Why Congress Passed the Corporate Transparency Act
The Corporate Transparency Act was proposed to deal with anonymous corporations. An anonymous corporation is an entity that masks the identity of the person or entity that started the corporation. Evidence has shown that anonymous corporations are often the legal entity of choice when criminals seek to launder money or assets. These types of companies may also be used to support the following illicit activities:
- Drug cartels
- Sex and human traffickers
- Countries seeking to avoid sanctions for financial crimes
- Corrupt government officials laundering money from state or federal funds
To combat these illegal practices, the CTA requires that corporations and limited liability companies (LLCs) report the name of the natural person that owns and controls the corporation. This information must be disclosed to law enforcement agencies, financial institutions, and other entities that have mandatory anti-money laundering obligations.
The CTA was not only supported by Congress but many other people and legal entities like businesses, prosecutors, national security experts, and many other parties. If you are interested in knowing more about the requirements placed upon corporation and LLC owners, you should consult with our California tax lawyers and CPAs.
If having your identity disclosed in association with one of these previously anonymous entities creates tax fraud concerns, you have a short window to voluntarily get right with the government and avoid a criminal tax prosecution through a domestic or offshore voluntary disclosure.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
Reporting Information Under the Corporate Transparency Act
If the Corporate Transparency Act applies to your business, you should be aware of the information that you need to report to law enforcement, financial institutions, and others. The owner of a corporation or LLC will have to provide the following information to comply with the CTA:
- The name of the beneficial owner of the company
- The address of the beneficial owner
- The date of birth of the owner
- The driver’s license or ID number of the owner
Additionally, if there is a change in ownership of the corporation, this information must also be reported. Note, however, that the owner of the corporation is not required to report information regarding the operation of the business or its purpose.
All information reported by the owner of the corporation will be given to the U.S. Treasury Financial Crimes Enforcement Network, also known as FinCEN. FinCEN is a federal agency that oversees financial data in order to protect it from cyberterrorists and other criminal organizations.
You should also be aware that local, state, and federal law enforcement agencies will have the ability to view CTA information in the event of an investigation. Upon customer consent, financial institutions could also access the information to meet their anti-money laundering compliance regulations.
There are some exceptions to the CTA. For instance, if a corporate entity frequently files redundant reports with agencies like the Security Exchange Commission (SEC), they will be exempt from reporting under the CTA. Additionally, large private companies that clearly operate within the United States will not have to report under this law.
Penalties for Violating the Corporate Transparency Act
If the owner of a corporation does not comply with the Corporate Transparency Act, they will be subject to civil and criminal penalties. Violations of the CTA include willful failure to provide information or providing false information in order to avoid revealing the true identity of the corporation owner.
If the corporation is assessed a penalty for failing to adhere to the CTA, they could be charged up to $500 for every day that the corporation is not compliant with the law. If the owner of the corporation is brought up on criminal charges, they may be fined $10,000 and could face up to two years in prison.
Note that simple negligence is not enough to support a civil or criminal penalty. For example, if the owner of a corporation made a good faith mistake when reporting information under the CTA, they will not face civil or criminal penalties.
Agencies that collect information from corporate entities are also required to keep the information confidential. However, if the gathered information is disclosed without authorization, the violators could be assessed civil penalties up to $250,000. Additionally, the discloser of information may also be subject to a criminal penalty of five years in prison upon conviction.
Call Our Dual Licensed California Tax Attorneys and CPAs to Speak About Your Corporate Transparency Act Concerns
If you operate a corporation and need legal assistance to comply with the Corporate Transparency Act, you should call the dual licensed California Tax Lawyers and CPAs at the Tax Law Offices of David W. Klasing. Owners of a corporation are already subject to a variety of laws, and the CTA will only add to those obligations. Our firm will ensure that you are ready to deal with new regulations that may affect your company. A confidential consultation could be scheduled with legal staff at the Tax Law Offices of David W. Klasing by calling (800) 681-1295. You could also reach the firm by using our online submission form.
We Are Here for You
Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.
In addition to our main office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento. During the COVID-19 pandemic, our staff are working from home, but have full virtual meeting capability.
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