BOI Reporting Requirements

(BOI) Reporting is fairly new requirement by FinCEN that applies to year 2024 and going forward. Here are the steps that I want business owners to take:

1. Be aware of this new requirement by simply reading through the attachment or scheduling a call and I will walk you through it.
2. Identify if you’re subject to the filings. Most small businesses will be subject to filing.
3. Gather Information and file the BOI Report online.
4. On the application (Request to Receive FinCEN ID). It’s not required but strongly recommended.
5. File Updated or Correction to BOI Reports within 30 days of change.
6. Stay Compliant and avoid penalties (up to $500 each day).

The Initial Filings Deadlines:

• For businesses formed prior to 2024 – the deadline is December 31, 2024.
• For businesses formed after 2024 – the deadline is 90 days after formation.
• For businesses formed after 2025 – the deadline will be 30 days after formation.

Updated or Correction Filing Deadlines:

• 30 Days after the change or discovery of a mistake.

If you need assistance with filings, please contact us by scheduling a call.

I would like to bring your attention to important filings for small businesses that were introduced in 2023 and have become a requirement in 2024.

BOI (Beneficial Ownership Information) is a reporting requirement with the federal government filed on https://boiefiling.fincen.gov/. I have prepared more information for you; please see the attachment.

The deadline for businesses existing prior to 2023 is the end of 2024, so you have plenty of time to file. However, for new businesses, the deadline is 90 days.

Most of you will be able to file these reports independently. However, if you need me to file those reports, please make sure you let me know, provide all requested information, and be aware there will be a $100 fee from us.

With that said, feel free to research if you have any questions or concerns. Best regards.

1. 1099s Filing Requirements Deadline: January 31st, 2024.

Here are scenarios under which you will be required to file 1099s:

a. Payment to an unincorporated entity (generally an individual) of $600 or more in annual compensation for services.

b. Running a corporation without payroll will require at least one 1099 to be issued to owners.

c. Rental activities where owners perform some type of management activities.

2. Phone Calls: Schedule in Advance.

During the tax season, things will get busy. I rely on you to take the initiative and reach out to me. The best way is to schedule a phone call where we can discuss things, resolve ambiguities, review documents, and tax returns. This is especially important for new clients. Please note that scheduling periodic phone calls will provide the best value for the service, allowing us to discuss each topic more extensively instead of cramming everything into a single call.

3. Submitting Tax Documents for 2023.

This week, I will send you an invitation to complete business and personal applications and upload documents. The invitation will be sent via email. This process is done annually to ensure that we account for all the changes you make in any particular year. If you’re struggling to complete the application and need assistance, please schedule a call, and I will walk you through the process.

For first time filers, once you receive an invitation, you will need to create an account for personal tax filings with Pro-Connect, using your email and chosen password. For business tax filings, if you’re operating a partnership or corporation, create an account accordingly. For those with a Single Member LLC, two PDF applications are attached, one is for Small Business and the second is for Rentals. Those should be filled out and submitted with personal filings.

On your personal return if you’re a first time filer and claiming dependents, please complete PDF application and attach it with your personal filings.

Thank you for your attention to these matters.

I would like to break Tax Projection into 2 types:

Simplified Projection – where the main adjustment is for business activity, all else assumed the same as last year unless you explicitly notify us of other adjustments.

Complexed Projection – where all adjustments are considered as long as provided by the client plus tax assumptions that could provide you with Scenario#2 which is a hypothetical “what if” type of scenario. This type of projection must be requested by the client.

The Tax Projection should have 2 phone calls:

• First – review business activities and bring books up to date; notify me of any other adjustments from the previous year.
• Second – review prepared tax projection with advisor.

If you would like to receive Tax Projection timely and accurately, we are running out of time.

Tax Projection Sample
Purpose of Tax Projection

1. Sales of Primary Home.
2. Home Office.
3. Retirement Accounts.
4. Tax Projection.

Sales of Primary Home:
If you’re planning to sell your primary home and would like to understand the tax consequences of the sale, please review the brief presentation. It covers calculations and important facts surrounding the sale and Section 121 exclusion.

Home Office:
While most small businesses already claim a home office, this presentation serves as a reminder of the requirements and benefits associated with a home office deduction.

Retirement Accounts:
As we approach the end of 2023, I recommend considering the setup and contribution to retirement accounts. Additionally, I’ve included information on another plan, the Defined Benefit Plan: Cash Balance. This plan allows for substantial contributions, but it is typically more expensive and has commitment requirements.

Tax Projections:
For those subscribed to Tax Advisory services who would like a tax projection to better understand your tax situation before year-end, please schedule a call-in early December. In the notes for the appointment, type ‘Tax Projection 2023.’ Attached is a sample of a Tax Projection for your reference.

Thank you for your attention, and I look forward to discussing these matters with you.

1. Income Recognition.
2. Hobby Loss Factors.
3. Bonus Depreciation.
4. Priority List.

Income Recognition:

Generally speaking, there are two methods of accounting: Cash and Accrual. As a small business, you most likely fall under the Cash Method of accounting. It’s important to understand these methods because they dictate when income is reported and taxed. For clients with long-term projects or those who accept prepayments and wish to defer income recognition, it’s crucial to grasp the basic concept that the IRS uses to determine when income should be recognized. For more information, please refer to the attached document.

Hobby Loss Factors:

A business loss can be a valuable benefit, potentially reducing your tax liability and even leading to tax refunds by offsetting other income. However, it’s essential to be aware that statistically, the IRS tends to audit taxpayers who consistently report business losses. The general rule is that if you have experienced a loss in 3 out of 5 years, the IRS may scrutinize your business activities to assess whether there is a genuine intent to make a profit. To gain a better understanding of IRS factors and how they might apply to your situation, I have provided a fact sheet in the attached document. Please review it for more information.

