Author: Leon Clinton

For existing businesses, the Corporate Transparency Act (CTA) goes into effect on January 1, 2024, and imposes a brand-new federal filing requirement on most corporations,

limited liability companies, and limited partnerships and on certain other business entities.

No later than December 31, 2024, all non-exempt business entities must file a beneficial owner information report (BOI report) with the Financial Crimes Enforcement Network (FinCEN)—the Treasury Department’s financial intelligence unit.

These BOI reports must disclose the identities and provide contact information for all of the entity’s “beneficial owners”: the humans who either (1) control 25 percent of the ownership interests in the entity or (2) exercise substantial control over the entity.

Your BOI report must contain all the following information for each beneficial owner:[1]

• Full legal name
• Date of birth
• Complete current residential street address
• A unique identifying number from either a current U.S. passport, state or local ID document, or driver’s license or, if the individual has none of those, a foreign passport
• An image of the document from which the unique identifying number was obtained

FinCEN will create a new database called BOSS (Beneficial Ownership Secure System) for the BOI data and will deploy the BOSS to help law enforcement agencies prevent the use of anonymous shell companies for money laundering, tax evasion, terrorism, and other illegal purposes. It will not make the BOI reports publicly available.

The CTA applies only to business entities such as corporations and LLCs that are formed by filing a document with a state secretary of state or similar official. It also applies to foreign business entities that register to do business in the United States.

Some businesses are exempt from the CTA, including

• larger businesses with 20 or more employees and $5 million in receipts, and
• businesses already heavily regulated by the government, such as publicly traded corporations, banks, insurance companies, non-profits, and others.

The CTA does not apply to sole proprietors or general partnerships in most states. But it does apply to single-member LLCs, even though the tax code disregards such entities and taxes them on Schedule C, E, or F of Form 1040.

The initial BOI report filing does not expire, and you don’t need to renew it. But you have an ongoing duty to keep the BOI report up to date by reporting any changes to FinCEN within 30 days of occurrence.

Failure to comply can result in hefty monetary penalties and up to two years in prison.

If you want to discuss the CTA, please call me on my direct line at 408-778-9651.

[1] 31 CFR Section 1010.380(b)(1)(ii).

• By Leon Clinton
• December 15, 2023

The SECURE 2.0 Act, enacted in late 2022, is changing your retirement plan’s ability to allow catch-up contributions.

Enhanced Catch-Up Limits (2025 Onward)

One of the major updates introduced by SECURE 2.0 is the enhancement of catch-up contribution limits for individuals aged 60 to 63. Starting in 2025, the maximum catch-up contribution for employer-sponsored plans—401(k), 403(b), and 457(b)—increases to the greater of $10,000 (adjusted for inflation) or 150 percent of the 2024 regular catch-up contribution limit.

For SIMPLE IRA participants, this limit is the greater of $5,000 or 150 percent of the 2025 regular catch-up limit. This change offers a significant opportunity to bolster your retirement savings.

To be clear, these super catch-up contributions are allowed only if you reach age 60, 61, 62, or 63 during the year in question. If you are not within that age window for the year in question but are age 50 or older, the “regular” catch-up contribution maximums apply. Those maximums are $7,500 and $3,500 (SIMPLE IRA) for 2023, adjusted for inflation in future years.

Controversial Change for High-Income Participants Delayed

Another change initially set for 2024, which faced considerable backlash, has been postponed to 2026. This pertains to high-income participants (with prior-year FICA wages over $145,000, adjusted for inflation) in employer-sponsored plans. Such individuals will make catch-up contributions only to a designated Roth account.

While these contributions don’t reduce taxable wages, they do offer tax-free growth and withdrawals under qualifying conditions.

Why This Matters

The Roth account change, though now delayed, will eventually impact how high-earning individuals can make catch-up contributions. If your plan doesn’t offer a Roth option, amendments to enable these contributions might be required.

Immediate Steps

The status quo remains for 2024 and 2025, allowing standard catch-up contributions for those age 50 or over. It’s advisable to start planning for the SECURE 2.0 changes, especially if you manage a 401(k) plan for employees. Understanding these shifts and preparing in advance will help ensure smooth compliance and optimal retirement planning.

If you want to discuss these SECURE 2.0 changes, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• December 11, 2023

I am writing to share some important insights regarding tax-loss harvesting, a strategy that can be beneficial for managing your investments and tax obligations.

While tax-loss harvesting is often considered a year-end tactic, it’s also applicable whenever you need to offset gains, especially looking ahead to 2024.

The wash-sale rule disallows a loss from selling stock or mutual fund shares if you buy substantially identical securities within a 61-day window surrounding the sale.

For example, if you sell shares at a loss and repurchase the same or similar shares too soon, the tax code disallows your loss. The rule aims to prevent investors from claiming a tax loss while maintaining a position in the market.

Fortunately, the disallowed loss isn’t lost forever. It’s added to the tax basis of the new securities, reducing future gains or increasing future losses. But navigating this rule requires careful planning.

You could use the “double up” strategy to maintain your position in a stock while still harvesting tax losses.

Additionally, it’s important to note that the wash-sale rule currently does not apply to cryptocurrency losses, as the IRS classifies cryptocurrencies as property, not securities. This exemption offers a unique opportunity for tax-loss harvesting in the crypto market.

If you want to discuss tax-loss harvesting, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• December 9, 2023