The Little Known Compliance Report That Could Cost You Thousands

It seems businesses have a never ending list of taxes and compliance reporting they have to follow. Now there is a new report you have to create. Failing to do so could cost you $500 for every day you fail to do so.

Learn about what this report is and your requirements to avoid these penalties. Almost every business is required to file this so it’s critical you comply.

[00:00:01.22] - Alice

The Books in the Biz, a podcast that looks at both the financial and operational sides of success. Please welcome our hosts, Dan Paulson and Richard Veltre. Dan is the CEO of InVision Development International, and he works with leaders to increase sales and profits through great cultures with solid operations. Rich is CEO of the Veltre Group and a financial strategist working with companies to manage their money more effectively. Now on to the podcast.

[00:00:32.25] - Dan Paulson

Welcome, everyone, back to Books and the Biz. Today, we talk about government compliance because it's so much fun. I'm not going to hide my feelings on this today, Rich. I think this is another one of those things where we get to jump through more hoops, and God forbid, you didn't know about this hoop. Now, hopefully by now, you've heard something about it. But I know that there's times where you forget to something, or you don't realize you have to do something, then you get penalized, then you do it, and then you ask for forgiveness, and they go, well, it doesn't matter that you didn't know, you should have known. Yes. Well, great. Great. So we're doing our civic duty today, to let you know about, at this time, I think is getting more known. I'm seeing more posts about it now. But up until now, I haven't really heard anything about it. And for those who are watching, I was kind enough to pull up the government website this is associated with. So the Financial Crimes Enforcement Network. You naughty, naughty people, what are you doing? I now have to fill out another report.

[00:01:44.04] - Rich Veltre

Rich, you're the finance guy, and actually, I'm starting to hear about this from the accountant. So this is directly linked to tax accounting in some way, shape or form, though it's not directly or directly linked in that most of the accountants are starting to talk about it, indirectly linked that you have to file yourself. I don't think the accountant can file for you. But Rich, maybe you can enlighten me on the Financial Crimes Enforcement Network, and the what, B OIS report that you now have to file before the end of the year?

[00:02:20.21] - Dan Paulson

Yeah. So accountants like myself, we only work when there's a pending in deadline.

[00:02:28.26] - Rich Veltre

So This one's coming up.

[00:02:32.26] - Dan Paulson

So I'll slap my own wrist for a second. But if you had an entity, you had a business that you registered with the Secretary of state, and this is actually the directions that if you're a sole proprietor, and you're just working under your own name, and you did not go out and actually register the business through a secretary of state, then you are not included in this list. So But if you set up LLLCs, S-corps, et cetera, up to a certain dollar amount of revenue, you have to go here and file a beneficial ownership report, which is what the BoI stands for. This law, a couple of years ago, and I forget which law it was, but I'm sure somewhere in this detail you'll see. But in the law, they said that they wanted everybody to register one time unless you had to go in and change information. But other than that, you're doing this one time. So if you had an entity that was formed before January first, 2024, you have the full year to go in and do your beneficial ownership report. You go to their website, you fill out, I think, just four pieces of information, which are like name, address, driver's license.

[00:03:55.02] - Dan Paulson

It's not an extensive report. You don't need a lawyer. You don't need an extensive number of advisors. I think it's just basically, if you own it, go in and put your name on it and file it once.

[00:04:08.07] - Rich Veltre

You do need images of your documentation, though. So get ready to take a picture of your driver's license and turn that in.

[00:04:13.01] - Dan Paulson

Okay. So I think you can But I think you still can appoint someone to do it for you.

[00:04:22.25] - Rich Veltre

Okay.

[00:04:23.17] - Dan Paulson

I believe you can. Now, I haven't actually done my own.

[00:04:29.10] - Rich Veltre

Oh, Yeah, I know.

[00:04:31.12] - Dan Paulson

Because I'm technically, while I could probably make the argument that I'm an accounting firm, I'm really more of a consulting firm. So the likelihood is I don't fit the definition. But accountants don't actually have to file it. They're in the exempt list. So I basically haven't done mine yet, but it looks to me like it's relatively easy. And I had planned on going ahead and doing this because I was formed in 2020. I don't remember 2022, we set these entities up for myself. And yes, I went through Secretary of State to do it. So I'm on the list. So I know that I have to file these by the end of the year. Now, if you filed for a new entity in that same way in 2024, you had 90 days to do it. So if you haven't done it already and you filed at the beginning of the year, I would jump up and down and run around and go find out how to do this because you're late. And I believe that just to give people a reasoning why the government decided to do this, I think it all goes back to the fact that if you think about it, there's a lot of people out there who have filed to set up a single member LLC.

