Author: [email protected]

May 03, 2024 | by RSM US LLP

Executive summary: The IRS has released its annual update, in which it pledges to triple its audit rates on large corporations.

The update states that the IRS will nearly triple audit rates on large corporations—those with assets over $250 million. The audit rate on such corporations was 8.8% in 2019. Under the plan, the audit rate would be 22.6% by 2026. Audit rates on other large business entities would increase exponentially as well. Large corporations should take note of the IRS’s increased audit focus and document any tax position or corporate transaction that might be questioned upon audit.

On May 2, 2024, the IRS released an update on the Strategic Operating Plan, its blueprint outlining its implementation of the Inflation Reduction Act (IRA). The annual update and accompanying supplement focus on recent and future contemplated changes as a result of the funding provided by the IRA.

Per the updated plan, the IRS will nearly triple audit rates on large corporations—those with assets over $250 million. The audit rate on such corporations was 8.8% in 2019. The IRS plans to increase audit rates on these corporations to 22.6% by 2026.

The updated plan also states the IRS will increase audit rates on large, complex partnerships to 1%, up from a tenth of a percent. The IRS will also increase audits on individuals earning more than $10 million—from a rate of 11% in 2019 to 16.5% in 2026.

Large corporations—as well as other large business entities—should take note of the IRS’s increased audit focus. Due to the increased probability of an audit, we recommend that taxpayers contemporaneously document any tax position or corporate transaction that might be questioned upon audit.

April 30, 2024 | by RSM US LLP

Executive summary: Distribution options

Employers establish retirement plans to provide a vehicle to set aside monies, whether funded by the employee or the employer, to be preserved for a retirement benefit. The rules related to when an employee can take a distribution from their retirement plan account are restrictive considering the goal of preserving the retirement funds. SECURE 2.0, enacted on Dec. 29, 2022, included provisions that loosen some of the restrictions on withdrawals from a retirement plan. The additional options available give plan sponsors flexibility in choosing what to offer their employees.

In general

There are a few general concepts to keep in mind as we dive deeper into some of the provisions added by SECURE 2.0.

1. A plan sponsor has discretion as to whether and how these optional plan provisions will be incorporated into the plan.
2. All the distribution provisions discussed are exempt from the 10% tax on early withdrawals (i.e., before age 59½) from a retirement plan. However, the amount withdrawn is still subject to income tax.
3. While income tax applies, there is the ability for an individual to recoup taxes, and restore their retirement savings, by re-contributing to the plan some or all the amounts withdrawn within three years of distribution.
4. The provisions can be made available to any plan participant, not just a current employee.

Domestic abuse

A survivor of domestic abuse often needs access to additional funds to assist in escaping or recovering from an unsafe situation. “Domestic abuse” for this purpose is defined in SECURE 2.0 as: “physical, psychological, sexual, emotional, or economic abuse, including efforts to control, isolate, humiliate, or intimidate the victim, or to undermine the victim’s ability to reason independently, including by means of abuse of the victim’s child or another family member living in the household.” The survivor must certify that they experienced domestic abuse within the last year to receive a distribution that is no more than the lesser of $10,000 (for 2024, as indexed) or 50% of the survivor’s vested plan balance.

This distributable event became available, after Dec. 31, 2023, for implementation by an IRC section 401(a) defined contribution plan (including 401(k), but not money purchase pension plans), 403(a) annuity plan, 403(b) plan and a governmental 457(b) plan, as well as individual retirement accounts (IRAs).

Emergency personal expense

Unforeseen emergency situations that require immediate financial resolution are a common occurrence. This distributable event allows up to $1,000 of the participant’s plan account to be withdrawn. To receive the distribution, the participant must certify that they have an expense for themselves or a family member that is an immediate financial need. Only one such distribution can be issued in a calendar year. Another personal expense distribution cannot be issued in the three calendar years following the year of distribution unless the withdrawn amount is repaid to the plan or contributions made by the participant to the plan after the distribution are at least equal to the amount distributed.

