YOUNGSTOWN, Ohio – If your business is not yet familiar with the Financial Crimes Enforcement Network (Fincen) reporting requirement, you need to act by the end of the year.
In late 2020, Congress adopted the Corporate Transparency Act, which empowers the Department of Treasury to require most individuals owning an LLC, corporation or any other entity to file new, additional documents with their secretaries of state.
Now that tax season has ended, accountants are ensuring their clients are aware of the requirements to file the Beneficial Owners Identification (BOI) paperwork. They also want to ensure their clients avoid the substantial penalties for failing to do so.
An accountant or attorney can file the form. But, says Tim Petrey, CEO of HD Growth Partners, there must be one for every LLC owned and some of his firm’s clients have dozens of LLCs.
“Our position is that we’re uniquely built to handle this kind of thing,” Petrey says. “We’re used to this. So we’re rolling out our BOI platform in the next couple weeks and we’ll be busy between now and the end of the year filling out all these forms for our clients.”
Kayla Emanuelson, CPA manager at Canfield-based Schroedel Scullin & Bestic LLC (SSB), says not only do small-business owners have to catch up filing the BOI on any company established in and before 2023, but those entities formed in 2024 have 90 days to file and new entities in 2025 and beyond will have 30 days. In addition, changes with the business will have to be filed within 30 days.
The purpose of the BOI, Emanuelson says, is to crack down on shell companies to stop money laundering.
Meanwhile, accounting firms are looking at what will happen next year and beyond as several tax laws are scheduled to expire.
For instance, the Tax Cuts and Jobs Act of 2017 sunsets at the end of next year unless Congress extends it. If it ends, Debbie Liggett-Dixon of DGPerry CPAs + Advisors says it will remove many benefits, both to individuals and businesses.
“So what we’re doing in the summer and into next year is trying to take full advantage of those benefits while we have them, just in case they do sunset,” Liggett-Dixon says.
Marc Mazzella, geographic lead for the Youngstown office of Cohen & Co., says it leaves clients uncertain about the near future. Accountants advising them based on “legislative probability” must be careful. For instance, trying to determine if they should take advantage of today’s income tax rate or defer to when the rate could rise.
If everything comes to pass, Mazzella says, business owners could be paying as much as 10% more on the same earned income, which means it would be beneficial to pay the tax now on the lower rate.
“Those are the conversations that we try to have with clients now and help them prepare and be a bit proactive, rather than reactive,” Mazzella says. “But there are a lot of changes coming down the road.”
The qualified business income deductions, which allow pass-through investors a 20% break, is a big part of what is sunsetting. Liggett-Dixon notes if someone has $1 million it could mean a $200,000 deduction loss.
“A lot of our pass-through entities, such as an S-Corp, partnership or certain LLCs, may end up being taxed at higher rates if the qualified business income deduction goes away. So we may say, does it make more sense to become a C-corporation, which has a flat tax of 21%,” Emanuelson says.
The potential for rising tax rates for individuals and businesses and ensuring that clients are prepared is a big part of the difference between accountants and advisers, according to Petrey.
“In my opinion, accountants are historians and advisers are the opposite,” Petrey says. “So the advisers are focused on the future and the accountants are obsessed with the past.”
Petrey says there was a 70% tax bracket before Ronald Reagan’s presidency, while today’s top tax bracket is the lowest ever at 36% with most business owners paying 30%.
“Conversely, though the problem is that this is the highest debt this country has ever seen,” Petrey says. “This is the worst ratio of GDP to debt.”
So he believes the health of the economy could lead to the need to raise revenue and the possibility of returning to a 70% tax rate, which Petrey says would mean those who have been deferring income taxes, for instance in a 401(k), could take a 70% hit.
“A lot of people have old tax planning mechanisms in place. They’re just deferring tax liability,” Petrey says. “And they keep rolling on every year. The risk with that strategy is you [would be] rolling out of 30% and into 70%.”
Other concerns, says Liggett-Dixon and Emanuelson:
• A slated change in the childcare tax credit dropping to $1,000 from $2,000.
• For those involved in giving and estate planning, the approximate $13.6 million per person exemption without tax consequence is about to be sliced in half in 2026 and the tax rate is 40%.
• Bonus depreciations, which led to businesses to invest in new equipment, began dropping to 60% from 100% two years ago. It is slated to drop by 20% each year until it expires in 2027.