[00:05:50.17] - Dan Paulson

So even though you filed for a single member LLC, which is through a secretary of State, you don't have a separate tax filing. Okay, it gets included in your personal tax return. So the government has lost track of the businesses that are operating in the United States. So they don't know who's out there. So they're basically saying everybody has to file because that will give them a roadmap of who owns what. Because if you think about it, if I go back to some of the advice I've given to people, we've set up a master LLC, and then we've I had separate LLLCs for little group activities. I used to call it the master, the mothership concept. So you file one tax return, and then legally, you set up separate entities, whether it's for real estate properties, whether it's for things that somehow you want to be legally separate. Those entities don't file separate tax returns. They file as part of the parent, which is great, because I've got 10 or so legal legally separated business is running, but I only file one tax return. My accountant only puts everything together and files once. So I pay one fee.

[00:07:09.27] - Dan Paulson

But the government can't see the 10 smaller entities, and that's why they're basically saying, you have to go back and tell us who owns what, because now they're trying to get back in some control over what entities are actually operating in the United States. They don't actually know.

[00:07:26.02] - Rich Veltre

So here's the five-year-old of me, Rich, going, why? I still don't understand why, because ultimately, I look at this from a taxation point of view. They're getting the tax because all that money flows through the entity, as you put it, and you pay for it through your personal taxes. Who cares if you got 10 different LLLCs, they all roll into one, and then that one pays. In my opinion, as long as you paid the tax and you've done your legal duty to do so, tough. Don't make more work for me, because this is just something else I forget.

[00:07:58.24] - Dan Paulson

I don't think that I actually don't think it's a tax reason. I think they've tied it because somewhere along the line, they're trying to get all the legitimate people to file. And that way, the people who are not legitimate will stand out in the Ether there that everybody else has filed except you. Why didn't you file? And I go back to the old movies that always say, we don't know who owns that building because it's a really complicated structure, and there's 50 seven different entities underneath it. When you finally get down to it, you have no idea who still owns the company. So that, I think, is what they're trying to get around. I think there's some things out there that they know people are operating. There's some networking, networking works that are working with these single member LLLCs that they just don't have track of who's who. And I think it takes too many people out of their site. And I'm not necessarily saying too many of the good people, because I think there's plenty of good people who are just going to do this, and it's going to be over, and it's no big deal.

[00:09:07.02] - Dan Paulson

But there's going to be plenty of other people who are going to go, I don't want anybody to know what I'm doing. Well, you're the person they're after. And they won't self-report anyway for that very reason. Yeah. So I don't believe. I truly don't believe that this is a tax reason. I don't believe it's anything other than the fact that the laws around the single member LLLCs and the disregarded entities and the laws around that have given too much shelter to the things that are out there, and they want to get a handle on it. So I mean, If you think about it, LLLCs are all formed at the state level. So the federal government doesn't have a database of who formed other than the IRS. So if the IRS got an EIN request, then they do have a database. But again, who knows if they're all tied in because those LLLCs could operate with cash, never have to open a bank account, never hire an employee. Maybe they didn't ask for an EIN because they don't have those two things. So it's possible. So that's why I think this is a one time push to get everybody to register, and then they have files.

[00:10:22.04] - Rich Veltre

Well, I have filled them out. They aren't overly tedious. I mean, if you've got the information you need, you know you need, it takes you roughly three to five minutes, I'd say, to fill it out beginning to end. For those who are listening, some of the key information you need is your EIN. So I do have a question about that, because there are certain entities that you do create that you might not have an EIN for, because as you pointed out, it's a pass through to another LLC. Well, okay, if it's asking for an EIN, I don't have an EIN for that particular LLC, then what do I do? The other information you need, as you highlight it, is some personal form of documentation to prove who you are, ie a driver's license. I think maybe a passport, Social Security number can be used as well, I believe. There's three different documents. I just went with the driver's license because that was the easiest one. And I know that number by heart, so that made it super easy for me. So that's really all the information asked for. It's not going into much more detail.

[00:11:28.04] - Rich Veltre

Oh, you're And the address, so your physical address of where the entity is located. So that's really about all you need. But I will be curious in those situations, for example, and I'll use the example, we have a LLC for a property we own. It's in a different state. In order to do things in that state, we had to get an LLC set up because we couldn't use our LLC in Wisconsin in that state. That one does not have an EIM because that LLC just basically transfers into our other one here. How are we going to report that one?

[00:12:05.17] - Dan Paulson

That's a great question.

[00:12:09.20] - Rich Veltre

Because if that's the problem we're trying to fix, I'm not really sure that's going to do it. I'm not going to get an EIM for something. Actually, they've changed the rules down there. So now we don't have room tax that we got to pay. So that creates another problem. I got to get rid of that. So that's a different story, but that's for another day.

