Frequently Asked Questions

What is beneficial ownership information? 

Beneficial ownership information refers to identifying information about the individuals who directly or indirectly own or control a company. 

Why do companies have to report beneficial ownership information to the U.S. Department of the Treasury? 

In 2021, Congress passed the Corporate Transparency Act on a bipartisan basis. This law creates a new beneficial ownership information reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures. 

Under the Corporate Transparency Act, who can access beneficial ownership information? 

FinCEN will allow Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency, to obtain beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement. Financial institutions will have access to beneficial ownership information in certain circumstances, with the consent of the reporting company. Those financial institutions’ regulators will also have access to beneficial ownership information when they supervise the financial institutions. 

Beneficial ownership information reported to FinCEN will be stored in a secure, non-public database using rigorous information security methods and controls typically used in the Federal government to protect non-classified yet sensitive information systems at the highest security level.  

Should my company report beneficial ownership information now? 

Yes, you should report your company now, if: 

• You are a reporting company created or registered to do business before January 1, 2024. You will have until January 1, 2025, to file its initial BOI report. 

• You are a reporting company created or registered in 2024. You will have 90 days from the date of creation, if you haven’t filed by the 90 days, there may be penalties, but only for willful failure to report. Most companies do not know about this reporting requirement and have yet to comply. They are not willfully in violation. Because of these issues we do not expect penalties for late filing in 2024. 

And in the future, if: 

• You are a reporting company created or registered on or after January 1, 2025, will have 30 calendar days to file after receiving actual or public notice that its creation or registration is effective.
  

What companies will be required to report beneficial ownership information to FinCEN? 

Companies required to report are called reporting companies. There are two types of reporting companies: 

• Domestic reporting companies  are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States. 

• Foreign reporting companies  are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office. 

There are 23 types of entities that are exempt from the reporting requirements. Carefully review the qualifying criteria before concluding that your company is exempt. Common exemptions are tax exempt organizations, and inactive companies. 

 Is sole proprietorship a reporting company? 

No, unless a sole proprietorship was created (or, if a foreign sole proprietorship, registered to do business) in the United States by filing a document with a secretary of state or similar office. An entity is a reporting company only if it was created (or, if a foreign company, registered to do business) in the United States by filing such a document. Filing a document with a government agency to obtain (1) an IRS employer identification number, (2) a fictitious business name, or (3) a professional or occupational license does not create a new entity, and therefore does not make a sole proprietorship filing such a document a reporting company. 

Do the BOI reporting requirements apply to S-Corporations? 

Yes. A corporation treated as a pass-through entity under Subchapter S of the Internal Revenue Code (an “S Corporation” or “S-Corp”) that qualifies as a reporting company—i.e., that is created or registered to do business by the filing of a document with a secretary of state or similar office, is a reporting company. 

Do beneficial ownership information reporting requirements apply to companies created or registered before the Corporate Transparency Act was enacted (January 1, 2021)? 

Yes. Beneficial ownership information reporting requirements apply to all companies that qualify as “reporting companies”, regardless of when they were created or registered.  

Who is a beneficial owner of a reporting company? 

A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over a reporting company or (2) owns or controls at least 25 percent of a reporting company’s ownership interests. Because beneficial owners must be individuals (i.e., natural persons), trusts, corporations, or other legal entities are not considered to be beneficial owners. However, in specific circumstances, information about an entity may be reported in lieu of information about a beneficial owner. 

What is substantial control? 

An individual can exercise substantial control over a reporting company in four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control: 

• The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive office, chief operating officer, or any other officer who performs a similar function). 

• The individual has authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company. 

• The individual is an important decision-maker for the reporting company.  

• The individual has any other form of substantial control over the reporting company   

One of the indicators of substantial control is that the individual is an important decision-maker. What are important decisions? 

Important decisions include decisions about a reporting company’s business, finances, and structure. An individual that directs, determines, or has substantial influence over these important decisions exercises substantial control over a reporting company.  

What is an ownership interest? 

