But what about a spouse who may not be an owner, but is very influential in the decisions that the company makes or a key employee or something like that?

Annie Schwab: The definition of substantial control is. Fairly gray, [00:08:30] in my opinion. I mean, there's a lot of facts and circumstances that come into play here. There's even, um, a concern that, let's say an attorney or someone sets up this entity, the one who files the documents that created the entity must be reported. It could be a paralegal or another staff of an attorney that they would have to have their information reported. Well, geez.

Roger Harris: Yeah.

Annie Schwab: It could be us. Yeah.

Roger Harris: I mean, so you start with it's not as black and white as it seems just because they call [00:09:00] beneficial owners. It's not just affecting people who have a formal ownership in the entity. So we have to we have to understand that and remember this is new. So we have no history. We have no definitions, no court cases, no audit history. We have nothing to look back on, on how a certain set of facts or circumstances could be interpreted. So we're we're doing this with no no history. So so the initial [00:09:30] report, you go online, you go to the fencing website. You put some basic information in name, address, business ID number, all that. And okay, I'm going to say Annie Schwab owns 50%. So we clearly have to put Annie in there. And Joe Smith over here owns the other 50%. So we got to put them in there. But we also have to attach some documentation proving, I guess, that Annie Schwab exist. Right.

Annie Schwab: So you [00:10:00] need my driver's license, right.

Roger Harris: So so you got to upload Annie's driver's license in addition to putting all of Annie's information in. So let's go back. So we've got to do that sometime. If this business was started in 2024 or earlier, 2020 before 2024.

Annie Schwab: Correct before the first of 2024.

Roger Harris: Yeah. So if it was in business prior to 2024, we have all year to do what we [00:10:30] just talked about. We've got to fill the form out, list Annie and send her driver's license. How hard can that be? Right.

Annie Schwab: You make it sound simple. Roger.

Roger Harris: Right. Piece of cake. Well, Annie, does your driver's license ever expire?

Annie Schwab: It sure does.

Roger Harris: And how long is your driver's license? You're in Texas. How long?

Annie Schwab: I'm in Texas, I don't. Yeah, my mine goes for ten years. But regardless, if, let's say I lose my driver's [00:11:00] license, right? Or I get married and I change my name, or divorced and changed my name or move my my address has changed. My official name has changed the identification. My driver's license number has probably changed. Now you have 30 days to go in and up into that, log back into the portal and update that information. Right.

Roger Harris: Now. So there's the so yes, the initial filing in and of itself. Is not [00:11:30] the real problem, though. There are some concerns and we'll talk to them about determinations when it's not black and white and making legal determinations of whether the duties that let's say. Annie has an employee who they have delegated certain banking authority to. Now, are we qualified legally to make a determination if the duties that we that any delegated to that employee [00:12:00] fall under the definition of the Corporate Transparency Act of 2020? Most of us that are in this profession are not lawyers. In addition to being tax preparers, accountants, whatever you want to call them. So one of the challenges that we face here is are we prepared from a. Qualifying or risk position able to make determinations like that. And should we. So I know that.

Annie Schwab: Your CPA [00:12:30] yeah. The AICPA came out and said that making that determination is interpreting the law, which should only be done by an attorney. So there's, you know, and with the risk associated with the maximum penalties and fines and imprisonment, I mean, does your, you know, insurance cover that? I'm not sure I really want to have my name listed on, on any of these, um.

Roger Harris: Or give advice to someone that, that, that I come in and [00:13:00] advise you that that employee that we're talking about doesn't need to be disclosed because in my vast legal experience, which is none, I have determined that what you've told me that person does does not apply the way the law is written. So I don't disclose that person. And then I don't know how you get audited by FinCEN. I don't know how this. But then FinCEN come in, comes in and determines that it he [00:13:30] should have been reported. And now you're subject to these penalties. So, uh, we have to think, first of all, uh, clearly we're probably not qualified to give a lot of the advice when there are. Questions, let's say. And if it's not.

Annie Schwab: Black and white, you should probably just step away.

