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I have a confession to make: I have not yet filed my Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN).
It is not an act of resistance. It’s sheer procrastination.
Anecdotally, I know many colleagues and clients who haven’t yet pulled the trigger. And recently, a FinCEN representative acknowledged that only about 20% of the millions of businesses that need to report have filed. The deadline for most of us? Reporting companies created or registered to do business in the United States before January 1, 2024, must file by January 1, 2025. There’s more on reporting–and exceptions–a bit further down in the newsletter. (You can also find information here. (☆))
I’m coming clean to let you know two things: (1) you’re not alone, and (2) it’s not too late. You may be able to file the report yourself–it’s an online report filed through FinCEN (the same site where you file your Report of Foreign Bank and Financial Accounts, or FBAR)–but if you need help, reach out to a professional. The end of the year will be here before you know it.
Looking ahead to 2025, taxpayers are thinking a bit more about the Taxpayer Cuts and Jobs Act of 2017 (TCJA). Some—but not all—of the tax provisions in the law are set to expire at the end of 2025.
You’re familiar with some of the highlights of the TCJA, like those lower tax rates and the section 199A deduction for pass-through entities. It’s likely that those will get renewed in 2025. But what are some of the other provisions that might expire that aren’t so popular?
The TCJA imposed a $10,000 cap on state and local taxes (SALT) deductibility. If this provision under the TCJA expires, state and local property and income taxes (or state and local sales taxes) will again be deductible.
And what about mortgages? Under the TCJA, the amount that you can deduct for home mortgage interest were capped—and the ability to deduct home equity debt (meaning home equity loans or refinancing not related to improving your home) was eliminated. Allowing that provision to expire would bring back the old limits.Other restrictions, like those for personal casualty and theft losses—and disallowance of home office expenses for employees—limited deductions for some taxpayers.You get the picture. The TCJA is more than just tax cuts. It took nearly a year to pass the original bill (with Republican control of the White House and both houses of Congress, as now). Don’t expect discussions about what stays and what goes to be any easier (☆).
To pay for some of those TCJA tax cuts, President-elect Donald Trump reportedly intends to roll back some green tax incentives, including the $7,500 electric vehicle (EV) tax credit. (If you’re not familiar with the credit, here’s a primer.)
Eliminating the EV tax credit could have far-reaching consequences and push U.S. automakers further behind in the race toward an electric future, while the sector becomes dominated by countries that actively support their EV industries.
But is it time to panic? While Trump has promised to undo the Democrats’ 2022 Inflation Reduction Act (IRA), repeal is hardly a done deal. Many IRA projects have brought jobs and investment dollars to Republican-held Congressional districts. Cleantech could even benefit from some other Trump policies–like cutting both the corporate tax rate and red tape, including time-consuming environmental reviews, that hold up the siting of green projects and electricity transmission lines.
Even if the IRA gets gutted, it won’t stop green growth. Economics, customers and the surging demand for electricity–particularly from all the new data centers being built to serve the needs of artificial intelligence–will continue to drive the growth of alternative energy (☆).
One more quick word before we dive into more good stuff. I know there’s a lot of uncertainty right now when it comes to tax and politics–and I don’t profess to have a crystal ball. But I do have a lot of great colleagues at Forbes who are doing their best to get you information that’s accurate, thoughtful, and useful. I appreciate your faith in us.
Enjoy your weekend,
Kelly Phillips Erb (Senior Writer, Tax)
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Taxes From A To Z: Y Is For Year-End
Most tax returns are filed based on an annual basis. Individual filers have a calendar year which is exactly as it sounds: January 1 to December 31.
Businesses, however, have a choice: calendar year or fiscal year.
- A calendar year has a December 31 year-end. Most small businesses file on a calendar year basis.
- A fiscal year consists of 12 consecutive months ending on the last day of any month except December (since that would be the same as a calendar year, right?).
You indicate your choice when you file your first income tax return (unless you have a required tax year). But be careful: once you’ve chosen your tax year; you may have to get IRS approval to change it. To get approval, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year. You must file Form 1128 by the due date (not including extensions) of the federal income tax return for the year you plan to change. If you qualify for an automatic approval request, you won’t have to pay the user fee, but if you do not qualify, a ruling must be requested and you must pay a user fee.