Bonus Depreciation Phase-out, using section 179 as alternative:

The 100% bonus depreciation is currently in a phase-out process, meaning that for assets placed in service in 2023, you can only deduct 80% as bonus depreciation. This reduction will continue until 2027. While bonus depreciation is a valuable option for reducing income, it’s important to note that there is an alternative option, Section 179, which allows you to deduct certain assets placed in your business, but only up to the amount of profit shown for the year. Section 179 is also permitted by most states with income taxes, unlike Bonus Depreciation, which is primarily a federal tax phenomenon. If you’ve put significant assets into service this year, it’s advisable to schedule a call to discuss how these changes in bonus depreciation may impact your tax return.

Priority List:

For new business owners who subscribe to my services, I have created a worksheet designed to assist you in prioritizing essential tasks for your business. When launching a small business, it’s common for owners to become overwhelmed, either by taking on too many small tasks or by concentrating on the wrong priorities. I believe that creating a list of business priorities can help you maintain focus and motivation. It’s important to remember that running a small business may often make you feel like a “jack of all trades,” but the reality is quite different. Those who seek solutions and are willing to delegate tend to outperform those who attempt to handle everything themselves. Therefore, it’s crucial to focus on tasks where your expertise shines and acquire new skills that can bring significant value to your business while delegating smaller tasks to hired assistance. This worksheet can serve as a valuable starting point to keep you organized and focused.

Looking forward to hearing from you.

Although I am a strong proponent of not overpaying taxes, making a conservative payment is a great strategic decision to lower tax burdens during the filings. Now, making payments could be a confusing process, and misapplied payments could create a messy situation. Therefore, if you have not made any estimated payments in the past, please schedule a call with me, and I will walk you through the process.

There may be other reasons to schedule a call as well.
When to Pay Estimated Tax

Bookkeeping Review:
It is important to regularly review your books, not just annually, to ensure that everything is properly categorized and to catch any discrepancies between bank and credit card balances. This review will help you gain a better understanding of your business and plan ahead in the short and long term.

Reimbursements:
As previously mentioned, business reimbursements should be recorded properly and reimbursed periodically. This includes expenses such as Home Office, Telephone, Mileage, and any other expenses paid via personal accounts instead of the business. We can assist you in ensuring that these reimbursements are handled correctly.

Payroll Adjustments:
For those of you who have an ongoing payroll, it may be necessary to review your payroll for adjustments. As mentioned before, payroll can is an expensive way to compensate yourself. If your business is not performing well, it may be worth considering reducing payroll and taking out owners’ distributions. We can discuss this further during our call.

Tax Returns on Extension:
While most of our clients have already filed their business and personal tax returns, there are still some who have requested extensions for various reasons. If you know that your return is on extension, please schedule a quick call with us to review the situation and establish an expectation for filing those returns.

Other Considerations:
If you have any questions or concerns related to your business and would like to discuss them with us, now is a great time to do so. We are here to help and share our expertise.

Presentation

Budgeting for the Next Year:
Financial statements provide essential data for preparing budgets and making informed decisions about the upcoming year.

Valuation of Your Business:
Investors and potential buyers rely on financial statements to determine the value and worth of your business. Keeping clean financials often pay dividends, small businesses generally sold for 2-3x of owner’s annual compensation.

A Simple Overview with a CPA’s Conform Letter:
In various dealing with clients or banks, having well-organized financial statements validated by a Certified Public Accountant could be a matter of getting more business or securing a loan.

Financial Compilation, Review, and Audit:
If your business ever requires large loan, tries to participate in state or federal programs your Financial Statements might be require go through a process of compilation, review, or audit. Although small businesses typically don’t follow Generally Accepted Accounting Principles (GAAP) having structured financial will allow you to easily make necessary adjustments to comply with GAAP.

Our bookkeeping services encompass a smooth transition. It’s important to note that if you subscribe to our bookkeeping services, we will gradually adopt the concepts discussed, unless you object to the changes. If you have any objections, please send me a direct message, or schedule a call.

Offered Assistance with Advisory services. If you are subscribed to our Advisory Services and wish to enhance your financial reports, please feel free to schedule a call. I will guide you through the process.

Rest assured; this process will have no impact on your tax filings. The purpose of these changes is to improve financial reporting, and they will not affect your tax obligations.

The main intention of this presentation is to educate owners without any intention of imposing decisions.

So, which medical expenses will qualify?
Medical Expense Estimate Sheet.

We have prepared a worksheet with the most common, qualified expenses.
You can use the worksheet to calculate your estimated medical expenses and health insurance for a year. Once you have the Grand Total, you can estimate tax savings with a simple formula:

If your business is not an S-corp. or LLC taxed as an S-corp.:
(Grand Total) * 30% = Tax Savings.

If your business is an S-corp. or LLC taxed as an S-corp.:
(Grand Total) * 15% = Tax Savings.

*Please note that calculation is only an estimation, the percentage and the total Expense are subject to change.

Keep in mind:

• Sec 105 (HRA) fee starts at $350 annually.
• The HRA needs to be established before the occurrence of medical expenses in order to qualify for reimbursements and business deductions.
• Non-compliant HRA plans are subject to fees and penalties by IRS.

*More information on qualified medical expenses could be found with IRS Publication 502.

*If you have your own policy through the state or a private health insurance policy, your premiums will be eligible.