The IRS’s New Beneficial Ownership Reporting Rules

April 04, 2025
The IRS’s New Beneficial Ownership Reporting Rules

Introduction

The Corporate Transparency Act (CTA) requires certain business entities to report their Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN). This law aims to prevent financial crimes by increasing transparency about company ownership structures. In 2025, the IRS and FinCEN introduced new reporting rules, changing how businesses must disclose their ownership information.

 

This article explains who must report, the deadlines, key exemptions, and the impact of these new rules on businesses.

 

1. What Is Beneficial Ownership Reporting?

  • The IRS defines a beneficial owner as an individual who:
    • Owns at least 25% of a company’s shares, OR
    • Exercises substantial control over the entity (such as executives or decision-makers).
  • Reporting companies must provide names, addresses, dates of birth, and government-issued IDs of all beneficial owners.

 

2. Who Must File Beneficial Ownership Reports?

  • Corporations, LLCs, and other entities registered in the U.S. must report their BOI to FinCEN.
  • Foreign companies operating in the U.S. must also comply.
  • Sole proprietorships, general partnerships, and certain regulated entities are exempt.

 

3. Key Changes in the 2025 Rules

  • Reporting Deadlines:
    • New businesses formed in 2025 must report BOI within 90 days of registration.
    • Existing businesses must file by December 31, 2025 to remain compliant.
  • Enforcement Focus Shifted:
    • The IRS and FinCEN are prioritizing enforcement for foreign companies and high-risk entities.
    • Domestic small businesses have reduced compliance burdens under the revised rules.
  • Updated Compliance Guidelines:
    • Companies must update their BOI filings within 30 days of any ownership changes.

 

4. What Happens If a Business Fails to Comply?

  • Penalties for non-compliance include:
    • Fines of up to $500 per day for late reporting.
    • Criminal penalties (up to $10,000 and two years of imprisonment) for willful violations.\
  • Incorrect or fraudulent reporting may lead to audits and further legal consequences.

 

5. Steps to Ensure Compliance

  • Determine if your business is required to file.
  • Gather required ownership information (legal names, addresses, IDs of beneficial owners).
  • File BOI reports through FinCEN’s online portal.
  • Monitor ownership changes and submit updates within 30 days.
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Conclusion

The IRS’s new beneficial ownership reporting rules aim to enhance corporate transparency while easing compliance requirements for small domestic businesses. Companies must act before the 2025 deadline to avoid penalties. 

 

Tax Partners can assist businesses in determining their reporting obligations, filing BOI reports, and ensuring compliance with the latest IRS and FinCEN regulations.

 

This article is written for educational purposes.

 

Should you have any inquiries, please do not hesitate to contact us at (905) 836-8755, via email at [email protected], or by visiting our website at www.taxpartners.ca.

 

Tax Partners has been operational since 1981 and is recognized as one of the leading tax and accounting firms in North America. Contact us today for a FREE initial consultation appointment.

 

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