Important Information about the Corporate Transparency Act

Important Information:

RE: Corporate Transparency Act — Beneficial Ownership Information Reporting Requirement

Starting January 1, 2024, a significant number of businesses will be required to comply with the Corporate Transparency Act (“CTA). The CTA was enacted into law as part of the National Defense Act for Fiscal Year 2021. The CTA requires the disclosure of the beneficial ownership information (otherwise known as “BOI”) of certain entities from people who own or control a company.

It is anticipated that 32.6 million businesses will be required to comply with this reporting requirement. The intent of the BOI reporting requirement is to help US law enforcement combat money laundering, the financing of terrorism and other illicit activity.

The CTA is not a part of the tax code. Instead, it is a part of the Bank Secrecy Act, a set of federal laws that require record-keeping and report filing on certain types of financial transactions. Under the CTA, BOI reports will not be filed with the IRS, but with the Financial Crimes Enforcement Network (FinCEN), another agency of the Department of Treasury.

Below is some preliminary information for you to consider as you approach the implementation period for this new reporting requirement. This information is meant to be general-only and should not be applied to your specific facts and circumstances without consultation with competent legal counsel.

What entities are required to comply with the CTA’s BOI reporting requirement?

Entities organized both in the U.S. and outside the U.S. may be subject to the CTA’s reporting requirements. Domestic companies required to report include corporations, limited liability companies (LLCs) or any similar entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.

Domestic entities that are not created by the filing of a document with a secretary of state or similar office are not required to report under the CTA.

Foreign companies required to report under the CTA include corporations, LLCs or any similar entity that is formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by filing a document with a secretary of state or any similar office.

Are there any exemptions from the filing requirements?

There are 23 categories of exemptions. Included in the exemptions list are publicly traded companies, banks and credit unions, securities brokers/dealers, public accounting firms, tax-exempt entities and certain inactive entities, among others. Please note these are not blanket exemptions and many of these entities are already heavily regulated by the government and thus already disclose their BOI to a government authority.

In addition, certain “large operating entities” are exempt from filing. To qualify for this exemption, the company must:

a)    Employ more than 20 people in the U.S.;

b)    Have reported gross revenue (or sales) of over $5M on the prior year’s tax return; and

c)     Be physically present in the U.S.

Who is a beneficial owner?

• Any individual who, directly or indirectly, either:

• Exercises “substantial control” over a reporting company, or

• Owns or controls at least 25 percent of the ownership interests of a reporting company
  

An individual has substantial control of a reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title or if they have no ownership interest in the reporting company.

The detailed CTA regulations define the terms "substantial control" and "ownership interest" further.

When must companies file?

There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the beneficial owner’s information.

 - New entities (created/registered in 2024) — must file within 90 days

·       New entities (created/registered after 12/31/2024) — must file within 30 days

·       Existing entities (created/registered before 1/1/24) — must file by 1/1/25

·       Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file within 30 days

What sort of information is required to be reported?

Companies must report the following information: full name of the reporting company, any trade name or doing business as (DBA) name, business address, state or Tribal jurisdiction of formation, and an IRS taxpayer identification number (TIN).

Additionally, information on the beneficial owners of the entity and for newly created entities, the company applicants of the entity is required. This information includes — name, birthdate, address, and unique identifying number and issuing jurisdiction from an acceptable identification document (e.g., a driver’s license or passport) and an image of such document.

Risk of non-compliance

Penalties for willfully not complying with the BOI reporting requirement can result in criminal and civil penalties of $500 per day and up to $10,000 with up to two years of jail time. For more information about the CTA, visit www.aicpa-cima.com/boi.

 You can file online HERE

Please contact our office with any questions or concerns.

IRS announces moratorium on processing new employer retention credit claims

The IRS announced an immediate moratorium through at least the end of the year on processing new employer retention credit (ERC) claims.

According to the IRS release—IR-2023-169 (September 14, 2023)—the moratorium will allow the IRS to add more safeguards to prevent abuse and protect businesses from predatory tactics.

The IRS will continue to work on ERC claims received prior to the moratorium, but increased fraud concerns means processing times will be longer. In addition, payouts for these claims will continue during the moratorium period but at a slower pace due to detailed compliance reviews (i.e., existing ERC claims will go from a standard processing goal of 90 days to 180 days—and much longer if the claim faces further review or audit). The IRS noted that it has already referred thousands of ERC cases for audit.