Many plans already provide hardship distribution options for employees. However, the circumstances under which a hardship distribution can be issued are limited. For example, an employee’s car may require a $750 repair, which would not fall under one of the safe harbor reasons for hardship distribution. However, the employee could use the emergency personal expense provision to take a distribution to cover the $750 repair.

This distributable event became available, after Dec. 31, 2023, for implementation by an IRC section 401(a) defined contribution plan (including 401(k), but not money purchase pension plans), 403(a) annuity plan, 403(b) plan and a governmental 457(b) plan, as well as IRAs.

Federally declared disasters

Repeatedly, Congress has enacted legislation after disasters (e.g., hurricanes, floods, wildfires) providing individuals the opportunity to take a penalty-free distribution or loan from their retirement plan accounts to assist them as they rebuild their lives. In lieu of the disaster-by-disaster approach, Congress enacted permanent rules for distributions and loans related to federally declared disaster areas.

Key features of the new distribution provision are:

• A participant can request a distribution of up to $22,000 up to 180 days after the date of the disaster.
• The individual must have sustained an economic loss in relation to the disaster and must have a principal place of residence located in the disaster area.
• The tax effect of the amount withdrawn can be spread over three years rather than the entire amount being taxable in the year withdrawn.

Key features of the new loan provision are:

• The maximum dollar amount that can be made available is the lesser of 50% of the individual’s vested plan balance or $100,000 (increased from $50,000 under the normal loan rules).
• Loan repayments, whether on an existing loan or one taken because of the disaster, owed between the date of the disaster and up to 180 days after the disaster can be delayed for one year.

These provisions became available for disasters after Jan. 26, 2021, and can be implemented by an IRC section 401(a) defined contribution plan (including 401(k) plans), 403(a) annuity plan, 403(b) plan, and a governmental 457(b) plan, as well as IRAs.

Terminal illness

This provision was not added as a distributable event, but rather just as an exception to the early withdrawal penalty. Therefore, it only applies when a distribution is issued under another plan provision. The intention was to have this be an optional plan distributable event. There has been a technical corrections bill drafted that would address this, as well as some other SECURE 2.0 provisions, but it has not yet been finalized.

IRS Notice 2024-2 provides guidance on terminal illness distributions in the form of Q&As. The guidance confirmed the following:

• A terminally ill individual is one who has an illness or physical condition that a physician has certified is expected to result in death in 84 months or less. The 84 months is measured from the date of certification.
• Certification must be obtained prior to the distribution and contain specific information (e.g., the name and contact information of the physician, a narrative description to support the conclusion that the individual is terminally ill, the date the physician examined the individual, etc.) as outlined in Notice 2024-2.
• Only the physician’s certification must be provided to a plan administrator to support the distribution. However, the individual should retain appropriate underlying documents to support their distribution and as part of maintaining complete tax records.
• Generally, there is no limit to the amount that can be treated as a terminal illness distribution. However, distributions cannot be made solely because of a terminal illness. Therefore, the participant must qualify for a distribution based on another plan provision, and any limits applicable to the distributable event being utilized to issue the distribution would have to be considered. For example, a plan may allow in-service distributions, but it might cap such distributions to $10,000.

The provision became available after Dec. 29, 2022, for distributions from IRC section 401(a) defined benefit and defined contribution plans (including 401(k) plans), 403(a) annuity plans, and 403(b) plans, as well as IRAs.

Takeaway

Legislators see that employees have unexpected financial needs arise for which they need a source of funds. The only source, for some employees, with an amount sufficient to assist with the need is retirement plan savings. Relaxation of the distribution rules to provide an employee with a current source of funds may negatively impact the individual’s financial position in retirement overall but may also help encourage participants to contribute to their retirement plans by alleviating fears that their funds are not accessible when needed under extenuating circumstances. The opportunity is available for an employee to restore their retirement account by re-contributing the distribution taken, but how many individuals will avail themselves of this opportunity? Employees contemplating one of these distributions should consider 1) other sources of income that may be available to assist with the financial need, 2) the current tax ramifications of the withdrawal, and 3) how the reduction to their account balance will affect them in retirement.

