New FinCEN Guidelines: Tax Identification Numbers for Disregarded Entities in BOI Reporting

Understanding how a disregarded entity is defined and treated in regards to FinCEN BOI Reporting.

Stephanie Glanville | July 25, 2024 | Read time: 7 minute(s) | BOI Reporting, FinCEN Update, Small Business | No Comments

BOI Reporting requirements for disregarded entities

Recently, FinCEN introduced new guidelines for disregarded entities in beneficial ownership information (BOI) reporting. These updates are crucial for entities not treated as separate from their owners for tax purposes. This article will guide you through the latest requirements and how they impact disregarded entities, helping you stay informed and prepared for timely BOI submissions.

What is a Disregarded Entity?

Disregarded entities are business structures that are not recognized as separate for federal tax purposes from their owner. Essentially, these entities are considered an extension of their owner, meaning they do not have a distinct tax identity. Instead, all tax reporting, including income, deductions, and credits, is reported directly on the owner’s personal or corporate tax return.

A common example of a disregarded entity is a single-member Limited Liability Company (LLC). In this arrangement, the single member, whether an individual or another entity, directly reports the LLC’s financial activity on their tax return. The LLC does not file a separate tax return, simplifying the tax reporting process for its owner.

Reporting Requirements for Disregarded Entities

A disregarded entity must report the beneficial ownership information to the Financial Crimes Enforcement Network( FinCEN) if it meets the definition of a reporting company. A reporting company is generally defined as an entity that is created by filing a document with a secretary of state or similar office or a foreign entity registered to do business in the U.S.

A disregarded entity must provide one of the following types of taxpayer identification numbers (TINs) on its BOI report if it has been issued a TIN:

An Employer Identification Number (EIN) or
A Social Security Number (SSN) or
An Individual Taxpayer Identification Number (ITIN)

Different types of tax identification numbers may be reported for disregarded entities under various circumstances:

If a disregarded entity has its own EIN, the entity may report that EIN as its TIN.
If the disregarded entity does not have an EIN, it can provide another type of TIN or a tax identification number issued by a foreign jurisdiction.
If the disregarded entity is a single-member LLC or has only one owner who is an individual with an SSN or ITIN, it may report that individual’s SSN or ITIN as its TIN.
If the disregarded entity is owned by a U.S. entity with an EIN, it may report that other entity’s EIN as its TIN.
If the disregarded entity is owned by another entity or a series of disregarded entities, it may report the TIN of the initial owner up to the series of disregarded entities with a TIN as its TIN.

Guidelines for Foreign Reporting Companies

Foreign reporting companies qualifying as reporting companies under FinCEN guidelines must comply with specific reporting requirements when reporting beneficial ownership information (BOI). If a foreign reporting company does not have a U.S. taxpayer identification number (TIN), it must provide a tax identification number issued by a foreign jurisdiction and the name of that jurisdiction.

This allows foreign entities without a U.S. TIN to fulfill their BOIR obligations by providing an alternative form of identification recognized in their home country. The foreign jurisdiction’s tax identification number uniquely identifies the entity within the BOI report, ensuring compliance with FinCEN regulations.

How to Obtain an Identification Number

The IRS provides a free online application for an EIN, which is available immediately upon submission.

To learn more about Taxpayer identification numbers, visit the IRS website.
To learn more about Employer Identification Numbers and to access the EIN online application, visit the IRS website.

Most reporting companies use the online application to apply their EIN. However, if the responsible individual is a foreign person without an SSN or ITIN, the person needs to file Form SS-4 by mail or fax. To learn more about Form SS-4, click here, and for the instructions on Form SS-4, click here.

Implications and Compliance

Filing the Beneficial Ownership Information (BOI) Report is a crucial aspect. The filing deadline for the BOI report is based on the reporting company’s registration date.

Registered before January 1, 2024 – Deadline to submit by January 1, 2025
Registered on or after January 1, 2024 – Deadline to submit within 90 days from the registration date
Registered on or after January 1, 2025 – Deadline to submit within 30 days from the registration date

Failure to submit the report within the deadlines will impose potential penalties from the FinCEN. However, the civil penalties range from $591 per day, and the criminal penalties range from $10,000 to up to two years of imprisonment.

Meet BOI Reporting Requirements for Your Business with TaxBandits!

Ensuring compliance with the new FinCEN guidelines for reporting beneficial ownership information can be challenging, especially for disregarded entities. TaxBandits is a trusted e-filing software that streamlines the BOI reporting process, allowing you to file your reports efficiently and accurately.

With TaxBandits, you can rest assured that your reporting obligations are met with ease and precision. Our comprehensive tools and expert support guide you through each step, from understanding the requirements to submitting your BOI report.

Choose TaxBandits to stay compliant and focused on your business’s growth.