An ownership interest is generally an arrangement that establishes ownership rights in the reporting company. Examples of ownership interests include shares of equity, stock, voting rights, or any other mechanism used to establish ownership.  

Why would my spouse need to be reported as a beneficial owner in my company? 

A reporting rule requires the identification of each beneficial who has an “undivided interest in [an] ownership interest” that is more than 25% of the entire ownership interest, reporting companies should include both spouses if either spouse would be a beneficial owner and if that spouse is married and resides in one of the nine community property states (like WI) and if the applicable community property law does not exclude the ownership interest from the community property of the marriage. There are other ways to be a beneficial owner as a spouse, if a senior officer has substantial control and owns any amount of interest in the reporting company then the spouse would also own that amount and would need to be reported as a beneficial owner. In Community property states this can get complicated. 

Can beneficial owners own or control reporting companies through trusts? 

Yes, beneficial owners can own or control a reporting company through trusts. They can do so by either exercising substantial control over a reporting company through a trust arrangement or by owning or controlling the ownership interests of a reporting company that are held in a trust. 

Who is a company applicant of a reporting company? 

Only reporting companies created or registered on or after January 1, 2024, will need to report their company applicants. 

A company that must report its company applicants will have only up to two individuals who could qualify as company applicants: 

1. The individual who directly files the document that creates or registers the company; and 

1. If more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing. 

Which reporting companies are required to report company applicants? 

Not all reporting companies have to report their company applicants to FinCEN. 

A reporting company must report its company applicants only if it is either a: 

• Domestic reporting company created in the United States on or after January 1, 2024; or 

• Foreign reporting company first registered to do business in the United States on or after January 1, 2024. 

Can a company applicant be removed from a BOI report if the company applicant no longer has a relationship with the reporting company? 

No. A company applicant may not be removed from a BOI report even if the company applicant no longer has a relationship with the reporting company. A reporting company created on or after January 1, 2024, is required to report company applicant information in its initial BOI report but is not required to file an updated BOI report if information about a company applicant changes. 

Will a reporting company need to report any other information in addition to information about its beneficial owners? 

Yes. The information that needs to be reported, however, depends on when the company was created or registered. 

• If a reporting company is created or registered on or after January 1, 2024, the reporting company will need to report information about itself, its beneficial owners, and its company applicants. 

• If a reporting company was created or registered before January 1, 2024, the reporting company only needs to provide information about itself and its beneficial owners. The reporting company does not need to provide information about its company applicants. 

Is there a requirement to annually report beneficial ownership information? 

• No. There is no annual reporting requirement. Reporting companies must file an initial BOI report and then report any changes or report correction within 30 days. 

Can a reporting company report a P.O. box as its current address? 

No. The reporting company address must be a U.S. Street address and cannot be a P.O. box. 

If a beneficial owner or company applicant’s acceptable identification document does not include a photograph for religious reasons, will FinCEN accept the identification document without the photograph? 

Yes. If a beneficial owner or company applicant’s identification document does not include a photograph for religious reasons, the reporting company may nonetheless submit an image of that identification document when submitting its report, as long as the identification document is one of the types of identification accepted by FinCEN, such as a non-expired State-issued identification document. 

How does a company created or registered after January 1, 2024, determine its date of creation or registration? 

The date of creation or registration for a reporting company is the earlier of the date on which: (1) the reporting company receives actual notice that its creation (or registration) has become effective; or (2) a secretary of state or similar office first provides public notice, such as through a publicly accessible registry, that the domestic reporting company has been created or the foreign reporting company has been registered. 

What should I do if previously reported information changes? 

If there is any change to the required information about your company or its beneficial owners in a beneficial ownership information report that your company filed, your company must file an updated report no later than 30 days after the date of the change. 

A reporting company is not required to file an updated report for any changes to previously reported information about a company applicant. 

When should a filer of an updated BOI report be notified of a change? 

Communicate any changes to the filer with enough time to meet the 30-day deadline. 

What should I do if I learn of an inaccuracy in a report? 