[00:12:29.19] - Dan Paulson

Yeah. I started taking a look. I'm going to flip it through this while on camera for anybody who can't see me. There's a very extensive, frequently asked questions. For something that's supposed to be super sensitive, super simple, it's typical government 600 pages. So I may have to go look that up somewhere because I don't see it. You would think that would be one of the first questions in the frequently asked questions. But if that's what I need and I don't have one, how do I file? I don't know. I'll try to find out. Maybe we could do a supplement and say, Hey, by the way, last week's podcast, we had this open question. But yeah, I don't have an answer, unfortunately, to that piece because, again, some of the intention, this is what I think they're doing. This is what I think is the answer why. But But as in typical fashion, the how is probably the bigger nuisance.

[00:13:37.15] - Rich Veltre

Yes, it is. So some things to keep in mind with this. So why are we talking about this? I think we've figured out, okay, this is something you need to do. As I've mentioned in the description to this podcast, if you do not do it by the end of the year, you could be subject to fines of $500 per for every day it is not filed past them. So it doesn't take long to do the math on it to realize that in two weeks, you could have a pretty significant fine under your belt.

[00:14:12.21] - Dan Paulson

It's a big one. It's definitely a big one. I would not take it lightly. We actually had a meeting to go through, and I had someone start looking at every one of our clients that has tax returns and looking for what subsidia areas do you also have that might have been included in those tax returns. So we could have a master list and go back to the people that are on our list and say, Hey, you realize there's only one quarter left. So if you've done it already, let us know so we can take you off the list, and we don't hound you till the end of the year. But if you haven't done it yet, and you need help, then definitely get in touch with us. Don't wait till December 31st, when everybody's partying for the year-end, and I think someone needs to be in the office to do this. They won't be there. But, yeah, it's that important. The penalty, especially, is daunting enough. And I think that when they give people access to the database, which I think is the phase two of this, certain people will have access to it. And there's a nasty fine on whether if you use that information incorrectly or in an illegal way.

[00:15:24.21] - Dan Paulson

I think it's like a quarter of a million dollars or something is the fee.

[00:15:27.25] - Rich Veltre

So don't do that.

[00:15:28.27] - Dan Paulson

So If you're one of those people who needs this information for whatever reason, the government gives you a license to go ahead and use it, don't use it the wrong way because they're looking for ways to put money back in their pocket.

[00:15:43.17] - Rich Veltre

Oh, yeah, Definitely so. I just had a fleeting thought pass through my head on this as you were talking here, and I'm trying to remember what I was saying, so I'm going to sit here and talk a little bit. I guess one of the key things you... Oh, I know what it was. We touched base on at the beginning. I had heard through different sources that an accountant or somebody else cannot fill it out for you. You have to do it yourself. I will say, having filled out the report, I didn't see anywhere on there where you could check a box or somebody else could say filled out on behalf of. So I feel, and Rich, you can, again, this might be the addendum that we do on top of the other question we have, is I think you do have to fill it out yourself. I think it's better. It doesn't take that long. I think with the information you need, it's going to go a lot, lot quicker than to pass it off to, say, your accountant, because if your accountant is kind enough to do it for you, they're going to say, well, I need a cop, a a copy of X, which is going to probably be your driver's license so that they can fill it out.

[00:16:50.11] - Rich Veltre

And then they got to track you down, and that just slows down the process. Really, you're ahead to just fill it out yourself. We've got the website up here. So for those viewing it, the website is fincen.gov. If you go there, you will see all this information, the nice, scary Financial Crimes Enforcement Task Network. You'll see the Boi ownership information. I believe you can click on that. Oh, no, right here. It says, need to file a beneficial ownership information report. File your report now. Click the button. Takes you through the process. You can either print out a PDF and fill it out that way, and I believe either electronically send it or mail it in, or you can just do the online report. I highly recommend skip all those other steps, do the online report, take care of it. It's done. You will get an email back with the email you give them that lays out everything you put on that report. So you've got a copy of it, and along with a 20 or 30 digit alphanumeric confirmation code to prove that you filled it out. So it's pretty, I guess they would run out of numbers if you had to list every LLC out there.

[00:18:06.28] - Rich Veltre

So I think that's why they did that. But it is not hard to fill out. It's just, again, it's one of those things, and we can sit here, and that's part of the reason why we're doing this. I think there are a number of entities that are now starting to get the word out about this, because as you point out, Rich, deadline's approaching it. We're getting to the end of the quarter here, and it's got to be done by December 31st. So we're trying to make sure that everyone's aware of this, so you don't get the I told you so afterwards, even if you didn't. Because, again, the government doesn't care. If you didn't know, well, you should have known. That's the stuff I hear. It doesn't matter if we didn't tell you. You just should figure this out, because really, there wasn't a lot of direct information coming from the feds on this one that I remember. I don't see any news stories. I really don't see anything. The first time I heard this mentioned was about a year ago this time, I was talking with a colleague of mine. He says, hey, keep your eyes out for this.