Most businesses opt for a calendar year because it’s easier to track. However, your circumstances may require or lean towards choosing a fiscal year. That includes businesses that may be seasonal (such as campgrounds or ice cream parlors) or those that rely on other businesses operating on a fiscal year for funding (some nonprofits fall into this category).
There may be other circumstances in which your year-end isn’t as expected. For example, you may have a short tax year (less than 12 months). A short tax year may be required when your business is not in existence for an entire tax year, or you change your accounting period.
Questions
With just over a month to go before a major FinCEN deadline, a reader asks:
I thought I read that the CTA was ruled unconstitutional, but my accountant says I still need to file a report. Which is it?
You’re both right—with some caveats.
You’re referring to a relatively new law, the Corporate Transparency Act—or CTA—which requires reporting companies to file reports with FinCEN, the Financial Crimes Enforcement Network. As a result of the law, as of January 1, 2024, many companies were required to report information to the U.S. government about who ultimately owns and controls them.
(You can find out more here (☆).)
Months after the CTA went into effect, a federal district court found it unconstitutional. The ruling resulted from a lawsuit filed by the National Small Business United and Isaac Winkles. On March 1, 2024, U.S. District Judge Liles C. Burke of the Northern District of Alabama, Northeastern Division, found the CTA unconstitutional “because it exceeds the Constitution’s limits on Congress’ power.”
However, while the ruling bars the Treasury from enforcing the CTA against the Plaintiffs, it does not apply to enforcement against others—that means if you are not a named plaintiff in the suit, you still have to file. Some additional court actions have been filed, but those are moving through the courts slowly.
That means that the reporting deadline for companies in existence as of January 1, 2024, is January 1, 2025 (some exceptions (☆) apply to victims of recent hurricanes).
Confusion about the ruling may have resulted in businesses believing that they don’t have to file. Earlier this month, a FinCEN representative told those attending an AICPA Town Hall that the agency has only received about 6.5 million filings–they expect to receive 32 million reports.
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Statistics, Charts, and Maps (Oh My!)
When it comes to government, an entitlement (☆) typically means a benefit that is guaranteed, often by law. That distinction is made clear in the federal budget, where entitlement spending is separate from discretionary spending.
With discretionary spending—what Congress will be wrangling with before the December 20 deadline—there’s a lot of wiggle room regarding what can be added and what might be cut. But when it comes to entitlement spending, there’s no annual appropriation or subjectivity—the benefit is guaranteed. By law, those benefits will be paid even if there’s a deficit and even if, as now, Congress has not passed a budget.
The most popular entitlement programs in the U.S. are Social Security and Medicare. They are also the most expensive.
Social Security, Medicare, and Medicaid make up nearly half of the budget, costing a whopping $2.7 trillion. That’s more than three times as much as the country spends on defense, the largest discretionary budget item—and those costs aren’t showing any signs of slowing down.
A Deeper Dive
One of the talking points in Washington right now is the tax on Social Security benefits.
Once you start collecting Social Security retirement benefits, whether your benefits are taxable (☆) depends on your filing status and how much other income you receive. A majority of people who get Social Security do not pay federal income tax on those benefits—according to the Social Security Administration, only about 48% of people pay federal income taxes on their benefits (though other studies like this one suggest that the percentage is higher).
If your only source of income is your Social Security check, your benefits are generally not taxable. You may not even need to file a return.
But, if you received income from other sources, your benefits would not be taxed unless your combined income exceeds the base amount for your filing status.
All of that may be about to change. President-elect Donald Trump has proposed to stop taxing Social Security benefits.
Social Security benefits were previously tax-free. That’s because a couple of years after Congress created Social Security in 1936, the Treasury decided that benefits should get special treatment. So, while private pensions would be taxable, Social Security would be exempt. The Treasury decided that those benefits would be treated like a gift from the government.