Roger Harris: Yeah, now. And like anything else, when you take on a service and I think we have to step back and say if we have small businesses [00:14:00] as clients, they come to us for damn near everything and we are their primary advisor for almost everything. So we somewhat feel an obligation to try to help them with this because again, on the surface, how hard can it be? All I have to do is go online, type in a bunch of names, Social Security numbers, upload some driver's licenses, and then forget about it until Annie's driver's license changes, or until [00:14:30] you decide to give somebody else duties that they should or shouldn't have had, or we didn't give you the right advice to to determine if that key employee needed to be disclosed. And so did we price our services to make it worth taking the risk. Because I think one of the dangers that we're going to run into this is we're going to base this on how long it took me to type it into a website in terms, but not [00:15:00] price in the risk that we assumed by typing it in to that website.

Annie Schwab: Well, and the initial report, like you said, might only take you a few minutes, but it's the tracking and the communication that you have to have with the clients to know if something needs to be changed or amended or revised or or any or anything. And so so that's a burden on the business owners. They need to create internal procedures or policies so that they know who these beneficial owners are [00:15:30] and if anything changes. And then they need to let it let whoever's handling the reports do this. And so I mean, it's a lot of, um, like I said, burden on the business owners and also a burden on the accountants, you know, they're coming to us and we want to help them and we can explain the law to them. But should we be doing it right? I will say, if you're if you're not an attorney and you are assisting clients with setting up entities or business formation services, I would take a second look at that and see [00:16:00] if if that's something you want to continue to do, because technically you'll be listed as a, you know, as a beneficial owner. Um, and.

Roger Harris: You may the reporting agent of the entity of the reporting company or whatever their terms.

Annie Schwab: Are, you'll be listed. That's right. You'll be listed as the reporting agent. And you may disengage this client, you know, next year or the year after. How do you get yourself. Unassociated with the client at that point. So there's a there are some questions still [00:16:30] out there. Um, the FinCEN website did put out like some FAQs and then a guide. And within the guide there are some, you know, visuals with, you know, if this kind of chart, this is what you have to do. Um, I feel as though they, they tried and they did provide some level of FAQs and clarification. But like you said, I just I don't think it's going to be enough for people to fully understand [00:17:00] obligations. Who needs to be listed, how to make the changes? Um, I think it's a yeah.

Roger Harris: And there's a problem with the law. And, you know, I don't know that anybody, whether it's an attorney or an accountant or whoever. Is really set up to, to monitor these kinds of changes in the time frame that the law 30 days. Yeah, I mean, I, I mean, [00:17:30] we'll talk in a minute about what we're advising our pageant offices to do right now. But they're, they're. Giving an opinion here. Now, there are some flaws in the law that just don't work in the real world because first of all, small business owners have the least amount of resources internally to worry about legal and accounting stuff. That's why they hire us. So you first of all, you've passed a law that impacts the people with the least resources [00:18:00] to comply with it. You've put unreasonable time frames into the law 30 days, and you're asking people to track things that none of their advisors and them have ever had to worry about from a compliance or legal standpoint before, like driver's license numbers and home addresses and things like that. So it's it's set up to fail. Now, the problem is, [00:18:30] failing might mean that a lot of small business owners get huge penalties because they either didn't know about the law and ignored it, or couldn't comply with it.

Annie Schwab: Yeah, I think the lack of compliance is going to be because they don't know what to do, right? I think that's going to be really high.

Roger Harris: And so here we are. And the accounting and tax profession who have been the primary advisors to these people, something like this. Let's say if it was an annual part of filing a tax return like [00:19:00] the FinCEN, you know, for foreign bank.

Annie Schwab: Accounts, right?

Roger Harris: Bank accounts and stuff. We've we've dealt with that as routine as part of our tax prep services for years. Yeah. Uh, so it's not that we can't help with FinCEN requirements, but it has to fit into a relationship and a business model and the type of information that, you know, would be normally helped with. But we don't get to deal with this every 30 days. So there's some problems we see with [00:19:30] the law. And we're not the only ones you mentioned AICPA. There's been coalitions, and there's been a lot of advisors to small businesses who have been trying to to bring this to Fincen's attention, but as of right now, the law has gone into effect. The rules are what the rules are, and we have no guarantee that we'll get changes or will will get somebody to finally say, wait a minute, this doesn't work [00:20:00] the way it's written in the real world. So, uh, but that's our hope. And because we have all year before we have to do it. In other words, we could literally play this out till December 31st of 2024 and do them all. You know, for the.

Annie Schwab: Businesses that were that were in place prior to 2024.

Roger Harris: 2024.

Annie Schwab: Yeah, you could you could wait till December and maybe [00:20:30] there'll be additional guidance, tips, tricks, maybe there'll be, who knows, an extension, maybe there'll be, um, some case scenarios or something that would simplify the process.

