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Treasury may fine small businesses up to $10,000 if they don’t file this report

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Treasury Secretary Janet Yellen following a tour of the Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia, on Jan. 8, 2024.

Valerie Plesch/Bloomberg via Getty Images

Small businesses and their owners could face penalties of $10,000 or more if they don’t comply with a new U.S. Treasury Department reporting requirement by year’s end — and evidence suggests many haven’t yet complied.

The Corporate Transparency Act, passed in 2021, created the requirement. The law aims to curb illicit finance by asking many businesses operating in the U.S. to report beneficial ownership information to the Treasury’s Financial Crimes Enforcement Network, also known as FinCEN.

Many businesses have a Jan. 1, 2025 deadline to submit an initial BOI report.

This applies to about 32.6 million businesses, including certain corporations, limited liability companies and others, according to federal estimates.

The Treasury Department did not respond to CNBC’s request for comment on the number of BOI reports that had been filed to date.

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The data helps identify the people who directly or indirectly own or control a company, making it “harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures,” according to FinCEN.

“Corporate anonymity enables money laundering, drug trafficking, terrorism and corruption,” Treasury Secretary Janet Yellen said in a January announcement of the BOI portal launch.

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Here’s the kicker: Businesses and owners that don’t file may face civil penalties of up to $591 a day, for each day their violation continues, according to FinCEN. (The sum is adjusted for inflation.) Additionally, they can face up to $10,000 in criminal fines and up to two years in prison.

“To a small business, suddenly you’re staring at a fine that could sink your business,” said Charlie Fitzgerald III, a certified financial planner based in Orlando, Florida, and a founding member of Moisand Fitzgerald Tamayo.

The federal government had received about 9.5 million filings as of Dec. 1, according to statistics FinCEN provided to the office of Rep. French Hill, R-Arkansas, who has called for the repeal the Corporate Transparency Act. Hill’s office shared the data with CNBC.

That figure is about 30% of the estimated total.

FinCEN was receiving a volume of about 1 million new reports per week as of early December, Hill’s office said.

Many businesses may not be aware

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A “beneficial owner” is a person who owns at least 25% of a company’s ownership interests or has “substantial control” of the entity.

Businesses must report information about their beneficial owners, like name, birth date, address and information from an ID such as a driver’s license or passport, in addition to other data.

Companies that existed prior to 2024 must report by Jan. 1, 2025. Those created in 2024 have 90 calendar days to file from their effective date of formation or registration; those created in 2025 or later have 30 days.

Corporate anonymity enables money laundering, drug trafficking, terrorism, and corruption.

Janet Yellen

U.S. Treasury Secretary

There are multiple exceptions to the requirement: For example, those with more than $5 million in gross sales and more than 20 full-time employees may not need to file a report.

Many exempt businesses — like large companies, banks, credit unions, tax-exempt entities and public utilities — already furnish similar data.

Brian Nelson, under secretary for terrorism and financial intelligence for the Treasury Department, said in an interview at the Hudson Institute earlier this year that the agency was “on a full court press” to spread awareness about the BOI registry, which opened Jan. 1, 2024.

But it seems many business owners either aren’t complying with or aware of the requirement, despite outreach efforts.

The scope of national compliance is “bleak,” the S-Corporation Association of America, a business trade group, said in early October.

The “vast majority” of businesses hadn’t yet filed a report, “meaning millions of small business owners and their employees will become de facto felons come that start of 2025,” it said.

Enforcement is up in the air

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However, the situation isn’t quite that grim, others said.

For one, a federal court in Texas on Dec. 3 temporarily blocked the Treasury Department from enforcing the BOI reporting rules, meaning the agency can’t impose penalties while the court conducts a more thorough review of the rule’s constitutionality.

“Businesses should still be filing their information,” said Erica Hanichak, government affairs director at the Financial Accountability and Corporate Transparency Coalition. “The deadline itself hasn’t changed. It just changes enforcement of the law.”

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The government is expected to appeal, and enforcement “could resume” if the injunction is reversed, wrote attorneys at the law firm Fredrikson.

Additionally, Treasury said it would only impose penalties on a person (or business) who “willfully violates” BOI reporting.

The agency isn’t out for “gotcha enforcement,” Hanichak said.

