The 2022 Corporate Transparency Act Explained

Soon, reporting requirements for corporations are likely to change once the 2022 Corporate Transparency Act (CTA) goes into effect. When that time comes, it’s important for American companies, foreign and domestic, to know how to comply.

When the Corporate Transparency Act goes into effect, which is likely to happen soon, it will impact countless corporations in and out of the United States. The CTA’s goal is for corporations to be transparent about their beneficial owners and, once it goes into effect, will be enforced by the Financial Crimes Enforcement Network (FinCEN). Compliance with the CTA is crucial to avoid unnecessary penalties, so it’s important for corporations to consult with an experienced accountant to learn if they must abide by the CTA.

It can be difficult to keep track of the various reporting requirements for corporations, which is why our accountants are here to help. To learn more about the Corporate Transparency Act and the tax accountants at US Tax Help, call today at (541) 362-9127.

What Is the 2022 Corporate Transparency Act?

The Corporate Transparency Act is the most recent step in monitoring corporations domestically and abroad. Its goal is to monitor potential money laundering and other illicit activities by American corporations across the globe, by requiring information about corporations and their beneficial owners.

Essentially, the CTA will require American corporations, even those operated overseas by American expats, to report information to the Financial Crimes Enforcement Network. As an expat, you may already be familiar with FinCEN if you have foreign bank accounts and need to report your aggregate holdings each year to the agency. Unlike the IRS, FinCEN isn’t a tax collection agency but one for monitoring American money overseas. Now, with the Corporate Transparency Act, FinCEN will also collect information about your company.

Generally speaking, the CTA will require American corporations operating in the United States and abroad to report information about their company and beneficial owners. By providing FinCEN information, American corporations will be more transparent about their ownership and operations. Through the CTA, shell corporations will have more difficulty illicitly operating overseas.

While you now know what the Corporate Transparency Act is, generally, it’s still important to speak with a skilled tax accountant. It’s crucial to be familiar with the ins and outs of the CTA so that your corporation abides by its rules and filing requirements.

Who Has to Comply with the Corporate Transparency Act?

When new regulations go into effect, altering how corporations must report information, it can be unclear at first how the rules apply to your business. Because of that, it’s important for American corporations, including those operating abroad, to know whether or not they have to comply with the Corporate Transparency Act.

The CTA will likely go into effect soon and will affect American corporations in different ways. For new corporations created on or after the effective date, compliance within 14 days is necessary. That means, if you plan to organize a corporation after the CTA goes into effect, you should consult with a tax accountant immediately. Although you may have done your homework in preparation for starting your business, new rules can come up, like the CTA. Because of that, it’s always wise to speak with professionals who can assist you.

For businesses formed before the time the CTA goes into effect, the timeframe is more lenient. In that case, corporations have one year from when the Corporate Transparency Act goes into effect to comply.

It’s also important to note that foreign companies registered to do business in the U.S. also have to comply with the CTA.

While many American companies must comply with the CTA, some are exempt regardless of where they are located. For example, certain dormant companies or publicly traded companies don’t have to comply with the CTA. If you’re unsure whether or not your corporation or limited liability company needs to comply with the Corporate Transparency Act, speak to a CPA.

Because they operate their corporations abroad, Americans who own businesses overseas may be unaware that they still need to report information to FinCEN. In that case, it’s important to speak to our tax accountants for expatriates to ensure your corporation properly complies with the CTA.

Filing Requirements for the 2022 Corporate Transparency Act

While additional reporting requirements may make American corporations concerned about the financial impact, it’s important to know that the Corporate Transparency Act won’t affect your taxes. The CTA is for informational purposes only. That being said, corporations must be aware of the filing requirements to avoid incurring financial penalties.

Companies required to comply with the CTA will need to report information about each beneficial owner and the business itself. Regarding their beneficial owners and applicants, corporations must provide their legal names, dates of birth, addresses, ID number, or other unique identifying number approved by FinCEN. Beneficial owners are individuals who have significant control over a corporation or have at least 25% of a company’s ownership interests. If your corporation has a new beneficial owner, you have 30 days to update the information.

Regarding companies themselves, corporations must report their tax ID number and information about their registration, among other things. Gathering and organizing all of the correct information can be difficult, so it benefits corporations to enlist help from a CPA. Remember, even if you own a company located overseas, you may still have to provide this information so hiring a tax accountant for expatriates is wise.

Because the CTA has not yet gone into effect, some of the definitions and filing requirements may change. Not to mention, FinCEN is known for imposing steep financial penalties for failure to report. If alterations are made, it could impact your company and its reporting requirements, which is why it’s necessary to consult with a skilled CPA.

Ask Our Accountants About the 2022 Corporate Transparency Act Today

It’s important that your corporation stays up to date on ever-changing reporting requirements, like the CTA. To learn more about the Corporate Transparency Act and the tax accountants at US Tax Help, call today at (541) 362-9127.