April 29, 2024 | by RSM US LLP

Many people want their loved ones to inherit their home after they are gone. However, leaving the value of your home in your estate can contribute to a high estate tax bill. Qualified Personal Residence Trusts (QPRT) can be a valuable tool to make a lifetime transfer of your home to your family, still enjoy the home during your life, and potentially reduce your estate taxes.

What is a QPRT?

A QPRT is an irrevocable trust designed to reduce the amount of gift and estate taxes typically incurred when transferring a personal residence to beneficiaries. By transferring your home into a QPRT, you can continue living in it for a specified term while passing it on to your heirs at a reduced transfer tax cost. The essence of a QPRT lies in its ability to freeze (for estate tax purposes) the value of your home at the time of the trust’s creation, potentially shielding any future appreciation from estate taxes.

What are the requirements for establishing a QPRT?

• Generally, the personal residence must be the sole asset of the trust.
• You decide on a fixed term (e.g., 5, 10, 20 years) during which you retain the right to live in the home. After this term, the residence passes to the beneficiaries designated in the trust. You may live in the home after the term, but you must pay rent to retain the estate tax advantages.
• Once established, the terms of the QPRT cannot be altered, and residence cannot be taken back

What are the benefits of setting up a QPRT?

• When you transfer your home into a QPRT, the value of the gift used for gift tax reporting purposes is calculated based on the current value of your home minus the value of your retained interest in living there for the term of the QPRT. Thus, the value of the gift is less than an outright gift.
• Any appreciation in your home’s value during and after the term occurs outside of your estate, potentially saving on future estate taxes. 
• Payment of rent after the term is not considered a gift to the other QPRT beneficiaries.
• If necessary, the residence can be sold while it is owned by the QPRT.

What are the potential downsides of setting up a QPRT?

• If you die during the QPRT term, the entire home is included in your estate.
• Transfers made during life generally mean a carryover basis for your beneficiaries, leaving them with the burden of potential capital gains if they sell. If a QPRT is not utilized and the asset is included in your estate, there may be a step-up in basis, potentially avoiding capital gains.
• The payment of rent after the term can cause additional complications, such as determining the fair market rent, cash flow issues for the renter, or disagreements among family members.
• QPRTs may not be an efficient tool for multigenerational transfers because you cannot allocate your available generation-skipping tax exemption to the transfer until the end of the term, when values have likely increased.
• You must file a gift tax return and obtain a professional appraisal to establish the transferred interest’s value for transfer tax purposes.

Is a QPRT right for you?

QPRTs offer a strategic way to pass a valuable asset to your loved ones. However, the decision to use a QPRT requires careful consideration of its benefits and limitations. In addition, it is important to properly administer QPRTs to avoid IRS scrutiny. By understanding the requirements, advantages, and potential downsides, you can make an informed decision about whether a QPRT is right for your estate planning needs. As always, consult with your RSM tax advisor to tailor a strategy that best suits your situation and goals.

March 25, 2024 | by RSM US LLP

Executive summary: Credits for retirement plan sponsors

Continued concerns by congressional leaders for employees to attain retirement security have led to legislative changes intended to make it more affordable for certain employers to sponsor a retirement plan. Non-refundable credits were already in place to help employers offset the administrative cost of implementing and maintaining a retirement plan, but the SECURE 2.0 Act of 2022 (SECURE 2.0) enhanced an existing credit and introduced new start-up and military spouse credits to incentivize plan sponsors to maintain plans and make their setup and operation more feasible. SECURE 2.0 also provides plan sponsors the ability to use de minimis financial incentives to entice employees to elect to defer. The IRS provided additional guidance on these credits and financial incentives in Notice 2024-2.

