Confusion and Scams Surround Federal Reporting Requirement for Small Businesses

The National Small Business Association has won a court challenge against the Corporate Transparency Act, a law designed to combat money laundering. A deadline for a new federal requirement affecting small businesses is coming up, but litigation and education efforts have caused confusion and opened the door for scammers, especially for small business owners in Spanish-speaking communities.

Small businesses with 20 employees or fewer are now required to file a beneficial ownership information report with the U.S. Treasury Department. The Jan. 1, 2025 deadline is currently voluntary due to pending litigation. Reporting started last New Year’s Day but two lawsuits out of Texas and Alabama put enforcement of the 2025 deadline to file on hold, temporarily.

Some business advisors have told their clients that they will need to submit the information and have done some education on the program, but that’s as far as they go. “We have to stop short of telling people what is or is not required since it’s not our program,” said Trevor Leahy, the Oregon Secretary of State small business ombudsman, in the office of small business assistance.

The federal reporting requirement is part of the 2021 Corporate Transparency Act. The law calls for business owners to report their personal information and submit copies of identification online. The law is aimed at combating money laundering, but Molly Day, vice president of public affairs for the National Small Business Association, said people who are already committing financial crimes might not be likely to self-report their personal information. “I don’t think it’s going to do anything,” she said.

Her organization sued the federal government this year, causing the requirement to be put on hold for NSBA’s roughly 65,000 members. A second lawsuit, brought by Texas Top Cop Shop, Inc, led to reporting for all affected businesses to become voluntary, for now.

Leahy said he’s encouraging small business owners to stay up to date by signing up for electronic alerts from FinCEN, the Financial Crimes and Enforcement Network’s website. Some small business owners haven’t received any information about the new reporting requirement, or if they have, said Jose Balcazar, it was likely fraudulent.

Balcazar, a bilingual business advisor with the Small Business Development Center at Central Oregon Community College, said his office learned of official-looking letters sent to business owners informing them of reporting requirements and then soliciting owners for hundreds of dollars to file the information on their behalf. The Treasury warns people of the scams on its website. Filing beneficial ownership information report is free and can be done on the FinCEN website.

Balcazar’s team had been working to help business owners learn how to do the reporting but with all the delays and confusion, the outreach has been tough. “Unfortunately there is not a lot of press information, especially in Spanish,” Balcazar said. FinCEN’s website has an FAQ sheet in multiple languages but all other reporting portals and information is provided in English. The website can be translated into Spanish using Google’s webpage translation function.

Leahy said his office did participate in a bilingual education effort in the Portland suburb of Forest Grove to reach Spanish speakers about the new requirement. In Central Oregon, Balcazar said he’s been reaching out to his clients proactively to inform them.

If the law overcomes legal challenges, penalties for not submitting the information can be up to $10,000 and two years in prison. To learn more about Beneficial Ownership Information reporting people can go to FinCEN.gov/boi. Small business owners who prefer to conduct business in Spanish can reach out to Oregon Secretary of State’s Small Business Assistance office at 1-844-469-5512 or Central Oregon Community College’s Small Business Development Center at 541-383-7290.