Roger Harris: So given that, what what advice are we giving to our pageant offices of what we should do right now?

Annie Schwab: Uh, well.

Annie Schwab: The first thing you need to do is start the communication. They have to be aware that they are subject to this. Um, I don't think the filing [00:21:00] is, um, like you said, I think waiting until, you know, towards the end of the year and see how some of this plays out. But I do think talking to your clients, notifying them, communicating to them, um, what this is and what this means and what it could potentially mean from that for them in the future.

Roger Harris: Yeah. Because there's already companies out there today. Oh yeah. Offering, you know, services like, you know, again, there's companies that'll do everything for money. And there's [00:21:30] out there and I've seen everything from a one, the first fee for filing the first one and then a monthly monitoring fee and all these sorts of things. So I think first of all, we need to make sure the clients hear about it from us first because accurate information.

Annie Schwab: Right.

Roger Harris: Because if they don't, then they're going to hear about it from somebody else, and they're going to come to you and say, why didn't you tell me? And they're going to think you don't know anything about it. So I think what we're advising our office is to do is take this opportunity during the filing season, when [00:22:00] you're hopefully interacting with all of your small business clients that are covered by this, to bring them aware of what this rule is and what the penalties are and what the reasons behind it are, and why, it's not as simple as it seems. Yeah. So that you're the information so we can really work on solving that lack of awareness gap.

Annie Schwab: Yes, yes.

Roger Harris: And. What we're telling people is we're going to take the rest of 2024 with [00:22:30] the help of other associations, attorneys, all kinds of people, to try to develop a strategy that balances helping our clients with protecting us.

Annie Schwab: And we are also letting our, you know, asking our office owners if you were in the practice of helping people set up companies, stop, stop, stop and wait. Um, send them to an attorney. Um, let them know, [00:23:00] um, that there's a lot of risk associated with doing that. And as of right now, that's something that they can we can no longer do.

Roger Harris: Because I think we're all assuming and I think it's probably a hopefully the right assumption is that attorneys that are aware of this, uh, will make this part of what they normally do when they set up, say, an LLC or a corporation. You know, in many instances, they'll obviously do the legal work with the state. They'll maybe get them a federal ID number [00:23:30] may even if it's a S Corp election is necessary that they'll do that, that they'll also take on this beneficial ownership as part of that initial setup of the company. And they are qualified to make any legal determinations about that. Mystery employee that Annie's got back there, that we're trying to figure out whether we need to disclose them or not. So again, that will take the burden of that initial filing for new [00:24:00] businesses off of our plate. Unless you want to do that, then you know you're stepping right into it. Um, because again, it's the law is currently in place. So we're telling our folks, as Annie said, don't do that. Send them to attorney and tell them to make sure when the attorney, uh, they select knows what beneficial ownership interest is and they will do the immediate initial [00:24:30] filing. Now. And does that solve the update problem?

Annie Schwab: Definitely not. There's still that 30 day threshold for making updates. Um, we I don't know if that'll get extended. I don't know if there'll be leniencies with that, but someone is going to have to be monitoring, um, on a very, very monthly basis and making changes according to the law as it's written.

Roger Harris: Yeah. And here's an example of one [00:25:00] of the problems. We have, all these penalties that we talk about. If you read it it talks about intentional disregard. Now. What does that mean? We we don't have, you know, and FinCEN says, well, you know, we understand it's new. We're going to be lenient. Okay. What does that mean? What does that mean to be lenient? You know, so if if you do it in 45 days instead of 30, is that intentional disregard? Is that an accident? What's [00:25:30] the penalty for an accident versus intentional? We just have no history to rely on. So we have to assume unless you want to trust the government, there's something that I'm sure all of us are. You know, that because somebody goes on a webinar and says, well, we recognize this is new and it's confusing and that. So we're going to be lenient. Well, okay. Great. Now do I record this and play it to whoever comes out and tells me I owe $5,000 [00:26:00] that this person. So we just don't have anything to rely on from fencing about this. So yeah, we still even if we delegate that set up to that attorney. Monitor responsible for changes. So the one thing and we're engaged with our attorney, we have a meeting with him in a week or so. We're continuing to try to find the right balance of us helping our clients, [00:26:30] but protecting us from a liability standpoint and at the same time charging appropriately for whatever risk we are going to have to assume. And and again, we've been told clearly, do not give advice because you're not necessarily qualified. And secondly, uh, be very careful about leaving any doubt as to whose responsibility changes are that if a driver's license [00:27:00] does change.

