berkowitz pollack brant advisors and accountants

Monthly Archives: March 2013

IRS Penalty Relief for Taxpayers by Ken Strauss

Posted on March 29, 2013 by

 Finally, some good news for taxpayers.  Due to the late passage of the American Taxpayer Relief Act and its impact on a number of forms for deductions, the IRS has issued a penalty relief notice for delayed 2012 forms.

 The IRS normally assesses penalties on taxpayers who file late or request an extension. Because of the delay in distributing the forms, the IRS will abate certain penalties, including the late-payment penalty, when one of its delayed forms is part of a return.  The list includes fairly common forms, so taxpayers should be sure and ask if the abatement applies.

 Delayed forms include:

Form 3800 General Business Credit

Form 4562 Depreciation and Amortization

Form 5471 Information Return of US persons with Respect to Certain Foreign Corporations

Form 5695 Residential Energy Credits

Form 8396 Mortgage Interest Credit

Form 8582 Passive Activity Loss Limitations Form 8839 Qualified Adoption Expenses

Form 8844 Empowerment Zone and Renewal Community Employment Credit

Form 8863 Education Credits


Ken Strauss is a director in Berkowitz Pollack Brant’s Taxation and Personal Financial Planning practice. For more information, call 954-712-7099 or e-mail

Florida Alimony Overhaul by Sandi Perez

Posted on March 28, 2013 by

Supporters say a major overhaul of Florida alimony law will bring fairness to the system.  Those opposed say the proposed bill is anti-family, anti-women and will result in additional burden on the state welfare and court systems.

This issue has been working its way through the legislative process very quickly and has the potential to impact anyone paying or receiving alimony.

The law could do away with permanent alimony and limit the alimony term to 50% of the length of the marriage.  There are provisions that cap the alimony award at 20% to 33% of the payor’s income (depending on the length of the marriage), allow for retroactive modifications of awards and agreements (except those expressly designated as nonmodifiable) and terminate payments automatically upon the payor’s retirement age for social security purposes. Further, the bill creates a rebuttable presumption that both parties will have reduced standard of living after divorce.

If you are concerned about how this new law will impact your personal situation, please call our Family Law and Forensic Accounting practice at (954) 712-7000.



Sandi Perez CPA/ABV/CFF CFE is a director in the Family Law Forensic Services Practice of Berkowitz Pollack Brant. For more information, e-mail

Estate Planning in the New Environment by Joseph L. Saka

Posted on March 26, 2013 by Joseph Saka

Many people with wealth to protect are sleeping better at night because their fortunes aren’t large enough to expose them to federal estate tax. But no one should close their eyes to the fact that, regardless of your income, estate planning remains an essential tool for protecting loved ones.

The federal government has decided to continue its recent practice of limiting the bite of the estate tax to individual assets above $5 million. The threshold had been scheduled to freefall to $1 million on January 1, which would have exposed far more people and personal assets to the estate tax.

A new federal law called the American Taxpayer Relief Act reset the estate-tax exclusion at $5 million and annually adjusts this amount for inflation. The inflation-adjusted exclusion from federal estate tax for this year is $5.25 million of assets per individual, or $10.5 million for a married couple. The individual exclusion last year was $5.12 million.

Even for people with less wealth, estate planning remains a must. Good fortune, after all, will boost many successful individuals’ net worth to taxable levels in the future. Also, lawmakers conceivably could reverse course and expose more Americans to estate tax as they try to trim the federal debt.

Among other changes, the new law capped the federal estate tax rate at 40 percent, up from 35 percent last year.  That actually was a relief for taxpayers because the top rate had been scheduled to rise January 1 to 55 percent. In addition, the American Taxpayer Relief Act put a 40 percent cap on the federal tax rate on estates, gifts to children and others, and generation-skipping transfers to grandchildren.

The law also unified lifetime exclusions for estates, gifts and generation-skipping transfers at a combined total of $5 million per individual plus an adjustment for inflation. This means any mix of estate assets, gifts and generation-skipping transfers up to the amount of the lifetime exclusion is free from federal estate tax.

Remember, though, the lifetime gift exclusion applies only to amounts in excess of the annual gift exclusion, which is $14,000 per person this year (or $28,000 for a married couple), up from $13,000 last year. It is scheduled to increase in certain years in $1,000 increments.

Exclusion portability, a major feature of the new law, can be extremely beneficial to widows and widowers. Under the new federal law, if a deceased husband made partial use of the lifetime exclusion from estate tax and gift tax,  his widow can add his unused portion to her lifetime exclusion. (Exclusion portability is unavailable for generation-skipping transfers.)

For example, if husband dies this year after donating $2 million of gifts during his lifetime, and he leaves his wife an estate worth $8 million, she could avoid paying federal estate tax. How? She could add to her $5.25 million lifetime exclusion the $3.25 million of his lifetime exclusion that went unused. Pay attention to the fine print, though: Unused-exclusion portability is possible only if an election is made on the federal estate tax return of the deceased spouse.