[00:19:00.11] - Rich Veltre

He's in the financial industry. So I think he had a heads up a little bit earlier. But here again, we're back to that situation, where if you don't know, it doesn't matter. You're going to have to be compliant. So be sure you follow up on it.

[00:19:15.16] - Dan Paulson

Yeah. I think the other thing, too, if you go to this website, there is a frequently asked questions button somewhere on that page that I can't really see on this really small screen.

[00:19:24.20] - Rich Veltre

It's hidden here somewhere.

[00:19:26.13] - Dan Paulson

Yeah. But I think there's a frequently asked questions thing in there. And it does talk about who can do this for you? That thing. And it gets a little convoluted. So if it's a really simple deal for the small business owners that are listening, just go in, do it yourself. It's really easy to do. If your accountant asks you, let them know, Yes, I did it. There are plenty of people out there pitching to do this for you for a fee.

[00:19:57.03] - Rich Veltre

For a fee?

[00:19:57.23] - Dan Paulson

For a fee. So I don't know how those people People are actually doing it, whether you have to sign a power of attorney or whether it's something else that says you're going to do that. But like you said, you have to give a driver's license. So I have a couple of clients that I know I'm going to wind up having to file this for. And I've been working for them for a long, long time. So if I had to put my driver's license in, I would do it because I'm not worried that I would be incorrect. But I think to keep it nice and easy, I would just go ahead, jump on, file the forms. It's that simple. I think it's really just we just want to know who owns what. So for each entity, do the report, avoid the penalty, put it all in a file, and sleep well at night. I mean, that's really what it comes down to.

[00:20:44.02] - Rich Veltre

There's no- Hopefully.

[00:20:45.03] - Dan Paulson

I don't think that... Yeah, hopefully. But other than that, I think other people will have a little bit more difficulty, especially if they're operating with multiple entities in a complicated structure. Then I think I would talk to your accountant or your lawyer and say, what do we have to do here? What has to get done? How do we do it? Can you do it for me? And then at that point, I would say, sign the power of attorney. Let them do it. But for the small business owner, just go online. Make sure you've done it, at least for the entity that you're running, and make sure you're compliant.

[00:21:25.01] - Rich Veltre

Yes, exactly. It looks like the information you were talking about is actually under the beneficial ownership information icon, which is just below where it talks about filing for the report. There's three separate icons, one has the BoI in it. That's the one you want to click on. It takes you to a bunch more information next to the money services, business information, e-filing and SAR statistics. So that's the one you click on, you go in there. They've got a nice little video, a five minute demo on how to fill out the report. They have frequently asked questions pages that you're talking about. They have some alerts up here. It sounds like as we're talking about this, Vincent has learned of fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements. So this is going back to what you said. Maybe those entities out there looking to make a quick buck on this might want to be careful with who you choose for that. Let's just leave it at that. But there's tons of on here. Again, in typical government fashion, there's 100 pages to explain what should be done in two sentences, but they've got that covered.

[00:22:39.20] - Rich Veltre

So that's really what you got to do, and that's what we're talking to you about today. Rich, any other things we got to bring up about this, or do you think we've got it pretty well covered? Is this a simple report?

[00:22:51.13] - Dan Paulson

No, I think it's pretty straightforward. Clearly, like I said, that document talking about The frequently asked questions, there's a lot of questions there. So they're really trying to cover their basis so that you don't have an issue. I would probably look there first. If you don't see the answer to your question, just reach out. There's plenty of people now that know. I mean, your accountants all know. So it's definitely been something that has been out there, at least for the last few months, that it's finally taken hold, that this is something that has to get done. So there's plenty of people who can help you just know that it's out there and do what you have to do.

[00:23:35.21] - Rich Veltre

Good point. And if for some reason you don't know somebody, I'm sure Rich, you could probably always help them. What's the best way to get a hold of you?

[00:23:43.22] - Dan Paulson

Send me an email, rveltre@veltregroup.com.

[00:23:47.08] - Rich Veltre

And if you can't get a hold of Rich, you can always get a hold of me, though I won't be able to help you much on this one. I will probably defer you to Rich, but you can get a hold of me at danpaulsonletsgo.com. We encourage you to check out this and other episodes of Books in the Biz at b-O-O-K-S, the letter N-B-I-Z. Com. And yeah, hopefully we have more wonderful information to share. Rich, we're getting towards the end of the year. We probably have to do an end of year account and wrap up sometime in Q4, so I'm sure that'll be fun. But other than that, thank you all. Rich, till next week.

[00:24:23.17] - Dan Paulson

Till next week.