If you have a business structure like an LLC, partnership or corporation, the Dept of Treasury wants you to make another federal registration of the business. Miss it, and the penalties are huge. You’ll pay $500 – $10,000 per day and may even face criminal penalties of up to 2 years in jail. If you misuse the information, you could get a penalty of up to $250,000 and 5 years in jail. But what exactly is the CTA? And more importantly, what do you need to do about it?
Let’s go over some background first. The CTA came about as a way for the federal government to get their arms around money laundering.
It was passed into law on 1/2021 and the Treasury had a year to come up with the regulations. They released proposed regulations near the end of December 2021.
In essence every foreign and domestic entity, will need to register. If you start a new entity, you’ll need to register within 14 days with a central online database with FinCen (part of the Department of Treasury). Each entity will need a TIN (taxpayer identification number). You will need to disclose any owner who has 25% or more stake or any officer or director. Minor children do not need to be disclosed. Foreign owners do. Obviously foreign entities that have only foreign owners and no connection to a US taxpayer don’t need to register. But if a US taxpayer is somehow connected, it needs to be registered.
Each individual will need to disclose their name, date of birth, address, and some kind of numerical identifier. That could be your SSN (social security number) or passport number if you don’t have an SSN.
If you have an existing business structure, you need to be registered within 2 years of the effective date in the final regulations. (We don’t have that date yet.)
Since this is just proposed regulations, right now there is nothing you have to do. You will need to comply once it’s final though.
Right now, there are two things I recommend that you do:
If you’re thinking about getting a new entity, form it now.
If you have an entity (probably an LLC) without a TIN, get one now.
This is just one of the many changes we’re going to see over the next year or so. What you don’t know, can cost you. It’s much easier to plan ahead, with strategy, so you can avoid the possible pitfalls.
Join us on the 1st through the 4th Wednesday each month for Wednesday Coaching at 5 pm Pacific. We’ll cover breaking tax news like this, always focusing on strategic steps you can take to keep legal and pay the least amount of tax legally possible.