Month: October 2024

The clock continues to tick. Here are the upcoming deadlines for filing your Business Ownership Information (BOI) reports with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

Deadlines

If your business existed as of January 1, 2024, you must file your BOI report by January 1, 2025.

If you created your business in 2024, you have 90 days from the date of filing with your state’s Secretary of State to submit your BOI report.

Entities Required to File 

All limited liability companies (LLCs) and corporations must file. For example, if you own multiple LLCs, each requires a separate BOI report.

Penalties for Non-compliance

Failure to file on time can result in significant penalties, including fines of $591 per day, a potential $10,000 criminal penalty, and up to two years in prison.

Recent Updates from FinCEN

Companies that ceased to exist before January 1, 2024, are not required to file a BOI report if they completed the dissolution process before that date.

Companies created or still existing on or after January 1, 2024, must file a BOI report, even if they ceased operations before their filing deadline.

Special Considerations for Disregarded Entities

Disregarded entities, for U.S. tax purposes, must also file a BOI report using a valid taxpayer identification number (TIN), such as an EIN, SSN, or ITIN.

If you want to discuss your BOI filings, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• October 15, 2024

Here’s a recent update on the Employee Retention Credit (ERC) and the new IRS payback scheme.

New IRS ERC Payback Program

The IRS introduced a second ERC Voluntary Disclosure Program for 2021 claims. Under this program, you can say, “I didn’t deserve the ERC, so I’ll repay 85 percent of my claimed ERC and retain 15 percent tax-free.”

The program is available only for ERC claims from 2021, and there are specific eligibility requirements. If you claimed the ERC using a third-party payer, the third party must apply on your behalf.

Eligibility Criteria for Payback

You must not be under criminal investigation or an IRS employment tax examination for 2021 returns.

The IRS must not have notified you of ERC recapture or received third-party information about your non-compliance.

Steps to Participate

You need to complete IRS Form 15434 and upload it online by November 22, 2024.

After submitting the form, you will receive a closing agreement, which you must sign and return within 10 days.

No Appeals 

If the IRS denies your request to participate in the payback program, you have no opportunity for judicial review or administrative appeal.

Legislative Changes Pending

H.R. 7024, currently pending in the Senate, could introduce stricter penalties for ERC promoters and extend the statute of limitations for examining ERC claims to six years.

IRS ERC Processing

The IRS is currently processing a backlog of 1.4 million ERC claims. While some payments have begun, and some have been denied, many claims are still under review. It’s likely your wait for your ERC refund will continue.

If you want to discuss your ERC claims, please call me at 408-778-9651.

• By Leon Clinton
• October 11, 2024

Does your business classify workers as independent contractors instead of employees? You should know that the U.S. Department of Labor is trying to make it harder for all businesses to use independent contractors.

The Department of Labor enforces the Fair Labor Standards Act (FLSA), the federal law that requires most employers to pay employees a minimum wage and non-exempt employees time-and-a-half for overtime.

The key word here is “employee.” FSLA does not apply to independent contractors. They need not be paid time-and-a-half for overtime or even the minimum wage.

The question is—who is an independent contractor?

Initially, it’s up to each business to decide how to classify workers. However, your decision is subject to review by the Department of Labor, other government agencies such as the IRS, and your state unemployment and workers’ compensation agencies.

Bad things can happen if the government decides you’ve misclassified an employee as an independent contractor. The Department of Labor can make you pay back overtime pay for two years (three years if the misclassification is intentional). Your workers can also bring lawsuits for violations.

For FLSA purposes, workers are employees if, as a matter of economic reality, they are economically dependent on the hiring firm. The Department of Labor’s new test contains six factors hiring firms must consider: 

1. Opportunity for profit or loss; 
2. Investment in facilities and equipment; 
3. Permanency of the relationship; 
4. Degree of control by the hiring firm; 
5. Integration into the employer’s business; and
6. Skill and initiative required.

This test is complex and hard to apply. No one factor is determinative. Rather, you must examine all the circumstances of the relationship. 

To make worker classification even more challenging, the Department of Labor test is only one of many. The IRS, for example, uses a more business-friendly right-of-control test. Many states use an even stricter ABC test for workers’ compensation, unemployment, and state wage and hour law purposes.

A worker can qualify as an independent contractor under the IRS test but be an employee under the Department of Labor and state ABC tests.

Does this all sound like a mess? It is.

If you use independent contractors, you should review your relationship in light of the new Department of Labor test. 

If your company uses many independent contractors, it should always have them sign an independent contractor agreement with a clause waiving the right to bring or join any class action suit against the company, including suing for workers’ misclassification. The clause can avoid ruinously expensive class action lawsuits brought by plaintiff’s lawyers. 

If you want to discuss your worker classifications, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• October 8, 2024