The IRS is also developing a settlement program for repayments for those who received an improper ERC payment (more details will be available this fall), as well as a special withdrawal option for those who filed an ERC claim that has not been processed.

In addition, the IRS announced that it is working with the Justice Department to address fraud in the ERC program. A related IRS release—IR-2023-170 (September 14, 2023)—warns businesses to watch out for “aggressive marketing by nefarious actors” involving the ERC and urges people to watch out for “red

flags.”

Are you eligible?

According to Virginia Tax;

The 2022 Virginia General Assembly passed a law earlier this year giving taxpayers with a liability a rebate of up to $250 for individual filers and up to $500 for joint filers.

Not every taxpayer is eligible. If you had a tax liability last year, you will receive up to $250 if you filed individually, and up to $500 if you filed jointly. Tax liability is the amount of tax you owe throughout the year minus any credits (like the credit for taxes you paid to another state or the credit for low income individuals), deductions, or subtractions.

You can check your eligibility using our rebate lookup tool.  If you still have questions about your eligibility, check out these common scenarios for more information.

Happy Labor Day

From all of us at

BJ Kane & Co.

Our offices will be closed on Labor Day, Monday, September 5th.

Wishing you and your families a safe and happy holiday weekend.

Happy Holidays From BJ Kane & Co.

For many people, 2020 has been a disruptive, frustrating, heartbreaking, and disorienting year. But as December winds down, it's also an opportunity to take stock of the things that happened and some silver linings hidden amongst the chaos. Here are some of our silver linings.

• We built things at home that probably otherwise would not have gotten built.

• We watched shows that, in ordinary times, we probably wouldn't have time to view.

• We counted our blessings more than we usually do.

• We were able to keep their employees employed with the PPP loans.

• We probably told our loved ones that we loved them more than we used to.

• Random acts of kindness were at an all-time high.

• We got to know our clients at a more intimate level than we had ever known them before.

• Giving back to our community became more of a priority than it had been in years past.

• We became more proficient at cooking, cleaning, and using our computers.

We are grateful for all of the lessons we have learned this past year. We wish everyone a safe and Happy Holiday season. Please join us in helping our neighbors in need by raising $2000 for Arlington Food Assistance Center. Our fundraiser will last until January 6, 2021. Here's to a fresh start in 2021, Happy New Year. 

Senate Nears Deal to Extend PPP Spending Window

WASHINGTON—The Senate worked to coalesce on a deal that would double the amount of time businesses have to spend loans obtained through the Paycheck Protection Program, which is designed to help keep workers on payroll during the coronavirus epidemic.

“We have an agreement in principle on the basis of the language. We’re awaiting technical feedback from our Democratic colleagues,” Sen. Marco Rubio (R., Fla.) told reporters, with senators aiming to pass it as early as Thursday through unanimous consent before leaving Washington until June.

The change to the program would extend the time period to 16 weeks, and must be approved by the House. Under the current rule, the earliest recipients of PPP funds must finish using them by May 29.

Separately, House Democrats are expected next week to bring to the floor a bill to change the $660 billion program’s time frame, and change accessibility requirements. To become law, either bill would have to pass both chambers and be signed by the president.

IRS Update

The Treasury Department and the Internal Revenue Service are providing special payment relief to individuals and businesses in response to the COVID-19 Outbreak. The filing deadline for tax returns remains April 15, 2020. The IRS urges taxpayers who are owed a refund to file as quickly as possible. For those who can't file by the April 15, 2020 deadline, the IRS reminds individual taxpayers that everyone is eligible to request a six-month extension to file their return.

This payment relief includes: 

Individuals: Income tax payment deadlines for individual returns, with a due date of April 15, 2020, are being automatically extended until July 15, 2020, for up to $1 million of their 2019 tax due. This payment relief applies to all individual returns, including self-employed individuals, and all entities other than C-Corporations, such as trusts or estates. IRS will automatically provide this relief to taxpayers. Taxpayers do not need to file any additional forms or call the IRS to qualify for this relief.

Corporations: For C Corporations, income tax payment deadlines are being automatically extended until July 15, 2020, for up to $10 million of their 2019 tax due.

This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020.

Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. If you file your tax return or request an extension of time to file by April 15, 2020, you will automatically avoid interest and penalties on the taxes paid by July 15.

The IRS reminds individual taxpayers the easiest and fastest way to request a filing extension is to electronically file Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses must file Form 7004.

This relief only applies to federal income tax (including tax on self-employment income) payments otherwise due April 15, 2020, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details. More information is available at https://www.taxadmin.org/state-tax-agencies.