Startup plan tax credits

Small employer pension plan startup cost tax credit

SECURE 2.0 expanded the already available small employer pension plan startup cost tax credit to make implementing a retirement plan more attractive to a small employer. A small employer in this context is an employer with 100 or fewer employees who earned at least $5,000 in the prior tax year. Employees of employers related to the sponsoring employer under the controlled and affiliated service group aggregation rules are considered for this purpose. Historically, small employers could claim a nonrefundable credit for 50% of the cost to set up and administer a retirement plan, up to a maximum of $5,000. Costs paid by the employer, not the plan, are considered for purposes of the credit. The credit has been increased to 100% for employers with 50 or fewer employees earning at least $5,000 in the prior tax year, beginning in 2023. The 50% credit still applies for employers with 51 to 100 employees. Generally, the credit can be claimed for the first three years the plan is in operation. Amounts claimed towards the credit cannot also be deducted as an expense on the employer’s return. The employer can elect whether it takes the credit each year, so if an employer does not claim the credit for a given year, the costs may be deducted. Since the credit is nonrefundable, it is not beneficial for tax-exempt and governmental employers.

Additional credit for employer contributions

Small employers who meet the criteria of the small employer pension plan startup cost tax credit also have the opportunity to receive an additional credit for employer contributions (e.g., profit-sharing or match) made to a new defined contribution plan, for taxable years beginning after Dec. 31, 2022. The credit, which is available for up to five years, is 100% of employer contributions (up to $1,000 per eligible employee) in the year a plan is established and the next, 75% in the third year, 50% in the fourth year, and 25% in the fifth year. For an employer with more than 50 employees in the prior year, the credit is reduced two percentage points for each employee in excess of 50 (i.e., if the employer had 60 employees, the credit would be reduced by 20%). Contributions to employees with more than $100,000 in compensation cannot be taken into account for the credit. Even with the limitations on this credit, it provides a potentially significant tax savings opportunity for small employers.

Auto-enrollment credit

Although not new with SECURE 2.0, another credit to keep in mind is the auto-enrollment credit, which allows a $500 credit for a three-year period, beginning in the year a small employer implements an auto-enrollment provision in their retirement plan. Auto-enrollment is a provision that enrolls eligible employees into a retirement plan at a specific deferral rate, unless the employee elects a different deferral rate or not to defer.

Summary

To conceptualize the credits potentially available, consider a 401(k) plan with an auto-enrollment provision effective in 2022 by an employer with less than 50 employees in every year.

	Tax year	Credit for Startup Costs	Credit for Eligible Employer Contributions	Credit for Auto Enrollment
1st Credit Year	2022	50% up to $5,000	n/a	$500
2nd Credit Year	2023	100% up to $5,000	100%	$500
3rd Credit Year	2024	100% up to $5,000	75%	$500
4th Credit Year	2025	n/a	n/a	50%
5th Credit Year	2026	n/a	25%	n/a

Military spouse credit

A new credit, effective for taxable years beginning after Dec. 29, 2022, was born out of concern for military spouses who may not be able to participate in a retirement plan or may not become vested in their employer account within a retirement plan due to the need to frequently relocate. During each of the first three years in which a non-highly compensated military spouse participates in a defined contribution plan, SECURE 2.0 provides a tax credit of $200 for the military spouse’s participation plus an added credit of up to $300 for employer contributions made to the plan on behalf of the military spouse, subject to certain conditions. Conditions that must be met to qualify for the credit are:

• The military spouse must be allowed to participate in the plan within two months of employment.
• The military spouse must be immediately eligible for employer contributions at a rate at least as favorable as an employee who is not a military spouse would receive after two years of service.
• Employer contributions to the military spouse are immediately fully vested.

Small employers should keep in mind that the credit is based on each military spouse’s first three years of plan participation. Since each spouse could have a different three-year period, tracking the credit available for each year will require appropriate administrative measures.

