The Corporate Transparency Act is a game-changer for accounting firms: here's how to prepare.
Accounting firms across the U.S. must prepare now to advise their clients and be ready to handle the most significant onslaught of business reporting and filing requirements in decades.
An estimated 33M businesses, primarily small companies, will be required to file complex and confusing new reports. Accounting firms that are prepared will be positioned to significantly grow their advisory and compliance businesses by enhancing current client engagements and growing their client bases.
Breaking it down: CTA Beneficial Ownership Information reporting requirements
Beginning January 1, 2024, tens of millions of small businesses must comply with the Corporate Transparency Act (CTA) by filing a Beneficial Ownership Information (BOI) report.
Failure to accurately and timely file will result in significant FinCEN (U.S. Department of Treasury's Financial Crimes Enforcement Network) penalties, including $10,000 in civil fines and/or up to two years in prison. Similar to most mandated Department of Treasury filings, many of these companies will reach out to their trusted advisors, most often their accounting firm, for guidance and to outsource the complex and confusing required filings and other compliance activities.
Industry estimates put the number of entities required to file a BOI report — also referred to as reporting companies — that will reach out to professionals for help with CTA compliance at roughly one-half of those required to file BOI reports- a staggering 18M. Most reporting companies will need their CPAs to handle reporting and gathering data required for accurate reporting.
Why should BOI reporting matter to public accounting firms? This legislation, while not new, is a new and unique opportunity for accounting firms to acquire new clients, as many companies will need to understand and comply with these new rules. It's also an opportunity for accounting firms to increase their revenue per existing client. Based on FinCEN's estimates of BOI reporting volume, this ongoing revenue increase could reach 10% or more per client.
Next steps: Take action now to educate yourself and your clients on BOI reporting requirements, including how to identify who will be required to file and what type of information will need to be gathered. Put plans in place to take advantage of this significant opportunity and mitigate any potential liability you may be exposed to due to not being fully up to speed on the rules and regulations.