What Are the Penalties for Beneficial Ownership Non-Reporting in California?

 Posted on February 28, 2024 in Taxation Law

Companies in the United States and around the world are involved in a complex web of business operations and financial transactions. Because there are many opportunities for potential tax evasion or other schemes that may violate regulations, the laws of the United States require some companies to report beneficial ownership information. This helps to maintain transparency while ensuring that the IRS and the U.S. Department of the Treasury will have the necessary information to investigate and prosecute potential financial crimes.

Certain companies are required to file a Beneficial Ownership Information Report (BOIR) with the Financial Crimes Enforcement Network (FinCEN). Failure to comply with these reporting requirements can lead to significant penalties, including both civil and criminal consequences. Understanding these penalties is essential for any business entity, including small businesses or large corporations. An experienced attorney can provide invaluable assistance in navigating the complex legal landscape surrounding these regulations.

Civil Penalties for Non-Compliance

Civil penalties are one of the primary consequences faced by entities and individuals who fail to meet their beneficial ownership reporting obligations. These penalties may include fines of up to $500 for each day of a violation. That is, if a BOIR report was due 90 days after the date of registration of a company created after January 1, 2024, but the company did not file a BOIR report until 10 days after the deadline, they could be fined up to $5,000.

Civil penalties may apply to both corporations and individuals who file BOIRs on behalf of reporting companies. Penalties may apply to corporate entities that do not file initial reports or do not file updated or corrected reports when required. An individual may face penalties if they are the cause of a company’s failure to file because they failed to provide information needed to file a BOIR. Penalties may also apply to senior officers at the company during the time when a BOIR should have been filed.

Criminal Penalties for Egregious Non-Compliance

In cases where non-compliance is found to be willful or associated with other illegal activities, criminal penalties may be imposed. These can include fines of up to $10,000, and an individual who is convicted of this offense may be sentenced to up to two years in prison.

A willful failure to file a BOIR may lead to criminal penalties, although FinCEN does provide some opportunities for relief. Mistakes or omissions may be corrected within 90 days of the original deadline for filing a BOIR, allowing filers to avoid penalties. Willfully filing false information is more likely to lead to criminal penalties for a person who files a BOIR on a company’s behalf or for the senior officers of a reporting company.

Reporting companies have the responsibility to verify information reported to FinCEN and ensure that it is correct. When filing a BOIR, a company must certify that the information on the report is correct and complete. While a company is responsible for obtaining all required information from beneficial owners and company applicants, if any of these individuals willfully cause a company to fail to file reports as required, they may face criminal penalties.

Contact a San Jose Corporate Tax Attorney

If you are a business owner who is unsure about your beneficial ownership reporting obligations, or if you are concerned that you could face penalties for failing to file a BOIR when required, John D. Teter Law Offices can help you understand the best steps to take to maintain compliance with your legal requirements. We will work to help you avoid civil or criminal penalties while ensuring that all information is reported correctly and helping you address any related tax issues. Contact our San Jose, CA business tax lawyer at 408-866-1810 to schedule a consultation and get the legal help you need.