Annie Schwab: Yeah, that.

Roger Harris: Is the 100% responsibility of the client to tell us, for us to make the change. Again, that sounds simple.

Annie Schwab: Well, what if you have?

Annie Schwab: How do you put 100 people?

Roger Harris: Yeah. I mean, how do you do that in such a way that the client fully understands and some other lawyer won't say you accepted more responsibility than you tried to tell [00:27:30] the client, you know. So it's it's it's going to be a challenging year when it comes to this law because everything seems simple until you have to think through it. And I think that's why we got it. We got it. Yeah, because the bureaucrats. This seems simple.

Annie Schwab: Yep. I'm putting my thing. I'm crossing my fingers that AICPA can work with FinCEN and some of the other organizations, and come to some understanding [00:28:00] of why it's not so easy. And then, of course, provide guidance so.

Annie Schwab: That, like I said, it's.

Roger Harris: Just in my opinion, it's just not workable. And again, we're talking about the smallest to small businesses. We're talking about the landscaper. With an LLC that goes out and lawn maintenance, I should say, cuts grass. But first of all, they know about this, that they have any idea you know, who. Their officers or [00:28:30] their members of their LLC are? I mean, how many are people don't even know? You know, if they're incorporated, who the secretary of their corporation is or because. Because there's also designated officers that have to be reported.

Annie Schwab: Whether they're owners.

Roger Harris: Or not. So and then whatever, think that the secretary of their company, who happened to be somebody they knew when they formed the corporation that they may not even see every once in a while. And the reason I ask Annie about how long does her driver's license, you know, we're probably [00:29:00] all going to have very sensitive, uh, and be very aware of what we're supposed to do this year. But, Annie, you said your driver's license is. For how many years?

Annie Schwab: I think I'm.

Annie Schwab: Ten.

Roger Harris: Okay, so you're going to. So ten years from now, we're going to be as sensitive to the fact that your driver's license changed as we are today. And when you go, you're probably just going to go whether you have to go in person or online, you're going to update your driver's license. And by then you've moved and you've got a new address. Is [00:29:30] it ever going to come to your mind that you have a FinCEN reporting requirement?

Annie Schwab: I can't imagine that it would.

Roger Harris: And it never has before. So, I mean, we just got to hope that over the next, well, 11 or 12 months. Yeah, that we can get some some reasonableness and some changes made to this because I think I speak for I know I speak for our Paget offices, and I think I speak for almost everybody out there. We would like to help our clients with this.

Annie Schwab: Oh [00:30:00] yeah.

Roger Harris: But we have to do what's right for us. So, Annie, why don't you summarize again, what is the advice we're taking? And we're not telling you to do this. You do what you want to do. But we'll tell you what we have told our Paget offices. But and it's going to be an ongoing bit of advice because, yeah, the more we learn, our advice may change. But Annie summarized what we're telling our offices today, they should do as it relates to the beneficial ownership, reporting [00:30:30] and serving their clients.

Annie Schwab: Yes, I think the most important thing that we can do now is to educate, talk to our clients, inform them of what it is, what it means, um, why it's there. Especially take advantage during tax season when maybe you're talking to the majority of them or seeing them in person. Um, even client, you know, sending out a client letter, you know, advising them of, of this new reporting requirement, um, making sure that [00:31:00] they know that you are looking out for them and that you're following any updates and that they will get back to you. Um, also let them know, like, yes, it's effective January 1st, meaning the portal is open. You can file the reports, but they do have some time to figure out when and how and who should be reported. Let them know that it's something that you can assist them with towards the end of the year. I think by then hopefully we will have some more information. [00:31:30] Um, and then like I said earlier, if you know, a client comes to you requesting your assistance with the formation of an LLC or, or a new entity, take a moment and explain to them, just don't say, oh, I can't do it. Take a moment and explain to them the ramifications of doing that could be on you. Um, and perhaps have them go to an attorney. So maybe have a referral attorney that you have that you can send your clients to, um, for formation, um, issues. Yeah.

Annie Schwab: Yeah.

