How Does the BOIR Form Impact Your Company’s Tax Filing Process?

In recent years, regulatory changes in the U.S. have placed an increased emphasis on transparency in business ownership and financial transactions. One such change, the Beneficial Ownership Information Report (BOIR), was introduced under the Corporate Transparency Act (CTA), which requires businesses to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). The BOIR aims to reduce the use of shell companies and improve the ability of regulatory authorities to prevent illegal activities like money laundering and fraud.

As a business owner or manager, it’s essential to understand not just what the BOIR is and how to file it, but also how it impacts your company’s tax filing process. While the BOIR primarily focuses on ownership transparency, it is intricately connected to your company’s tax obligations and filing procedures. This article will explore the relationship between the BOIR form and your tax filings, detailing how meeting the new requirements could streamline or complicate your tax process, and what steps you need to take to stay compliant.

What is the BOIR and Why Is It Required?

The Beneficial Ownership Information Report (BOIR) is a document that all certain U.S.-based businesses must file with FinCEN under the Corporate Transparency Act (CTA). The goal of the BOIR is to collect key details about the individuals who own or control a business—referred to as beneficial owners. It applies to most corporations, limited liability companies (LLCs), and other similar entities operating in the U.S.

The report requires business owners to submit information about themselves and any individuals who control 25% or more of the company’s equity. Specifically, the BOIR requests the following:

• The name, address, and date of birth of each beneficial owner
• A unique identifying number (e.g., passport or driver’s license number)

The first filing deadline for the BOIR is January 1, 2025, and businesses must update their filings within 30 days if there are any changes to their ownership structure.

How the BOIR Impacts Your Tax Filing Process

While the BOIR itself is not a tax form, the information it requires and the filing process can influence several aspects of your company’s tax filings. Here’s how:

1. Streamlined Ownership Verification for Tax Filings

The Beneficial Ownership Information Report helps streamline the process of verifying ownership and the structure of your company. When you file your business taxes, whether you are a sole proprietor, an LLC, or a corporation, understanding who owns the company and their respective shares is a critical part of tax filings.

For example, if your company has multiple owners or stakeholders, your tax filings (such as the Form 1065 for partnerships or the Form 1120 for corporations) require information about the ownership structure. The BOIR provides clarity on these ownership relationships, making it easier for both you and the IRS to confirm who is entitled to report income and how profits and losses should be distributed.

Additionally, the IRS may use information from the BOIR filings as part of the due diligence process to ensure compliance with tax laws. Accurate reporting of ownership is crucial to avoid audits, penalties, and disputes with the IRS.

2. Transparency in the Distribution of Profits

One of the key aspects of tax filings is the distribution of profits among owners and the associated tax obligations for each individual. By reporting the beneficial owners in your BOIR, you provide transparency about who controls the business, which can influence how profits are taxed. For example:

• LLCs typically pass income through to their owners (members) for taxation purposes, and each member will report their share of the profits on their personal tax returns (Form 1040).
• Corporations, on the other hand, may have different rules, especially if they are structured as an S-Corp or C-Corp.

The information in the BOIR will help both you and the IRS confirm the identity of the individuals who should be taxed on the income your company generates. Furthermore, if the beneficial owners change, the updated BOIR information will help ensure that tax filings reflect the correct ownership structure.

3. Simplified Compliance for Multinational Entities

If your company is part of a larger multinational organization or has foreign owners, the BOIR can provide clarity when filing international tax forms such as Form 5471 (for foreign-owned U.S. corporations) or Form 8858 (for foreign disregarded entities).

The BOIR helps streamline the process by ensuring that all beneficial owners are disclosed, including foreign owners, which is critical when determining your company’s tax obligations under U.S. law. For example, the IRS requires that all foreign owners of U.S. businesses file an annual tax return to report their U.S.-source income. The BOIR can help confirm the ownership interests and guide accurate reporting for cross-border taxation.

4. Changes in Ownership and Tax Implications

If your business undergoes any ownership changes, whether through the sale or transfer of shares or the addition of new beneficial owners, the BOIR must be updated within 30 days. These ownership changes could trigger important tax implications, such as:

• Capital gains taxes for owners who sell their shares.
• Transfer taxes or state-level taxes related to changes in ownership.
• Reallocation of income or deductions among the new owners.

Notifying FinCEN of these changes will ensure that your business’s records remain accurate, which is critical when filing business tax returns. The information reported in the BOIR can also be used to track who is entitled to certain tax benefits or deductions, preventing complications down the line.

5. Enhanced IRS Scrutiny and Compliance Checks

The IRS and other federal agencies can use the Beneficial Ownership Information Report to enhance compliance checks. If a discrepancy arises between the BOIR and the tax filings of your company, it could trigger an audit or review.

For example, if the BOIR shows that a person is listed as a beneficial owner of the company, but they do not report income or assets appropriately on their individual tax return, the IRS may launch an investigation. The BOIR thus serves as an additional layer of accountability, ensuring that both ownership and tax filings align.

6. Tax Deductions for Compliance Costs

Finally, it’s important to note that any costs associated with BOIR compliance—including legal fees, accounting services, and consulting—may be deductible as business expenses. These costs can help reduce your company’s taxable income, which could result in lower overall tax liability.

If you need assistance with the BOIR filing process, consider working with professionals who specialize in corporate transparency and tax compliance. These expenses are generally deductible and should be factored into your overall tax planning strategy.

Preparing for the BOIR Filing and Tax Filing

As you prepare to file your Beneficial Ownership Information Report (BOIR) by the January 1, 2025 deadline, it’s essential to start by:

1. Identifying beneficial owners—take the time to accurately determine and document the ownership structure of your business.
2. Collecting required information—make sure that you have the personal details and identification numbers of each beneficial owner.
3. Reviewing tax implications—consult with a tax advisor to understand how the BOIR impacts your business’s tax filing process.
4. Staying up to date—if there are any changes in ownership or control, ensure the BOIR is updated promptly and accurately.

Conclusion: The BOIR and Your Company’s Tax Filing

While the BOIR itself is a separate regulatory requirement from your tax filings, it has a significant impact on how you manage and report your company’s ownership structure and profits. Understanding the link between the BOIR and your tax filing process is key to maintaining compliance with both federal transparency and tax regulations.

With the first filing deadline of January 1, 2025 approaching, now is the time to start preparing for the BOIR filing. By ensuring that your company’s ownership information is accurate and up-to-date, you can streamline the tax filing process, avoid penalties, and maintain the transparency necessary to grow your business in today’s regulatory environment.

For more information or help with the filing process, visit BOIR.org today. Our team of experts is here to guide you through every step of your Beneficial Ownership Information Report filing and ensure that your business stays compliant with all applicable laws.