As your trusted Certified Public Accountant, we are committed to keeping you informed about significant changes in laws that may impact your business. Today, we want to enlighten you on the Corporate Transparency Act (CTA) and its significance to your company.
The Corporate Transparency Act, signed into law in 2021, represents a crucial step towards promoting transparency and preventing illicit financial activities. This law aims to enhance corporate accountability by requiring certain businesses to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).
The CTA primarily targets companies that are easily susceptible to money laundering, terrorist financing, and other financial crimes. It requires these businesses to report details about their ultimate beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Beneficial owners are individuals who directly or indirectly hold at least 25% ownership interest in the company, exercise substantial control, or receive substantial financial benefits from the entity.
The Corporate Transparency Act applies to corporations, limited liability companies (LLCs), and other similar entities. If your business falls within these categories, it’s crucial to familiarize yourself with the filing requirements to ensure compliance.
As your dedicated financial partner, we are here to help keep you informed of these changes in the law and any developments that may occur as the law’s implementation continues. Our recommendation as it relates to the filing requirements, determination of eligibility, and actual filing, is to contact your attorney.
The Corporate Transparency Act is a significant stride towards promoting transparency and accountability in the business world. If you have any questions or concerns regarding the CTA, please do not hesitate to reach out.
Thank you for entrusting us with your financial matters.
Audit Requirement Changes for Employee Benefit PlansUnderstanding the conditions triggering a mandatory audit for your 401(k) plan has historically posed a challenge, especially for companies hovering around the 100-employee threshold. Thankfully, in a world that is becoming increasingly complex and challenging, the Department of Labor has simplified things starting in 2023. Instead of counting all eligible plan participants regardless of if they actually contribute to the plan, a company now only has to report eligible employees that have a balance in the plan and terminated employees that still have a balance in the plan. As far as the timing of the balance is concerned, this is based off of the beginning of your plan year. This change is expected to reduce the number of plans that qualify as “large plans”, which serves as the basis for audit requirement.
As an example, consider the following fact pattern. A company has 75 employees eligible for the 401(k) plan at the beginning of the year, and only 20 of them actually participate and have a balance at the beginning of the year. Additionally, there are 40 terminated employees who still maintain a balance in the plan. Under the old methodology, this would mean the plan has 115 (75 + 40) employees for the purposes of filing the Form 5500, and an audit would be required because it exceeds the 100 participants requirement. Under the new methodology, only the 20 employees that participate and the 40 terminated employees with balances would count, so with 60 participants, they would be well under the audit requirement.
It is important to note that there is still the “80-120 Participant Rule” in effect. This allows plans with between 80 and 120 participants at the beginning of the plan year to file the Form 5500 in the same manner as they did in the prior year. So if a plan had 90 participants in the prior year and increased to 104 participants, they could opt to continue to file as a small plan and forgo the required audit for that year.
Aside from attempting to simplify the methodology for people, the DOL hopes this change will encourage more small businesses to establish 401(k) plans so that their employees have an easily-accessible retirement vehicle.
Even with this change, navigating your 401(k) plan and the necessary audit requirements can be challenging. emc is here to provide guidance and help along the way.
Bridgette Toth is Now an Enrolled Agent!We’re thrilled to announce that Bridgette Toth has successfully fulfilled all the requirements to attain the prestigious status of Enrolled Agent with the Internal Revenue Service. An Enrolled Agent is an individual who has demonstrated expertise by passing a rigorous three-part comprehensive IRS examination, covering both individual and business tax returns.
This esteemed designation represents the highest level of recognition bestowed by the IRS. Those who achieve Enrolled Agent status not only showcase their tax knowledge but also commit to upholding ethical standards. To maintain this elite status, individuals like Bridgette must complete 72 hours of continuing education courses every three years.
Bridgette’s dedication to her professional development is commendable, and we take pride in her accomplishment. By enhancing her skills, she is better equipped to serve our clients with excellence. Congratulations, Bridgette, on this significant achievement!