The 411 on BOI

Another week, another time to talk about the miscellaneous reporting required of business owners. (Don’t worry; we’ll lay off 1099s…for now.) Today we’re discussing a more impending need: BOI reports are due New Year’s Day, 2025.

You may have heard BOI referenced, but be unsure about what it is, or whether it applies to your business. Beginning this year (in 2024), the U.S. Treasury Financial Crimes Enforcement Network began requiring all companies registered within, or registered to do business in, the United States to report “Beneficial Ownership Information”. Per the Treasury Department, “Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or control a company,” and the reason for this is to, “make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.” (Frequently Asked Questions, Beneficial Ownership Information, https://fincen.gov/boi-faqs, U.S Department of Treasury Financial Crimes Enforcement Network, 2023)

The short answer is, a bipartisan law has been passed to help track the flow of money from businesses within the United States and, as a business owner, you are almost definitely required to complete this reporting.

The good news is that this reporting is relatively easy, particularly compared to much of the reporting, forms, and files you may be used to filling out. (Many of us are still traumatized by the deluge of documentation required to benefit from the CARES Act.) All you need is some basic information about the owners of the company. Also, there is no fee for this required filing.

When you are ready to get started, head to https://boiefiling.fincen.gov/. If you have any questions, the FAQ linked above gets into detail on who needs to file, what information you need, etc.

Good luck, and happy reporting!

by Courtney Barbee

It's time to have the talk (about 1099s).

The blissfully uninitiated may ask, "What are 1099s?"

1099s are, essentially, a service vendor's version of the W-2s you'd file for an employee. The IRS mandates that you do them a favor by helping report the money you pay individuals and small businesses for services.

"Oh, I don't have any contractors, so I can't stop reading here." PLEASE DON'T.

Does your business pay for rent? Marketing? Legal help? These are all services.

If you spend money on anything that isn't a material good, via any method that isn't a credit card, 1099s need to be on your radar. There are multiple types of 1099 filings, but, in general, the one most people think of is Form 1099-NEC. This covers most of your cash and check payments for services to unincorporated vendors.

(There is often confusion here around what makes a vendor incorporated. Please note than having an LLC does not automatically mean that a company is incorporated, as an LLC acts as a legal designation, and not, necessarily a tax entity. There can be LLCs that are sole proprietorships and LLCs that are S-Corporations.)
Besides non-employee contractors (the "NEC" in "Form 1099-NEC"), there are special forms and rules for how you might record rent payments, or payments to attorneys. Rules also change frequently on how payments made by such sources as PayPal and Venmo are reported.
In short, 1099s are messy, complicated, and the government can punish you severely if you get them wrong. (Basically, just like the rest of the tax code.)

If this is a tax season thing, why are we talking about it now, in early October?

Like W-2s, 1099s are due by January 31st. They are though, in my opinion, more complicated than W-2s. With 1099s, if you have someone paid with both check and credit card, you wouldn't include the credit card payments. On the other side, if you have a vendor who has been paid under both their personal and business name, you want to be careful to combine those payments. Vendors are also notoriously bad for providing updated W-9s each year, which causes issues when addresses, or business forms change. In the event of error, it is the 1099-filer, not the recipient, who incurs penalties.
Given their importance and complexity, we find it vital to start preparing early. When the calendar flips over to a new year, we are on the clock to quickly close the books on the fiscal year, verify cash receipt totals, and get the forms filed by the end of the month. That is why we start discussing 1099s with clients now, and begin doing as much work as possible in advance. Penalties for late, ignored, or improperly filed 1099s can cost hundreds of dollar per form, so it is vital that they are done on-time, and correctly.

by Courtney Barbee