Small Businesses Face $10,000 Penalties If They Don’t Comply with New U.S. Treasury Reporting Requirement
Small businesses and their owners could face penalties of $10,000 or more if they do not comply with a new U.S. Treasury Department reporting requirement by the end of the year. The Corporate Transparency Act, passed in 2021, aimed to curb illicit finance by requiring many businesses operating in the U.S. to report beneficial ownership information to the Treasury’s Financial Crimes Enforcement Network (FinCEN), also known as the Financial Crimes Enforcement Network.
The requirement applies to about 32.6 million businesses, including certain corporations, limited liability companies, and others. Businesses have until January 1, 2025, to submit an initial Beneficial Ownership Information Report. The data helps identify the people who directly or indirectly own or control a company, making it “harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.”
However, many businesses may not be aware of the requirement, and the government has received only about 9.5 million filings as of December 1, which is about 30% of the estimated total. The Treasury Department has yet to respond to a request for comment on the number of BOI reports filed to date.
Businesses and owners who do not file may face civil penalties of up to $591 a day for each day their violation continues, which is adjusted for inflation. They can also face up to $10,000 in criminal fines and up to two years in prison.
The situation is concerning for small businesses, with one financial planner stating, “To a small business, suddenly you’re staring at a fine that could sink your business.” The government is urging businesses to file their information, but it seems that many are unaware of the requirement or are not taking the necessary steps to comply.