Roger Harris: And, and every [00:32:00] call I've been on, every meeting I've been on as it relates to this with other people in our profession, we're all trying to find a way to help. But again, we have to be smart about it. And and time right now is is our ally. We have time to to to state our case to to talk to the powers that be and to try to find, uh, a middle ground, if you will, where we can do some maybe all of this for our clients. [00:32:30] But, um. We're not there yet, and we're going to have to take a take advantage of our, uh, year to to see what we can do. There is one occasion that, you know, it's going to come up to you that I'm going to tell you that we have also advised our clients they may go to an attorney to set up an LLC who may not be knowledgeable of this, because, again, this lack of understanding is not reserved to just the small business community. It exists [00:33:00] in the tax practitioner community and in the legal community.

Annie Schwab: Absolutely.

Roger Harris: So they may have gone to an attorney, set up an LLC, um, in January, and then they show up in your office in June. And want you to help them do their accounting, set up their business, whatever the case may be. And now you're outside the 90 days and they're in violation of FinCEN.

Annie Schwab: That conversation's not going to go well.

Roger Harris: No. And what [00:33:30] can we do at that point, Annie?

Annie Schwab: Right, exactly. They're going to be one off situations that we just don't have the answers for yet.

Annie Schwab: Right? So we're going to have to.

Roger Harris: Send them back to that attorney who remember, the attorney made the initial mistake of not doing the form, uh, or not submitting the information on formation. And we don't have any idea what how you get about, you know. Once you submit it and you put dates in there and you, I don't know, I've [00:34:00] never even seen a penalty from FinCEN for anything like. I mean, I don't even know what they would tell you. So we're saying send them back to where the problem started. Don't try to be the solution maker.

Annie Schwab: Yeah.

Roger Harris: Unless and until we get some ideas of what, you know, that's going to happen and there'll be somebody and we'll eventually see. Oh, this is how it happened. This was the case. This is what you do. But until we have that, go back to the person who created the original sin, you [00:34:30] know. Yeah, right. Don't try to be a hero.

Annie Schwab: And we'll be bringing information as we get it too. So, you know, continue to listen to our podcasts if something happens tomorrow or next week or next month, um, changes. Uh, we'll, we'll definitely be communicating that.

Roger Harris: For something that. No. Well, I won't say nobody knows about, but for something that's such a small percentage of the community knows about, there's a lot of discussion going on about it in the background. [00:35:00] And, and I just maybe I'm too much of an optimist, but I have to believe that somewhere during the year, there's going to be a realization that we've got to make some changes here to make it work or just be prepared for massive noncompliance. And I have no idea how FinCEN is going to catch noncompliance, honestly. I mean, I've never seen a FinCEN auditor, so I don't know if there are.

Annie Schwab: Yeah.

Roger Harris: No, no, such an animal. I don't know, maybe there is, maybe there isn't. [00:35:30] So, you know, when does this get caught and what's the penalties and what's intentional versus I didn't know you know I didn't know.

Annie Schwab: About willful.

Roger Harris: Willful I mean I'll so anyhow it's it's a big topic. It's out there. It's started the law is is.

Annie Schwab: In effect in.

Roger Harris: Effect.

Annie Schwab: Portals open, portals.

Roger Harris: Open. But you know, I've heard somebody say, well, how hard can it be? It's just a form. Yeah. Okay. Be careful. [00:36:00]

Annie Schwab: That's why we that's why we do. To get awareness. Get awareness out there.

Roger Harris: Any final thoughts on this, Andy, before we'll try to.

Annie Schwab: Um, couple know.

Annie Schwab: If this is new to you and this is the first time you've heard of it. Um, do go to the FinCEN website. Like I said, there's a guide, there's, uh, some FAQs, some visual with, like, flow charts and stuff. It is worth taking ten minutes out of your day to make sure that you have an understanding of what this is and a full grasp, so that when you're talking to your clients, you're probably [00:36:30] going to get some questions from them. Um, but at least you'll have, you know, a place to go. And then, like I said, we'll we'll continue to provide any updates that we have on this topic to you through our podcasts.

Roger Harris: Yeah, we're engaged in the ongoing discussion to try to make this again. I think we're all trying to find the right place that we can fit in and help our clients. But again, we just don't want to take on an undue amount of risk and ultimately responsibility. That's that's not there. Yeah. Um, all [00:37:00] right. We're we're recording this. We're assuming you're listening to this during the middle of tax season, but you may not listen to any podcast till May, we hope.

Annie Schwab: But yeah that's true. That's.

Roger Harris: But what other what other advice as we're right in the middle of a filing season would would we leave our listeners with.

