BOI reporting support for agencies with remote employees

Navigating BOI Reporting and Remote Employee Compliance for U.S. Businesses The Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) reporting requirements have seen significant changes, particularly impacting U.S. businesses. Coupled with the complexities of managing remote employees across state lines, understanding compliance is crucial for agencies and LLC founders. ### Federal BOI Reporting: What U.S. Businesses Need to Know Now A major development occurred on March 26, 2025, when the Financial Crimes Enforcement Network (FinCEN) issued an interim final rule. This rule removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act. This means that for most U.S.-created domestic entities, federal BOI reporting is no longer required. However, the reporting requirement still applies to foreign entities that are formed under the law of a foreign country and are registered to do business in any U.S. State or Tribal jurisdiction. For these foreign reporting companies, specific deadlines apply: - Entities registered to do business in the U.S. before March 26, 2025, must file BOI reports by April 25, 2025. - Entities registered on or after March 26, 2025, have 30 calendar days to file an initial BOI report after receiving notice that their registration is effective. FinCEN also lists 24 specific exemptions, such as large operating companies, subsidiaries, and tax-exempt entities. Even with the narrowed scope, U.S. domestic entities should still assess their status, document any exemption determinations, and continuously monitor FinCEN and Treasury updates, as the regulatory landscape remains active. ### BOI Reporting Details for Applicable Entities For those entities still required to report, the process involves identifying the entity itself, its beneficial owners (individuals exercising substantial control or owning/controlling at least 25% of ownership interests), and in some cases, company applicants. Required data elements include name, date of birth, address, an identifying number (SSN/ITIN or passport), and an image of an acceptable identification document. Reports must be filed electronically through FinCEN's secure e-filing system. Willful failures to report can lead to significant civil penalties (up to $591 per day, inflation-adjusted) and criminal penalties (up to two years imprisonment and/or fines up to $10,000). FinCEN offers a 90-day safe harbor for voluntary corrections. ### Remote Employee Compliance: Navigating State Payroll and Nexus Rules The physical presence of a remote employee in a state often creates 'nexus,' triggering tax and employer obligations for the out-of-state employer. These obligations typically include: - State income-tax withholding for that state (if applicable). - State unemployment insurance (SUI) registration and contributions. - Workers' compensation requirements. - Compliance with state-specific labor laws (e.g., wage statements, paid leave, notices). A single remote employee can establish nexus, requiring an employer to register in that state. Employers must track employee work locations, proactively register as employers in states where employees work, and update payroll systems and HR onboarding processes to ensure compliance. ### State-Specific Examples for Remote Employee Obligations Understanding state-specific rules is critical: - California: Employers must register with the Employment Development Department (EDD) for payroll taxes and unemployment insurance. California has additional payroll obligations like State Disability Insurance (SDI) and Employment Training Tax (ETT), and aggressively enforces nexus, meaning one remote worker can create a taxable presence. - New York: New York applies a 'convenience of the employer' rule, which may require withholding for New York income tax even if an employee works remotely from another state, depending on the circumstances. - Texas and Florida: While these states do not have a state personal income tax, employers with employees there must still register for unemployment insurance and comply with workers' compensation and other payroll reporting obligations. - Illinois: This state has income tax and nonresident withholding rules, requiring employers to withhold for work performed in Illinois and register as employers where appropriate. ### Actionable Guidance for Compliance 1. BOI Compliance Posture: Determine if your entity is a FinCEN reporting company under the current rule. For most U.S.-created domestic entities, federal BOI reporting is not required, but foreign entities registered in the U.S. may still have obligations. Document your company's formation jurisdiction and exemption analysis, and monitor FinCEN updates. 2. Data Collection & Onboarding: Implement a secure HR onboarding process to collect necessary identity documentation for owners/founders/company applicants (if applicable) and physical work location data for remote employees. Ensure sensitive data is encrypted and access is limited. 3. State Payroll Compliance: Track each remote employee's physical work location, register as an employer in each state where services are performed before paying wages, withhold correct state income tax (if applicable), register and pay SUI, and obtain workers' compensation coverage. Establish clear policies for employee relocations. 4. Verify Identity Remotely: Use acceptable ID images and ISO/AML-grade identity verification tools when collecting ID for BOI or payroll. Maintain secure records according to FinCEN's guidance. 5. Use Service Providers Carefully: Third-party service providers can assist with BOI reports or multi-state payroll, but be aware of state regulations regarding the unauthorized practice of law. Ensure clear contracts and authorizations are in place. 6. Privacy & Recordkeeping: Follow FinCEN's secure filing guidance, minimize copies of sensitive documents, enforce access controls, and align retention with regulatory requirements. 7. Ongoing Monitoring: Assign an internal owner (e.g., CFO/Compliance Officer) or external counsel to monitor FinCEN press releases and state tax guidance, as the BOI/CTA landscape is dynamic. ### Resources and Next Steps For comprehensive guidance, refer to official FinCEN resources such as the FinCEN BOI landing page, the Small Entity Compliance Guide, and Federal Register notices. For state-level remote work considerations, the NCSL provides valuable insights. Given the complexity, it is highly recommended to consult a tax attorney or payroll specialist for tailored advice on multi-state compliance.