“FinCEN understands this is a new requirement,” it said in an FAQ. “If you correct a mistake or omission within 90 days of the deadline for the original report, you may avoid being penalized. However, you could face civil and criminal penalties if you disregard your beneficial ownership information reporting obligations.”

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Personal Finance

Some shoppers prefer retail credit cards over buy now, pay later plans

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High interest rates aren’t deterring many shoppers from store credit cards.

When asked to choose between a store card or a buy now, pay later plan, 58% of surveyed shoppers prefer store cards, according to a new report by LendingTree. The remaining 42% picked BNPL loans.

The site polled 2,040 U.S. adults in September.

That choice “speaks to the fact people may be looking for a little bit longer-term help with their financial situation,” said Matt Schulz, chief credit analyst at LendingTree.

In December, new cards offered by the top 100 retailers had an average annual percentage rate of 32.66%, up from 27.7% in 2022, according to the Consumer Financial Protection Bureau. Many short-term BNPLs do not charge interest, but longer-term loans do, and on the higher end, those rates can be comparable to a store card.

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Younger shoppers have been early adopters of BNPL, and that shows in their payment preferences. 

About 59% of Gen Zers and 51% of millennials prefer BNPL over retail store credit cards, Lending Tree found. To compare, 38% of Gen Xers and 22% of baby boomers prefer BNPL.

“Buy now, pay later really started off as a millennial, Gen Z phenomenon,” Schulz said. “Younger Americans really drove a lot of the growth.” 

Whichever payment option you plan to use to finance holiday purchases this year, keep in mind the cost of carrying the debt, experts say.

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A retail credit card can affect your credit history, as the account is reported to the three major credit bureaus: Equifax, Experian and TransUnion.

BNPL has been somewhat “invisible” to credit bureaus in the past, meaning the loan did not show up on users’ credit reports. But AfterPay, Affirm and Klarna are among the providers reporting some BNPL loans to the credit bureaus.

Both payment forms can be attractive for shoppers. Retail store credit cards tend to be easier to qualify for compared to other credit cards, especially as banks have been tightening credit card approval requirements in recent months, Schulz said. 

Over the third quarter of 2024, some banks have tightened their lending standards for credit card loans, lowered their credit limits and increased minimum credit score requirements, according to the Federal Reserve.

“It’s a reaction from the banks to rising delinquencies, rising debt and overall economic uncertainty,” Schulz said.

BNPL can also be relatively easy to apply for and qualify.

“The rise of buy now, pay later is the biggest reason why Americans are opening fewer store cards,” according to Ted Rossman, an industry analyst at Bankrate.

‘Consider the total cost of ownership’

The holiday season is here, a busy time to buy gifts for family and friends. If you find yourself in a situation where a retail store credit card or a BNPL can help stretch your budget, consider the “total cost of ownership,” Rossman said.

“Both of these payment methods can be advantageous depending on how you use them, but could also be a pretty slippery slope into debt and overspending,” he said.

BNPL can be tricky because you can have multiple loans running at the same time, and the costs “can add up,” Rossman said. Make sure to keep track of the pay-later loans you have and are able to withstand the automatic deductions.

If you can’t pay a retail card purchase off at the end of the statement period, any discount, reward or perk that you may get is going to be washed over by the interest you’ll owe on top of the outstanding balance, Schulz said. 

“Paying 30% interest to save 15 or 20% doesn’t make a whole lot of sense financially,” Schulz said.

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Personal Finance

What to know before rebalancing with bitcoin profits, advisor says

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Many investors are likely still deciding whether to stay in bitcoin or reduce their profits from the last bull run to new all-time highs.

So, after a strong year for bitcoin, it could be time for investors to weigh rebalancing their portfolio by shifting assets to align with other financial goals, according to financial experts.    

The price of the flagship digital currency sailed past $100,000 in early December and was still up more than 130% year-to-date, as of Dec. 18. 

Some investors now have large bitcoin allocations — and they could have a chance to “take some risk off the table,” said certified financial planner Douglas Boneparth, president of Bone Fide Wealth in New York.

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“The golden rule of ‘never invest more than you’re willing to lose’ comes into play, especially when we’re talking about speculative assets,” said Boneparth, who is also a member of CNBC’s Financial Advisor Council.