Financial incentives for participants

Employers of all sizes often look for ways to increase the number of employees who elect to defer to a retirement plan. Historically, this has been in the form of targeted communication campaigns and financial literacy education of eligible employees. Beginning in 2023, SECURE 2.0 provided a new tool employers can use to entice employees to elect to defer. A de minimis financial incentive (not paid for with plan assets) can be offered to eligible employees who make a deferral election, provided they do not already have an election to defer on record.

In Notice 2024-2, the IRS noted a financial incentive will be considered de minimis if it does not exceed $250 in value. For example, as noted in the guidance, “if an employer announces on Feb. 1, 2024, that any employee for whom an election to defer under a CODA is not in effect on that date and who, within the next 90 days, makes an election to defer, will receive a $200 gift card, then the gift card is a de minimis financial incentive…”

Unless an exception is provided under the Internal Revenue Code, the financial incentive is considered includable in an employee’s wages and is subject to applicable employment tax withholding and reporting. For example, a gift card is a cash equivalent and considered to be a taxable fringe benefit. Therefore, no exception is available in this example and the value of the gift card is taxable compensation to the employee.

Takeaway

SECURE 2.0 expanded opportunities for employers to establish and operate retirement plans, especially for small employers. There are nuances involved in determining whether the credits are available and how the credit amounts are calculated. For example, specific criteria are applied to determine who is an eligible employer, how compensation is determined for the thresholds discussed, and to which years the credits can apply. RSM US can assist in evaluating credits or financial incentives available to employers sponsoring retirement plans, as well as for consulting on other retirement plan matters.

Stay tuned for other retirement plan topics each month and check out our previous article, Retirement plan audit and contribution considerations.

March 15, 2024 | by RSM US LLP

To improve traceability and detect and protect organic integrity across the supply chain, the United States Department of Agriculture created the National Organic Program (NOP) Strengthening Organic Enforcement (SOE) rule, which will become effective on March 19, 2024. This means all organic imports into the United States must be declared as such and contain an associated NOP import certificate. Importers and exporters of organic products who sell, process, treat, pack, containerize, repackage, label or store agricultural products, regardless of the product packaging, must have organic certifications and be listed on an NOP import certificate. Food and beverage companies must take note and address this new rule.

Each certificate must have a unique identification number to provide an auditable record trail of the import, supporting traceability and verification of organic integrity as products travel from a certified organic exporter outside the U.S. to a certified U.S. importer. Certificates must contain detailed information about the quantity and origin of organic products being imported into the U.S. The importer or its customs broker must enter the NOP import certificate number into the U.S. Customs and Border Protection’s Automated Commercial Environment (ACE) system to associate the shipment details in ACE with the import certificate information.

Pursuant to 7 CFR § 205.101 of the rule, the following operations are exempt from these requirements but must still comply with organic production and handling as well as applicable labeling requirements:

• Production or handling operations that sell agricultural products as “organic” but whose gross agricultural income from organic sales totals $5,000 or less annually
• Retail establishments that do not process organically produced agricultural products
• Retail establishments that process, at the point of final sale, agricultural products certified as “100% organic,” “organic,” or “made with organic (specified ingredients or food group(s))”
• Handling operations that only handle agricultural products that contain less than 70% organic ingredients or that only identify organic ingredients on the information panel
• Operations that only receive, store and/or prepare for shipment, but do not otherwise handle, organic agricultural products that are enclosed or will remain in sealed, tamper-evident packages or containers prior to being received or acquired by the operation
• Operations that only buy, sell, receive, store and/or prepare for shipment, but do not otherwise handle, organic agricultural products already labeled for retail sale that are enclosed or will remain in sealed, tamper-evident packages or containers that are labeled for retail sale prior to being received or acquired by the operation and are not otherwise handled while in the control of the operation
• Operations that only arrange for the shipping, storing, transport or movement of organic agricultural products but do not otherwise handle organic products

To obtain certification, the exporter must request an NOP import certificate from their certifier. They must identify products as organic on all export documents such as invoices, packing lists, bills of lading and U.S. Customs entry data and provide the NOP import certificate to the importer. The exporter must also verify that the product has not been exposed to a prohibited substance, treated with a prohibited substance because of fumigation, or treated with ionizing radiation at any point in the products’ movements across the country border.

