Real Investor Radio

Episode 29 | Tax Law with Douglas Stein – Unpacking the Corporate Transparency Act

January 19, 2024

Episode Summary:

In this episode, Jack BeVier and Craig Fuhr interview tax attorney Doug Stein about the Corporate Transparency Act (CTA) and its implications for tax planning for investors in real estate. The CTA requires the reporting of beneficial owners of LLCs and other entities, removing the anonymity that previously existed. These reporting requirements apply to both existing and new entities, with non-compliance resulting in penalties. Although the impact on trusts remains unclear, it is likely that beneficiaries will need to be disclosed. Reporting can be complex and time-consuming, so seeking professional help is recommended, especially for those managing multiple entities.

Overview of Episode 29

In this episode, Craig Fuhr and Jack BeVier discuss the Corporate Transparency Act (CTA) with tax attorney Doug Stein. They explore how this act changes tax planning for investors by requiring more detailed ownership disclosures for LLCs and other entities. As a result, investors now need to report beneficial ownership, including complex entity structures, within 90 days of forming a new entity.

Increased Audits and Compliance Expectations

Accordingly, the CTA will likely lead to more IRS audits, as this new transparency allows the IRS to trace ownership more accurately. Investors should adjust their tax planning strategies to ensure compliance. Additionally, entities must file separate reports for each ownership change, increasing administrative responsibilities.

Consequences of Non-Compliance

Failure to comply with CTA requirements can result in fines of up to $10,000 per year. For investors, this means understanding the rules and filing correctly is crucial to avoid costly penalties. After all, these compliance costs can significantly affect overall investment returns.

Tax Planning with Entity Structures

The CTA affects investors with layered LLCs and trusts seeking anonymity. Stein advises investors to assume transparency and focus on tax planning strategies that comply with the new rules. Above all, the discussion highlights the importance of understanding regulatory changes in tax law to make informed investment decisions.

Key Takeaways on Tax Planning

As tax laws evolve, investors must stay informed and proactive in tax planning to mitigate risks and optimize returns.