Before using bitcoin profits to buy other investments, you may consider using the gains to fund another financial goal, like retiring early or buying a home, he said.  

Decide on your ‘line in the sand’

There’s a different thought process if you want the money to stay invested, Boneparth said.

Typically, advisors pick an asset allocation, or mix of investments, based on a client’s goals, risk tolerance and timeline.

Often, there’s a “line in the sand” for the maximum percentages of a single asset, he said.  

Typically, Boneparth uses a maximum of 20% of a client’s “investable net worth,” which doesn’t include a home, before he starts trimming allocations of one holding.

‘There’s no free lunch’ with taxes

However, you could harvest crypto gains tax-free if you’re in the 0% long-term capital gains bracket for 2024, experts say.

For 2024, you’re eligible for the 0% rate with taxable income of $47,025 or less for single filers and $94,050 or less for married couples filing jointly. These amounts include any gains from crypto sales.

“That’s a very effective strategy if you’re in that bracket,” Andrew Gordon, a tax attorney, certified public accountant and president of Gordon Law Group, previously told CNBC.

The 0% capital gains bracket may be bigger than you expect because it’s based on taxable income, which you calculate by subtracting the greater of the standard or itemized deductions from your adjusted gross income.

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Paying down debt is a top financial goal for 2025. These tips can help

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When it comes to financial resolutions for 2025, there’s one goal that often lands on the top of the list — paying down debt, according to a new survey from Bankrate.

That’s as a majority of Americans — 89% — say they have a main financial goal for 2025, the November survey of almost 2,500 adults found.

While paying down debt came in as a top goal, with 21%, other items on Americans’ financial to-do lists include saving more for emergencies, with 12%; getting a higher paying job or additional source of income, 11%; budgeting and spending better, 10%; saving more for retirement and investing more money, each with 8%; saving for non-essential purchases, 6%; and buying a new home, 4%.

Those goals cap off a year that had some financial challenges for consumers. Some prices remain elevated, even as the pace of inflation has subsided. As Americans grapple with higher costs, credit card debt recently climbed to a record $1.17 trillion. The average credit card debt per borrower rose to $6,380 in the third quarter, according to TransUnion.

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Lower interest rates may help reduce the costs of holding that debt. The Federal Reserve moved on Wednesday to cut rates for the third time since September, for a total reduction of one percentage point.

Yet the best-qualified credit card borrowers — those with superior credit scores — still have an average rate of 20.35%, down from around 20.79% in August, according to Mark Hamrick, senior economic analyst at Bankrate.

It could be injurious to personal finances if people accumulated debt that they’re not substantially paying down,” Hamrick said. “It’s prudent and heartening to see that people are identifying debt broadly as something they want to address in the coming year.”

‘The Fed isn’t the cavalry coming to save you’

To pay down credit card balances — as well as other debts from auto loans or other lines of credit — individuals may need to shift their financial priorities.

A majority of Americans admit to having bad financial habits, finds a recent survey from Allianz Life Insurance Company of North America.

That includes 30% who admit to spending too much money on things they don’t need; 28% who don’t save any money; 27% who only save some money; 23% who aren’t paying down debt fast enough; and 21% who spend more than they earn.

For debtors who want to pay their balances down, the best approach is to take matters into their own hands, said Matt Schulz, chief credit analyst at LendingTree.

“Even though the Fed is reducing rates, the Fed isn’t the cavalry coming to save you,” Schulz said.

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Asking your credit card company for a more competitive interest rate on your debt often works, according to Schulz. About 76% of people who asked for that in the past year got their way, LendingTree found.

“It’s absolutely worth a call,” he said.

Moreover, balance holders also may keep an eye out for 0% transfer offers, which can let them lock in a no-interest promotion for a fixed amount of time, although fees may apply. Or they may consider a personal loan to help consolidate their debts for a lower rate.

Even as debtors prioritize those balances, it’s still important to prioritize personal savings, too. Experts generally recommend having at least three to six months’ living expenses set aside in case of an emergency. That way, there’s a cash cushion to turn to in the event of an unexpected car repair or veterinary bill, Shulz said.

Admittedly, by also prioritizing savings, it will take more time to pare down debt balances, he said. But having savings on hand can also help stop the debt cycle for good.

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