Similarly, importers must ensure that they have accurate NOP import certificates and ensure products are identified as organic on all import documentation and customs entry data. They must maintain import documents and provide them during inspections. Importers also must verify that shipments do not come into contact with prohibited substances or be exposed to ionizing radiation since export and have a documented organic control system to conduct this verification.

Recommended next steps

U.S. food and beverage importers should take immediate action to comply with the SOE rule by taking the following steps:

• Review the SOE final rules
• Determine if operations meet the new rule requirements
• Obtain NOP import certificates for applicable products
• Develop a formal organic control program
• Audit internal processes and documentation to ensure compliance

February 26, 2024 | by RSM US LLP

The Employee Retention Credit (ERC) provided a refundable employment tax credit for eligible employers experiencing economic hardship, generally for wages paid between March 13, 2020 through Sept. 30, 2021. While the program provided necessary economic relief for employers experiencing financial hardship related to COVID-19, the Service was eventually inundated with claims by applicants that were either not eligible for relief or claimed an excessive amount of ERC. Many applicants were misled into claiming ERC because of aggressive marketing by third party promoters.

The Service is responding to the influx of dubious claims by aggressively targeting ERC claims for audit, placing a moratorium on the processing of new claims and launching criminal investigations on promoters and businesses associated with improper claims. 

The Service recently advised businesses to revisit their eligibility before March 22, 2024. The more beneficial ERC Voluntary Disclosure Program remains open only until March 22, 2024 for taxpayers that previously claimed and received the ERC but have now determined they were ineligible for some or all quarters. The voluntary disclosure program gives taxpayers an opportunity to repay only 80% of the erroneous ERC received and avoid certain penalties and interest while providing protection against future audit of the employment tax returns at issue. 

An employer may enter the ERC Withdrawal Program to avoid potential penalties and interest if the ERC refund has not yet been paid by the IRS but the employer now believes it is ineligible (or partially ineligible). An employer may only withdraw a claim if it has not been selected for an IRS examination. The ERC withdrawal program continues to be effective even after March 22, 2024.

With the March 22, 2024 deadline quickly approaching, the Service encourages employers to carefully review their ERC claims while there is still time to voluntarily disclose errors under the most beneficial program. 

The agency also alerted employers of seven common signs that a claim may be incorrect:

1. Too many quarters being claimed.  It is uncommon for a taxpayer to qualify for ERC for all quarters that the credit was available. Employers are urged to carefully review their eligibility for each quarter, especially if they are asserting eligibility under the government orders test rather than the gross receipts test. Even employers satisfying the gross receipts test may need to examine eligibility if they are a large employer who must establish wages claimed for ERC were paid for the nonperformance of service.
2. Government orders that do not qualify. To claim the ERC under the government order test,
   1. The government orders impacting the employer’s operations must have been in effect and the operations must have been fully or partially suspended because of the government order during the period for which they are claiming the credit,
   2. The government order must be due to the COVID-19 pandemic, and
   3. The order must be a government order, as opposed to guidance, a recommendation or statement.
3. Too many employees and wrong calculations.  Employers need to meet certain rules for wages to be considered qualified wages, depending on the tax period. As the law changed throughout 2020 and 2021, the credit is likely to be overclaimed if the same credit amount is used across multiple tax periods for each employee. In addition, large eligible employers must follow a set of additional rules when calculating eligible wages that can be complex. 
4. Business citing supply chain issues. A supply chain disruption alone does not qualify an employer for ERC. Employers need to carefully review the rules on supply chain issues to ensure eligibility.
5. Business claiming ERC for too much of a tax period. Businesses should review their claim for overstated qualifying wages as it is uncommon to qualify for ERC for the entire calendar quarter if their business operations were suspended due to a government order during only a portion of a calendar quarter.
6. Business did not pay wages or did not exist during eligibility period. Employers can only claim ERC for tax periods in which they were in existence and paid wages to employees. Businesses should confirm they only submitted claims for tax periods for which they can verify that employees were paid and the business was ongoing.
7. ERC promoter claims there is nothing to lose.  Businesses that were told applying for the ERC presented no risk should carefully review their claims for eligibility. Incorrect ERC claims risk repayment, penalties, interest, and audit.