If a beneficial ownership information report is inaccurate, your company must correct it no later than 30 days after the date your company became aware of the inaccuracy or had reason to know of it. This includes any inaccuracy in the required information provided about your company, its beneficial owners, or its company applicants.  

If the size of a reporting company fluctuates above and below one of the thresholds for the large operating company exemption, does the reporting company need to file a BOI report? 

Yes. The company will need to file a BOI report if it otherwise meets the definition of a reporting company and does not meet the criteria for the large operating company exemption (or any other exemption). If the company files a BOI report and then becomes exempt as a large operating company, the company should file a “newly exempt entity” BOI report with FinCEN noting that the company is now exempt. If at a later date the company no longer meets the criteria for the large operating company exemption or any other exemption, the reporting company should file an updated BOI report with FinCEN. Updated reports should be submitted to FinCEN within 30 calendar days of the occurrence of the change. 

To qualify for the large operating company exemption, an entity must have more than 20 full-time employees in the United States, must have filed a Federal income tax or information return in the United States in the previous year demonstrating more than $5,000,000 in gross receipts or sales, and must have an operating presence at a physical office in the United States. 

1. How do I save on my taxes?  Here are some quick thoughts on what may be available:

   1. Max out your 401(k) plan versus banking on potential stock market gains.

   2. Put more money toward tax-deferred retirement plans. 

   3. If you contribute charity, contribute appreciated assets instead of cash.

   4. In any one year there may be certain tax credits available.

2. How can I take advantage of gifting rules?   How Much is the Gift Tax Limit for 2023? The gift tax exclusion for 2023 is $17,000 (it was $16,000 in 2022). As a result, you can give up to $17,000 to as many people you want in 2023 without having to worry about paying the federal gift tax.

3. What is the tax effect of this transaction? We are asked frequently to determine the tax liability from selling stocks, an investment property, a business or rental property.  Our approach is to utilize your prior year tax return as a base and then complete various "what if" scenarios in order to estimate the tax impact of the transactions.  In addition we discuss alternatives in completing the transaction in order to minimize, defer, or eliminate your tax liability. 

1. What entity should I choose for my business? Here are some websites which explain some of the general choices.  The choice for you will depend on your specific circumstances. Generally, we recommend setting most entities up as an LLC as this type of entity is the most flexible in being changed to be taxed as other entities as your needs change.

   1.  https://www.venable.com/insights/publications/2021/06/choice-of-entity-basics-and-other-suggestions

   2. https://www.thetaxadviser.com/issues/2015/mar/tax-clinic-02.html
2. Can you explain the cash flow statement, and how I can generate cash in the business? A cash flow statement is a financial statement that provides aggregate data regarding all cash inflows that a company receives from its ongoing operations and external investment sources. It also includes all cash outflows that pay for business activities and investments during a given period.
3. How much salary should S corporation owners take? The amount of salary which the owners of an S corporation need to take is one of the most "hot-button" issues for the IRS.  This structure allows the shareholder/employee to reduce the amount of Social Security and Medicare tax required to be paid.  However, the owner/employee compensation must be reasonable.  Reasonable compensation is depended on all of the facts and circumstances for any one S corporation and its owners.  We can assist you with determining what might be a reasonable compensation so as to avoid issues with IRS.  Here are some resources:
   1. https://www.mitaxcpa.com/blog/reasonable-salary-for-s-corp/
   2. https://www.collective.com/blog/money-management/freelancers-guide-to-paying-yourself-a-salary-from-an-s-corporation/
   3. https://www.hourly.io/post/owners-draw-or-salary-s-corp
4. What is the tax effect of this transaction? We are asked frequently to determine the tax liability from selling stocks, an investment property, a business or rental property.  Our approach is to utilize your prior year tax return as a base and then complete various "what if" scenarios in order to estimate the tax impact of the transactions.  In addition we discuss alternatives in completing the transaction in order to minimize, defer, or eliminate your tax liability. 
5. How does self-employment taxes work? 
   https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
   