Annie Schwab: Well the season opened um January 29th. So you're probably been filing returns by this point. Um, and like you, like, you know, every tax season comes with, um. Difficulties, [00:37:30] um, stressors. Um, so hopefully you are getting by, um, because we wouldn't be a podcast if we didn't talk about it. Um, let me give you an update on the IRC, the employee retention credit. Um, as of the end of of December, we received what was called the voluntary program. So if you recall, uh, IRC came as a result of the pandemic. Um, there's been a lot of fraud associated with these claims, as there was a lot of money associated. Um, there [00:38:00] has been a moratorium placed, um, on, on processing additional claims. So we've got, uh, clients who have legitimate claims sitting in a warehouse waiting to be processed. We've got claims that have previously been processed, and now the, uh, taxpayers have a ability to withdraw those claims if they have not cashed the check. Um, and then now at the end of December, we have a voluntary program, which is sort of [00:38:30] a way for you to say, hey, I either didn't know or I was fooled or I wasn't sure, and now I change my mind and I probably didn't qualify for the credit.

Annie Schwab: There's a program that runs through March 22nd where you can repay 80% without penalties and interest of the claim. You don't have to go amend the the previous income tax returns. Um, it's a form that you fill out and file through an IRS portal. So there are some options associated with [00:39:00] IRC claims. Of course if you're still if you're eligible, great. If you got your money and it was a legitimate claim, wonderful. But if you're running into clients who are questioning the eligibility or who would like to participate in the voluntary program to repay the money, they have until March 22nd. So IRC is still around and is still going to affect us through tax season. Um, so if you're not familiar with that, we did a podcast a couple of weeks ago, um, on [00:39:30] the IRC, specifically on the voluntary program. So you can find that one, um, and give it a listen.

Roger Harris: Yeah. Hopefully you didn't wait till May to listen.

Annie Schwab: Because that's.

Roger Harris: Gonna be a little late. And again, just and again, this is it's hard to know when people listen to this. But as we are recording this, uh, as happens every year, um, it seems like Congress is, uh, trying to wrap up their year end, their budget talks, and there's some talks about some tax changes, [00:40:00] uh, in the horse trading that goes on. I mean, one of the things they're talking about is, uh, repealing the R&D credit amortization and allowing for expensing and exchange for a change in the title tax credit. So it's possible we get last minute, which helped name last minute anymore already into the year retroactive. We get retroactive tax changes that will all have to deal with which would make tax season really fun.

Annie Schwab: But um.

Roger Harris: That's [00:40:30] the world we live in today with a Congress that that doesn't get things done until the last minute, and the last minute isn't, in their mind, concerned about the filing season. So we may have to deal with that, which always means that the first thing that happens is they pass the law. Then we have to wait for our softwares to get modified and deadlines don't go away. So, uh, could be an interesting tax season or they can do nothing, you know.

Annie Schwab: Which has happened before as well.

Annie Schwab: Yeah.

Roger Harris: So if you're listening to this [00:41:00] in May, you don't care. You've already.

Annie Schwab: Had a good tax.

Annie Schwab: Season.

Roger Harris: You've already lived through whatever happened. But yeah, uh, if you're listening to this, you know, early in the filing season, pay attention to those discussions. We sometimes we're all frustrated with what happens in Washington. We just I don't care. I'm just going to tune it out. But. Well, there are things being talked about that could have a major impact on on your business clients or your individual clients, for that matter. And, uh, your filing season.

Annie Schwab: That's what we're here for. [00:41:30] We'll bring you all the news, everything you need to know during tax season.

Annie Schwab: Um, but know if.

Roger Harris: Anything happens, we will do a podcast on it. But you have to listen, and you have to get your friends to listen. You have to get everybody to listen, because us talking about it does no good if you don't hear it.

Annie Schwab: Well, Roger, let's get back to work. Back to.

Annie Schwab: Tax season.

Roger Harris: Yep. Another tax season started. Have a great one everyone. Thank you for listening to this federal Tax Updates podcast. We hope that you enjoy it. [00:42:00] We would love to have any comments or suggestions and uh, review it. Rank us hopefully. Good. Uh, and tell your friends about it and, uh, take us home. Annie.

Annie Schwab: I think that's it. I know everyone is is busy. Thanks again for listening and we'll be back next couple of weeks here with some more on the federal tax updates. Thank you everyone.

Roger Harris: Bye everybody.