Millions of small companies this year have a limited time to report information on their "beneficial" owners as part of efforts of the federal Corporate Transparency Act via the U.S. Treasury's Financial Crimes Enforcement Network.
As often happens with confusing new compliance mandates, affected businesses might turn to their accounting firms for help. Are firms the best source for how to help clients report beneficial ownership information to the feds? Maybe. Firms have begun fielding inquiries — but must guard what they say.
"We've informed clients that they're responsible to file the BOI information," said Scott Kadrlik, managing partner at Meuwissen, Flygare, Kadrlik & Associates, in Eden Prairie, Minnesota. "The data needed is very personal and, once they gather it, they can easily file the information rather than pay us to do so."
"We represent many businesses and very few asked us about BOI reporting requirements," said Gail Rosen, a CPA in Martinsville, New Jersey. "We did have one new business that started in 2024. They are knowledgeable and knew about the BOI requirements and were able to fulfill the filing on their own."
Top 100 Firm Sikich has made the decision not to offer BOI reporting services. "Due to the information needed and the rules related to when BOI reporting is necessary, Sikich has taken the stance that our clients should reach out to their attorneys or handle it in-house," said Neil Keller, Milwaukee-based partner-in-charge of tax. "We have sent out communications to our clients, provided information on our website and encouraged our team members to remind clients of the new reporting rule."
Burden
"The BOI reporting requirement will create a big burden for accounting firms that provide these services, since some fairly common situations, such as if a beneficial owner moves, can create a new filing requirement — requiring the accounting firm to not only know about that move, but file a new BOI report within 30 days or face potential late-filing penalties," Keller said.
Penalties for willfully violating the requirement can rise to hundreds of dollars a day, criminal fines and imprisonment.
"This filing requirement falls on smaller businesses, being that entities that reported more than $5 million of gross receipts on their prior year income tax return combined with having more than 20 full-time employees are exempt from filing," Rosen added.
In early March a federal judge in Alabama
When trying to help clients with BOI, accounting firms run a major risk of off-the-cuff advice constituting legal practice. According to the AICPA/CIMA webinar "
But obviously the CTA/BOI reporting situation is changing frequently. "We're also hoping the AICPA will convince FinCEN to delay the reporting for another year," Kadrlik said.
In a letter sent to leadership of the Senate Banking Committee and the House Financial Services Committee in February, the AICPA warned that despite extensive outreach and education efforts to inform small businesses of their new obligations concerning BOI, many remained "broadly unaware" of their reporting requirement.
"We believe the rule should be suspended until the small business community is considered well-informed of their requirement," said the letter.
Insurance risk
Carriers have begun to address potential coverage questions for accounting and the BOI. For example, CNA's accountants professional liability policies generally will cover "professional services associated with the CTA by an insured accounting firm," the carrier says in its primer,
But "two issues presented by the CTA may raise additional coverage implications," the carrier adds.
"First, some commentators have speculated that certain activities that may be performed by accounting firms in order to assist a client with their compliance with the CTA could involve the practice of law. In many jurisdictions, practicing law without a law license is considered a criminal offense. Second, FinCEN's Frequently Asked Questions regarding beneficial ownership information reporting … states that "an individual who willfully files a false or fraudulent beneficial ownership information report on a company's behalf may be subject to the same civil and criminal penalties as the reporting company."
"Our malpractice insurance carrier has told us that they will not insure us if we file the BOI, as it's considered an unauthorized practice of law by an accountant," New Jersey's Rosen said.
For now, firms are left trying to handle a shifting new requirement for business clients in the middle of another hectic season.
"This requirement is a huge, unfair burden for accounting firms, especially smaller firms," Rosen said. "When we reach out to clients and tell them they must fulfill this requirement, some clients will bombard us with questions, some clients will ignore it and some will not be able to do this on their own."
"I fear that accountants will be on the receiving end of this problem," she added.