COVID-19 Update

At B.J. Kane & Company, P.C. the health of our team members, clients and community partners are of the utmost importance. With rumors circulating about the possibility of extending the filing season,  we want to make sure to keep the lines of communication open with you as it relates to our services. As of this writing, we are operating under the assumption that filing deadlines will not be changed. However, as this is a rapidly evolving situation, we are prepared for various different scenarios and will keep you informed of any decisions made by the Federal government or taxing authorities.

In an effort to maintain the highest level of safety for our staff and our clients, we have decided to limit the amount of people coming in and out of our office.  Therefore, we will not be scheduling any in person meetings for the foreseeable future.  We will, however, continue to conduct conference calls and utilize remote meeting software and applications.  If you already have an in person meeting scheduled with one of our staff members, our Administrative department will be reaching out to you in the next couple of days to either reschedule or change to a conference call/virtual meeting.   We also ask that you utilize our secure portal, Federal Express, or other postal services when sending us your information/documents rather than dropping off at our office.  If you must drop off in person, please let us know prior to your arrival and one of our staff members will coordinate drop off with you.    

While many things are currently unknown, please be assured that we are monitoring the situation as it relates to your obligations with your federal and state income tax returns and our staff continues to work on a normal schedule to ensure timely filings.  As additional information becomes available, we will continue to communicate with you all.  Should you have any questions or concerns, please do not hesitate to reach out to a member of your B. J. Kane team.

Tax Law Changes 2018, 10 of 10

Education tax breaks

Earlier versions of the tax bill called for reducing or eliminating some education tax breaks, but the final version does not. Specifically, the Lifetime Learning Credit and Student Loan Interest Deduction are still in place, and the exclusion for graduate school tuition waivers survives as well.

One significant change is that the bill expands the available use of funds saved in a 529 college savings plan to include levels of education other than college. In other words, if you have children in private school, or you pay for tutoring for your child in the K-12 grade levels, you can use the money in your account for these expenses.

Tax Law Changes 2018, 9 of 10

The marriage penalty is (mostly) gone

One thing to notice from these brackets is that the so-called marriage penalty, which many Republican leaders (including President Trump) wanted to eliminate, is almost absent.

If you're not familiar, here's a simplified version of how the marriage penalty works. Let's say that two single individuals each earned a taxable income of $90,000 per year. Under the old 2018 tax brackets, both of these individuals would fall into the 25% bracket for singles. However, if they were to get married, their combined income of $180,000 would catapult them into the 28% bracket. Under the new brackets, they would fall into the 24% marginal tax bracket, regardless of whether they got married or not.

In fact, the married filing jointly income thresholds are exactly double the single thresholds for all but the two highest tax brackets in the new tax law. In other words, the marriage penalty has been effectively eliminated for everyone except married couples earning more than $400,000.

Tax Law Changes 2018, 7 &8 of 10

The 2018 tax brackets

In President Trump's campaign tax plan, he proposed reducing the number of tax brackets from seven to three, and the House of Representatives' original tax reform bill contained four brackets. However, the final bill kept the seven-bracket structure but with mostly lower tax rates.

For comparison, here are the 2018 tax brackets that were set to take effect under previous tax law.

Tax Law Changes 2018, 6 of 10

Education tax breaks

Earlier versions of the tax bill called for reducing or eliminating some education tax breaks, but the final version does not. Specifically, the Lifetime Learning Credit and Student Loan Interest Deduction are still in place, and the exclusion for graduate school tuition waivers survives as well.

One significant change is that the bill expands the available use of funds saved in a 529 college savings plan to include levels of education other than college. In other words, if you have children in private school, or you pay for tutoring for your child in the K-12 grade levels, you can use the money in your account for these expenses.

Tax Law Changes 2018, 5 of 10

Capital gains taxes

The general structure of the capital gains tax system, which applies to things like stock sales and sales of other appreciated assets, isn't changing. However, there are still a few important points to know.

For starters, short-term capital gains are still taxed as ordinary income. Since the tax brackets applied to ordinary income have changed significantly, as you can see from the charts above, your short-term gains are likely taxed at a different rate than they formerly were.

Also, under the new tax law, the three capital gains income thresholds don't match up perfectly with the tax brackets. Under previous tax law, a 0% long-term capital gains tax rate applied to individuals in the two lowest marginal tax brackets, a 15% rate applied to the next four, and a 20% capital gains tax rate applied to the top tax bracket.