1. Who can I call for Estate Planning?  Estate planning attorneys.
   1. https://borakoveosman.com/
2. What do I do following the death of a loved one?  We can prepare the IRS and state income tax documents required upon the death of a loved one.  In addition, here are some resources which you may find helpful:
   1. https://www.actec.org/estate-planning/inheritance-estate-settlement-distributions/
   2. https://www.unitedway.org/my-smart-money/immediate-needs/a-family-member-has-died/immediate-steps-to-take-when-a-loved-one-dies

 

1. IRS FAQs. https://www.irs.gov/faqs
2. How do I apply for a Federal ID Number for my Business?  https://www.irs.gov/businesses/small-businesses-self-employed/employer-id-numbers
3.  Wisconsin Department of Revenue Individual Taxpayer FAQs. https://www.revenue.wi.gov/Pages/FAQS/home-i.aspx
4. Wisconsin Department of Revenue Business Taxpayer FAQs.  https://www.revenue.wi.gov/Pages/FAQS/home-b.aspx
   
   

1. What is the process for becoming a client?
   1. You can fill out a form on our website.  You can also send an email to office@sorgecpa.com or call 608-221-2253 to have our support staff complete a prospective client form.  You will receive the form and a scheduling link where you can set up a video chat in order to discuss your needs.
2. What is the process for getting my tax documents to you for completing my return?  

   Some additional bullet points to address frequently asked questions regarding our services:

   1. Our protocol includes a brief video or phone meeting in order to gain an understanding of your needs and answer your questions.
   2. After the meeting I will send a welcome letter which includes the steps for getting set up on our system along with colleagues who will provide assistance.
   3. The cost varies based on complexity and communication requirements.
   4. Our minimum fee is $350.  We complete many returns for $500.  The range is from $350 to $5,000 from straightforward to the most complex. 
   5. A $100 retainer is required which we hold while a client.
   6. If you require tax planning services these are generally provided separately from tax preparation services at a rate of $280 per hour.
   7. Questions are answered and tax planning is done throughout the year.
   8. In-person meetings are available before and after tax season.
   9. We highly recommend Tax Caddy (free, secure online application and smartphone app) for sharing and keeping documents.  You own and control Tax Caddy, you just give us access to it so that we can use your documents in order to prepare your tax return and answer questions.  All of your documents and tax returns are stored here.
   10. We communicate any questions we have as we complete your tax returns.
   11. The outline of our services above improves our turn-around time.  Our goal is to have your returns completed within 14 days.  We can generally meet this goal when complete documents are delivered to us by mid-February.
   12. As we get later into the tax season, after March 1st, our turn-around time will increase to at least 4 weeks, and could be as many as 10 weeks.  
   13. We file extensions automatically, when appropriate, at no additional cost, if we need a bit more time to get returns completed and delivered to you.  For tax information submitted by April 15th we complete the vast majority of returns by April 30th as the number of returns received daily after April 15th declines quite significantly.
   14. Notify us if you expect to owe and if you will be providing your complete documents after March 1.  We can send voucher in order to make an estimated tax payment so as to avoid penalties and interest for an extended return.
   15. If you are to receive refunds there is no need to be concerned about late filing as we will file an extension on your behalf.
   16. We collect and process tax information throughout the year.
   17. If you expect to owe significant tax when your tax returns are filed we highly recommend making estimated payments before April 15th in order to cover your estimated tax liability which will result in avoiding penalties and interest.
   18. All returns are reviewed by a Certified Public Accountant or Enrolled Agent before finalization.
   1. We highly recommend using Tax Caddy.  We will help you get set up on this application once you decide to become a client.  This is a free program which you own and provide us access to.  You can simply upload your electronic documents.  You can take photographs with your cell phone from within the application.  We send all documents to you, including the automated tax organizer, through Tax Caddy.
   2. You can also deliver physical documents on paper.

1. Do you have questions?  We will continue to update content in order to provide continuously improving answers to your common questions.  Please don't hesitate to make requests!