But in 1983, Social Security was running out of money. President Ronald Reagan suggested a set of reforms, including cutting benefits, which was politically unpopular. In the end, Reagan’s Greenspan Commission suggested that relatively affluent taxpayers—people at the time making more than $20,000, or couples more than $25,000—should pay income taxes on 50% of their benefits. Taxing benefits has been the rule ever since.
(You can read more about Trump’s tax proposals here.).
Tax Filings And Deadlines
📅 January 1, 2025. Due date for reporting companies created or registered to do business in the United States before January 1, 2024, to file Beneficial Ownership Information (BOI) reports with FinCEN.
📅 February 3, 2025. Due date for individuals and businesses affected by Hurricanes Beryl and Debby (more info here (☆) and here (☆)), those in South Dakota affected by severe storms, straight-line winds and flooding that began on June 16, 2024, taxpayers in Puerto Rico affected by Tropical Storm Ernesto, and those individuals and businesses in Connecticut and New York affected by severe storms and flooding from torrential rainfalls that began on August 18, 2024.
📅 May 1, 2025. Due date for individuals and businesses in the entire states of Alabama, Georgia, North Carolina and South Carolina and parts of Florida, Tennessee and Virginia affected by severe storms and flooding from Hurricane Helene (☆) and Hurricane Milton.
📅 September 30, 2025. Due date for individuals and businesses impacted by recent terrorist attacks in Israel.
Tax Conferences And Events
📅 December 12-14, 2024. ABA Section of Tax, 2024 Criminal Tax Fraud and Tax Controversy Conference, Las Vegas, NV. CLE available. Registration required.
📅 December 16-17, 2024. NYU 43rd Institute on State and Local Taxation, Westin New York at Times Square, New York, NY. CLE and CPE available. Registration required, virtual option available.
📅 July 21-23, 2025. National Association of Tax Professionals Taxposium 2025, Caesars Palace, Las Vegas. Registration required.
Trivia
Small businesses—defined as those with 500 employees or fewer—account for 99.9% of U.S. companies (about 33 million companies), according to the Small Business Administration. Of those, how many have paid employees?
(A) Six million
(B) Ten million
(C) 16 million
(D) 20 million
Find the answer at the bottom of this newsletter.
Positions And Guidance
The IRS has published Internal Revenue Bulletin 2024-47.
The Public Company Accounting Oversight Board (PCAOB) adopted a rule amendment to address situations in which a registered firm has ceased to exist, is nonoperational, or no longer wishes to remain registered, as demonstrated by its failures to file annual reports and pay annual fees for at least two consecutive reporting years.
The American Institute of CPAs (AICPA) submitted a letter to Congressional leadership of the Senate Banking Committee and the House Financial Services Committee expressing “grave concerns” with the Financial Crimes Enforcement Network (FinCEN) Beneficial Ownership Information (BOI) reporting requirement that went into effect on January 1, 2024. According to the AICPA, there is a worrisome lack of awareness surrounding the reporting requirements for BOI and they have raised concerns about the complexities around the rule with FinCEN.
Noteworthy
National advisory and public accounting firm Withum has launched a new AI-focused website.
The U.S. Senate Committee on Finance held a hearing earlier this week to consider the nomination of David Samuel Johnson to be Inspector General for Tax Administration (TIGTA). Johnson currently serves as the Assistant Inspector General for Investigations at the Department of Veterans Affairs. He previously served as Assistant Chief in the Fraud Section of the Criminal Division of the Department of Justice and as Assistant U.S. Attorney and Health Care Fraud Coordinator at the U.S. Attorney’s Office for the District of Columbia. If confirmed, he would replace J. Russell George, who died earlier this year.
Sharon Shachar, a tax attorney at Ballard Spahr, whose focal areas include advising clients on complex business and real estate transactions, was recently inducted as a member of the Tax Club of New York, a prominent, invitation-only organization of recognized tax practitioners.
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In Case You Missed It
Here’s what readers clicked through most often last week:
You can find the entire newsletter here.
Trivia Answer
The answer is (A) Six million.
While most of the 33 million small businesses in the U.S. don’t have paid employees, about six million of them do. They account for just under half of total private sector employment (46%).
Feedback
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