Instead of this type of structure, the long-term capital gains tax rate income thresholds are similar to where they would have been under the old tax law. For 2018, they are applied to maximum taxable income levels as follows:

Finally, the 3.8% net investment income tax that applied to high earners stays the same, with identical income thresholds. If Congress is successful in repealing the Affordable Care Act, this could potentially go away, but it remains for the time being.

Tax Law Changes 2018, 4 of 10

Tax breaks for parents

I mentioned earlier that the personal exemption is going away, which could disproportionally affect larger families.

However, this loss and more should be made up for by the expanded Child Tax Credit, which is available for qualified children under age 17. Specifically, the bill doubles the credit from $1,000 to $2,000, and also increases the amount of the credit that is refundable to $1,400.

In addition, the phaseout threshold for the credit is dramatically increasing.

If your children are 17 or older or you take care of elderly relatives, you can claim a nonrefundable $500 credit, subject to the same income thresholds.

Furthermore, the Child and Dependent Care Credit, which allows parents to deduct qualified child care expenses, has been kept in place. This can be worth as much as $1,050 for one child under 13 or $2,100 for two children. Plus, up to $5,000 of income can still be sheltered in a dependent care flexible spending account on a pre-tax basis to help make child care more affordable. You can't use both of these breaks to cover the same child care costs, but with the annual cost of child care well over $20,000 per year for two children in many areas, it's safe to say that many parents can take advantage of the FSA and credit, both of which remain in place.

Tax Law Changes 2018, 2 of 10

Mortgage interest, charitable contributions, and medical expenses

These three deductions remain, but there have been slight tweaks made to each.

• First, the mortgage interest deduction can only be taken on mortgage debt of up to $750,000, down from $1 million currently. This only applies to mortgages taken after Dec. 15, 2017; pre-existing mortgages are grandfathered in. And the interest on home equity debt can no longer be deducted at all, whereas up to $100,000 in home equity debt could be considered.

• Next, the charitable contribution deduction is almost the same, but with two notable changes. First, taxpayers can deduct donations of as much as 60% of their income, up from a 50% cap. And donations made to a college in exchange for the right to purchase athletic tickets will no longer be deductible.

• Finally, the threshold for the medical expenses deduction has been reduced from 10% of adjusted gross income (AGI) to 7.5% of AGI. In other words, if your adjusted gross income is $50,000, you can now deduct any unreimbursed medical expenses over $3,750, not $5,000 as set by prior tax law. Unlike most other provisions in the bill, this is retroactive to the 2017 tax year.

2018 Tax Law Changes and How it will Effect You

The SALT deduction: Bad news for high-tax states

The biggest tax deduction by dollar amount that Americans have taken advantage of in recent years is the deduction for state and local taxes -- also known as the SALT (State and Local Taxes) deduction. Specifically, Americans have been able to deduct the following:

• State and/or local property taxes, such as those paid on a personal residence, automobile, or other personal property.

• State and local income taxes or state sales taxes, whichever results in the larger deduction. Generally speaking, income taxes are the better deduction, but the option to deduct sales tax allows residents of states without an income tax to benefit, as well. If you choose the sales tax option, you don't need receipts -- the IRS provides a calculator to determine this deduction.

Starting with the 2018 tax year, however, the SALT deduction is limited to a total of $10,000. This may sound like a lot, but many Americans -- especially those in high tax states like New York, New Jersey, and California -- have been deducting several times this amount. For example, the property tax on my parents' modest home in New Jersey almost reaches the $10,000 cap all by itself.

Now, millions of Americans cannot deduct their state and local taxes, and on top of that, the higher standard deduction means that many families who pay high amounts of state and local taxes may not be able to take advantage of the SALT deduction at all.

Published White Board Video on YouTube

BJ Kane & Co. is proud to work with GWTW Marketing LLC. to bring our concept of providing state of the art tools for our Medical and Dental practices. This tool was created by Maestro Group in efforts to simplify and execute a more efficient way for Physicians to manage their practice. https://youtu.be/SDxNwoHj9HQ

Giving Back To Our Community

This month we will be supporting Kyle's Kamp.  A local charity started by Kyle's parents while he was hospitalized, undergoing treatment for cancer, as a Facebook page to update family and friends on is progress.  It quickly evolved into a local charity raising millions of dollars benefitting  Childrens National  for research for childhood cancer.  We will be participating in their Casino Night at Westwood Country Club February 24th.  If you want to learn more about this worthy charity please visit www.kyleskamp.org.