Annual Tax Filing Season & BOI Reporting

Annual Tax Filing Season

This week, we’re in for a two-fer! First and foremost: ‘tis the time of the season where we set New Year’s resolutions and get out into the world, fully renewed with the zest of life and the excitement of the many adventures to come! Yet, this is also the time of the season where Dan must don his chiding parent hat, and state for the public good: Get in your tax preparer’s good graces.

Why emphasize this? Why bring it up every year this time of year? Because as has been noted and warned for many years now, highly qualified tax preparers are becoming, and to some extent already have, become a luxury good. This means if your tax return consists of a W2 from your employer and a standard deduction, that hiring a qualified tax preparer is probably an expensive luxury. For those with more complex needs such as rental properties, stock and equity compensation, or businesses they own, it too has become an expensive luxury, but much more a necessity. To give an example, one preparer we know has raised their base price from $720 to $1,260 for a return, or as high as $1,560 with an agreement to pay a $50 monthly subscription throughout the year. Another has literally implemented the professional joke that “if you double your prices, you’ll lose half your clients, and have half the work for the same money.”

So how do you get in your preparer’s good graces? Well, first of all, you need to recognize whether you need a preparer in the first place. As mentioned before, if you have a single or double W2 income as a household without any complex assets, it may not be the case that you need a qualified tax preparer. Assuming that you do, however, have a complex enough situation to require a tax preparer, the first thing to do is read the instructions. That might seem funny, but every tax preparer has a process they want you to follow for tax returns, and yet the complaint from them every year is that people don’t follow the instructions. Secondly, provide what’s needed for your preparer to complete your tax filing and then be patient. Most preparers are taking a default position that your return may be extended, which means that they will get you an estimate for any taxes due, but your actual filing may not be done until later in the year. The reason for this is because tax return compliance requirements have grown significantly over the past several years, while the amount of time permitted to complete the tax return has not. Consequently, many preparers simply don’t have the actual physical time to get all returns done before March 15^th (for businesses) and April 15^th (for individuals). Third, and in tandem with numbers one and two: do not harass your preparer. There’s an analogy that comes up every year around tax time which is the “invisible checkout line.” Everyone knows that they’re in a checkout line when it comes to getting their tax filing done, but they can’t see the line, and thus, they often resort to pestering their tax preparer every few weeks to see how much closer they’ve gotten to “checking out.” While that can help you as the customer know that you’re moving along, remember that alongside hundreds of other customers doing the same thing, answering the question simply eats up precious time that could be spent moving you further along!

As for future expectations, let’s just be abundantly clear: highly qualified tax preparers are only going to get less and less common (the profession has a negative growth rate) and more and more expensive in the future. Now is the time to decide whether you really need the professional help to get your returns done, or whether it’s a luxury you can or can’t afford to indulge in in the future. None of this is to say that these professionals don’t want to help you, but recognize that their attention and interests will fundamentally lie with consumers who need help with complex problems that they can pay a premium to solve.

Beneficial Ownership Information Reporting

This is a legal requirement that took effect as of 1/1/2024. Simply put, if you own a small business with less than 20 employees, you are required to file a document with the federal government declaring basic information about the company, its location, and its owners. This has been done to shore up lax recordkeeping at the state level and to combat money laundering and shell companies used for questionable purposes. Consequently, if you own a small business, even a tiny sole proprietorship LLC or entity solely for providing a business structure for a hobby or similar activity, you must submit a filing to FinCEN, the “Financial Crimes Enforcement Network.”

Fortunately, doing this is rather easy. Simply go to the FinCEN BOI Reporting site, and either submit the filing online or download a PDF and then upload the PDF with supporting documentation to the site. Completing the filing for a sole proprietorship LLC like MY Wealth Planners literally took less than 2 minutes to complete, and the only documentation required was looking up the firm’s EIN number and uploading a copy of my driver’s license.

While I encourage you to just get this done today, you have until January 1^st of 2025 to complete the filing process, after which updates should only be required in the event that you have a change of ownership or material information about the business. If it’s any incentive to get you to get it done ASAP, failure to comply with the BOI filing requirement includes a $500-per-day penalty, so you really don’t want to wait until January 2^nd of next year to get it done! If you feel that you have a very complex structure or wonder if some sort of special case applies to you, this is an area that firmly falls under the practice of law, and consulting with a licensed attorney who specializes in small businesses is imperative.