Are You A Hairstylist With An LLC? Avoid This $10,000 Fine!
How The Corporate Transparency Act Will Affect Hairdressers
Hairstylists that own an LLC, listen up: A new law took effect on January 1, 2024 and it may impact the way you file your taxes this year. With non-compliance fines that can scale up to $10,000, you need to understand how this law could affect you—BTC reached out to April McDaniel, a CPA at Kopsa Otte, an accounting firm that specializes in salons, spas and beauty distributors. Here’s what we learned about the Corporate Transparency Act.
Kopsa Otte Disclaimer: Because every situation is different, it is important that individuals seeking specific advice contact a professional advisor. The information provided does not constitute legal, tax, accounting or financial advice and is offered as an information service only. No liability whatsoever is assumed in connection with the use of this info.
What is The Corporate Transparency Act?
“The Corporate Transparency Act originally passed in 2020 and becomes effective January 1, 2024. This act is part of the government effort to pursue corruption, money laundering, terrorist financing, tax fraud and to identify anonymous shell companies that assist in those illegal acts,” April shared. In short, the act is a part of a government effort to reduce illegal behavior such as bribery, embezzlement, hiding income, claiming illegitimate tax deductions or other unethical practices.
“The Act applies to any domestic reporting company,” April explains. “That includes a corporation, LLC or an entity created by filing a document with the secretary of state or any similar office under the law of a state or Indian tribe.”
What new information do I need to report?
The Corporate Transparency Act’s required reporting items include the following:
1. Name, date of birth and address of each beneficial owner(s).
2. Unique identification number from a driver’s license, valid US passport, foreign passport or other government identification. “This must include issuing jurisdiction and an image of the document,” April adds.
What Is A Beneficial Owner? “Someone who controls or owns at least 25 percent or more of the ownership. This includes someone who directly or indirectly exercises substantial control over the entity affecting major expenditures, borrowing, etc.,” April explains.
Who do I need to report the new information to?
According to April, this act requires U.S. companies to report to the Financial Crimes Enforcement Network (FinCEN). This will allow them to establish a comprehensive database that won’t be publicly accessible, but allows limited access to certain government organizations and officials.
What are your recommendations for action?
Hairdressers with corporations or LLC’s have until January 1, 2025, to comply; but, if you formed your entity after January 1, 2024, you have only 30 days to comply from the entity’s creation.
April’s advice? Don’t wait! Report the new information to FinCEN ASAP: “Civil and criminal penalties are steep!” See the possible fines below:
- Non-compliance fines: $500 per day
- Criminal fines: Up to $10,000 and/or imprisonment
“Create an electronic file or paper file to track this reporting. Contact your attorney for assistance in filing your beneficial ownership information to the FinCEN to comply with The Corporate Transparency Act,” April advises.
Download our FREE tax guide for hairstylists here!
