Warning: BOI Hazard

Published: Jan 25, 2024

BOI reporting brings strict deadlines and significant penalties, with many CPAs facing legal and insurance limitations. Here’s what firms should consider as the rules take effect.

 

By Janet C. Hagy, CPA-Austin 

 

Beneficial ownership information (BOI) reporting to FinCEN is unlike other compliance reporting that accountants are permitted to prepare for our clients. For the reasons discussed below, TXCPA and AICPA have issued extensive information on their websites. (See TXCPA BOI resources, AICPA BOI resources.) FinCEN has also published guides, forms and instructions for BOI reporting.  

The primary concern for CPAs is whether preparation of the new FinCEN BOI form constitutes the practice of law. Accountants have been specifically granted authority to prepare other FinCEN forms, for example Form 114, commonly referred to as FBAR, because the filing of this form is under the jurisdiction of the IRS. BOI reports are filed directly with FinCEN. For this reason, many professional liability insurance carriers are advising CPAs that they are not covering preparation or consulting services related to BOI reporting.   

For companies created or registered after Jan. 1, 2024, the filing deadline is 90 days after creation or registration. For companies existing before Jan. 1, 2024, the filing deadline is Jan. 1, 2025, to file an initial report. For companies created on or after Jan. 1, 2025, the filing deadline is 30 days after creation or registration. Updates to previously reported information are due within 30 days of the change. These deadlines are tight and do not correspond to the normal cycle of business most CPAs experience with their clients.   

The penalties for failure to timely file initial and ownership change reports are astounding. Willful failure to complete or update BOI forms can cause a company or its senior officers to be penalized up to $591 per day with possible criminal penalties including imprisonment of up to two years and/or a fine of up to $10,000.

Companies that typically stand in as registered agents in other states like CT Corporation are offering to prepare BOI reports for their customers. Fortunately, we have an option to refer our clients to these services. 

Although the summary of exemptions from BOI reporting states that accounting firms are exempt, only accounting firms registered in accordance with Section 102 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7212) (PCBOA) are exempt.  

Whether to advise your clients about the reporting requirement or accept engagements to prepare forms, and what to include or not include in engagement letters, are crucial topics to discuss with your attorney and professional liability insurance carrier as soon as possible. 

 

 

 

 

 

Topics:

You May be Interested in

  • The Verdict is In. The Texas Franchise Tax is GILTI, Raising New Questions and Potential Issues
    Beginning with the 2026 report year, the Texas Comptroller will align the franchise tax with the current Internal Revenue Code, likely requiring GILTI to be included in total revenue. This change raises sourcing, statutory and potential constitutional questions for businesses with foreign operations, creating new uncertainty and possible tax impacts.
  • NIL Income for Student-Athletes: Tax Implications and Emerging Pitfalls for Practitioners
    The expansion of NIL opportunities has created complex tax issues for student-athletes, whose income is generally treated as self-employment business income. Common pitfalls include unreported non-cash compensation, multi-state tax exposure, weak recordkeeping and limited financial literacy, all of which heighten audit risk. As IRS scrutiny increases and new reporting rules emerge, CPAs must understand these challenges to effectively advise this growing group of taxpayers.
  • Data Processing Services – SaaS and Software Licenses
    Cloud-based SaaS is treated as a taxable data processing service in Texas, with 80% of the sales price subject to sales tax, compared with 100% taxation for traditional software licenses. Taxpayers using SaaS in multiple states can further reduce Texas tax by allocating the software’s usage between Texas and non‑Texas locations. This often results in significant savings and may allow refunds for past overpayments.
More News

Support the Next Generation

Donate to TXCPA scholarships and help aspiring accountants achieve their goals.

Scholarships