Kewal Krishan & Co, Chartered Accountants
Tax Compliance Tax Credits

Have you heard about the crucial steps your company needs to take if it faces the risk of losing its exemption status? This is vital information that can save you from potential late filing penalties.

Timing Matters

When your initially exempt company no longer meets the criteria for its exemption, you’ve got 90 days to act. This clock starts ticking when you no longer meet those exemption criteria. And here’s the tricky part: even seemingly minor changes, like acquiring an asset or losing an employee, can suddenly put your exemption in jeopardy.

A Deadline to Remember

Let’s talk about an example. Imagine your company was exempt on January 1, 2024, but circumstances change, and you lose that exemption before January 1, 2025. In this case, you’ll need to file your initial report within 90 days of the exemption loss. Time waits for no one!

Protective Reports: Should You Consider Them?

Now, here’s the million-dollar question: should an exempt company file an initial report, regardless of its exemption status, just to play it safe and avoid late filing penalties? It’s an idea that has sparked some debate.

Join the Conversation

FinCEN asked for opinions on whether exempt companies should be allowed to file voluntary reports. While this idea was suggested, FinCEN ultimately chose not to address it in the Final Regulations. They’re sticking with the rule that a company losing its exemption must file a report “within” 90 days of losing that exemption. But what if you file a protective report early, well before losing your exemption? Would it work?

A Matter of Strategy

Here’s where you come in: Why didn’t FinCEN explicitly permit protective reports? And what’s the risk in filing one? It might just earn you some sympathy and possibly provide a defense or a basis for settlement if you challenge the validity of the Final Regulations on this point.

Stay Prepared

In the ever-evolving world of tax compliance, preparation is your best ally. Don’t wait until it’s too late—consider your options, make an informed decision, and stay ahead of the game.

Conclusion: Staying Ahead in Tax Compliance

In the intricate dance of tax compliance, understanding the nuances of exemption status and the critical importance of timing can safeguard your company from unforeseen penalties. Proactive measures, such as considering the strategic filing of protective reports, could serve as a crucial defense mechanism. As regulations evolve, staying informed and prepared is paramount for navigating these complexities effectively.

Have Questions?

Don’t let the maze of Beneficial Ownership Information reporting overwhelm you. Reach out to our team for expert guidance and support tailored to your business needs. Contact our COO Anshul Goyal at and schedule a consultation today to navigate the compliance waters with confidence.


This overview is intended for informational purposes only and does not constitute legal advice. Regulations may change, so please consult with a professional or the appropriate regulatory body for the most current information.


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