If an employer determines their claim was ineligible or partially ineligible, they should consult with a tax professional about taking advantage of the ERC Voluntary Disclosure Program or the ERC Withdrawal Program as soon as possible.

February 07, 2024 | by Atherton & Associates, LLP

 

If your entity does not fall into one of the categories above, you may still be exempt if your entity is considered a “large operating company.” The IRS defines a large operating company as an entity:

• With 20 full-time U.S. employees. A full-time employee is an employee who is employed an average of at least 30 hours per week. Employer aggregation rules do not apply
•  With a U.S. physical office; and
• That filed a federal income tax return in the prior year with more than $5 million in US gross receipts or sales (determined on a consolidated basis for taxpayers filing consolidated returns). Receipts or sales from outside the U.S. are excluded in determining the $5 million threshold.

All three of the rules above must apply to you at all times in order to be exempt from filing. So, if your employee count falls under twenty, you are required to report.

Entities in existence prior to January 1, 2024, have until January 1, 2025, to file these reports. However, entities formed in 2024 will have 90 days from the entity’s formation/registration to file these reports. The deadline changes to within 30 days of formation after 2024. If any of the reported information changes or a beneficial ownership interest is sold or transferred, the entity must report this information within 30 days of the change or face the potential of having the penalties described above imposed. Changes include reporting a beneficial owner’s change of address or name, a new passport number when a passport is replaced or renewed or providing a copy of a renewed driver’s license.

The BOI report must be completed electronically through the FINCEN’s secure filing system called “BOSS,” (Beneficial Ownership Secure System). 

Unfortunately, we understand that this will impose burdensome reporting requirements on most businesses, but the willful failure to report information and timely update any changed information can result in significant fines of up to $500 per day until the violation is remedied, or if criminal charges are brought, fines of up to $10,000 and/or two years imprisonment. These penalties can be imposed against the beneficial owner, the entity, and/or the person completing the report.

While we can do our best to our your questions directly, we highly recommend you visit the following website, https://www.fincen.gov/sites/default/files/shared/BOI_Informational_Brochure_508C.pdf for more information or https://www.fincen.gov/boi-faqs for FAQs to answer your questions. The registration can be found at https://www.fincen.gov/boi.

We hope that this information is helpful. Due to the many requirements of this new law, our firm is unable to fill out this information for you. Therefore, this is something that you must complete on your own. Please be sure to review all requirements and ensure that you complete the BOI report in a timely manner.

 

Sincerely,

Atherton & Associates, LLP

February 06, 2024 | by Atherton & Associates, LLP

Did you know that charitable organizations with gross revenues of $2 million or more must have audited financial statements prepared by an independent CPA? The $2 million threshold excludes grants received from governmental entities.  Understanding the intricate details of audit requirements for nonprofit organizations is crucial to maintain transparency and uphold financial integrity. At Atherton & Associates, we’re committed to helping nonprofits navigate these complexities and ensure compliance with laws and regulations like the Nonprofit Integrity Act of 2004. If your organization falls within the $2 million revenue category excluding governmental grants, it’s essential to have your financial statements audited by an independent CPA. For any questions or if you’d like to discuss the audit requirements and how they apply to your organization, don’t hesitate to reach out to our office. Our expert advisors are always here to assist you. Please call us at 209-577-4800.

Nonprofit Integrity Act of 2004

California Charity Laws & Regulations

National Council of Nonprofits / California Audit Requirements