The new federal law also allows older Americans to make tax-free charitable donations from Individual Retirement Accounts, or IRAs. A taxpayer who is at least 70 1/2 years old can directly transfer as much as $100,000 from an IRA to a charity without paying federal tax on the transfer.

Taxpayers can use various types of irrevocable trusts to remove assets from their estate to avoid or minimize estate tax. For example, a spousal trust allows a businessman to transfer income-producing assets to his wife to reduce his personal net worth for estate tax purposes. Many couples prefer this type of trust to others that are harder for them to control.

Life insurance is a tricky component of estate planning. Proceeds from life insurance policies are exempt from federal income tax. But for tax purposes, such income is considered part of the deceased person’s estate if the deceased bought the insurance. A better approach is setting up an irrevocable trust that obtains the life insurance policy and pays the premiums, because when the insured dies, the payout will stay out of his or her estate.

Don’t think of trusts, however, as purely a tax drive vehicle.  Trusts can be an important part of an estate plan, but they can be used for many different purposes.  Gifts or bequests into trusts that have adult children as beneficiaries can better protect their assets from divorce, creditors and lawsuits.  Use of trusts for the surviving spouse will help ensure that the spouse is taken care of but should the spouse remarry, the assets that have accumulated during the course of your marriage remain only for the surviving spouse and/or the children.  By having assets titled in trust, one can keep certain property out of your probate estate which may avoid many of the hassles, costs and lack of privacy concerns related to probate.

The American Taxpayer Relief Act didn’t change several types of legal techniques for minimizing federal estate tax. For example, it preserved grantor-retained annuity trusts, which allow taxpayers to transfer appreciation on their assets tax-free to others. The new law also preserved the ability of business owners to discount stock in their privately held businesses for estate tax purposes based on illiquidity, or the narrow market for such stock.

Even if you don’t get hit by the estate tax, the process of estate planning puts a worthy focus on your legacy. Creating a will, maintaining the right amount of life insurance, and other estate-planning tasks are critical. Calculating estate tax liability, if any, is just part of the process of giving your assets a life of their own.


 Joseph L Saka CPA/PFS is director in charge of Berkowitz Pollack Brant’s Tax Services practice. For more information, call (305) 379-7000 or e-mail


Florida’s Research and Development Tax Credit by Karen Lake

Posted on March 18, 2013 by

Florida has enacted a new R&D tax credit program. The state credit is computed based on 100% of qualified research expenses incurred in Florida.  Applications much be filed by March 20 of the following year.

There is a yearly cap, so it is important to submit information early. Please contact Karen Lake at 305-379-7000 for more details.

Ponzi Schemes and Bad Hedge Funds – by David Siegel

Posted on March 15, 2013 by

Scott Rothstein.  Nevin Sharpiro.  Arthur Nadel.  Bernie Madoff.  Ponzi schemes and financial frauds have become a regular feature in South Florida newspapers, so much so that Miami was second only to New York in federal prosecutions of securities and investment fraud.  The BPB Forensic Accountants have first hand knowledge of several large Ponzi schemes and other investment frauds that have cost investors $ billions. 

Scott Rothstein became a high flying prominent attorney in South Florida by using investor money to make charitable and political contributions and mix with wealthy members of society. He promised investors to double their investment in one to two years. Investors believed that their funds would be used to buy out structured settlements that resulted from fictitious litigation fabricated by Rothstein.  Investors attracted by Rothstein’s promised investment returns at little or no risk motivated victims to finance his scheme.

In another matter where BPB was the court appointed forensic accountants for the receiver of a group of hedge funds, the investment manager represented to investors that he had found a low risk, fully collateralized investment that paid returns in the range of 15%. Investors were similarly drawn to the promise of a low risk investment with a high risk return. Hedge funds are restricted to high net worth individuals and are exempt from certain SEC regulations under the theory that wealthy investors were sophisticated investors requiring less protection under the law.  When the borrower was unable to pay the investment returns, it led to investment losses in excess of $600 million.

The BPB forensic accountants investigated another group of hedge funds wherein sophisticated investors were once again defrauded, this time to the tune of $1.2 billion. This group of hedge funds earned consistently high returns even when Wall Street suffered loss years. How did the investment manager do this? Stock manipulation.   In order to cover up fund losses, the fund manager would first acquire publicly traded shell companies with little or no assets and no operations for pennies per share.   He would then execute a stock split that resulted in millions of shares owned.   On the last day of the year, he would acquire a few hundred shares of the thinly traded stock for a few dollars a share and value the fund’s holdings for millions of dollars even though these shell companies were purchased by the fund at a fraction of the cost.  Repeating this scheme whenever he needed to inflate the value of the fund, he created hundreds of millions of dollars of false profits, fictitious value and fraudulent fees for himself and other insiders.

We are often retained to investigate other fraudulent investment schemes and there doesn’t appear to be a lack of imagination or creativity on the part of fraudsters. It is important for investors to do their due diligence before investing. You can never ask too many questions. There is generally a direct correlation between risk and return and rarely such a thing as high return with no or little risk.  If you are made promises of high returns without any disclosure of the inherent risks, there is a high chance of fraud.  If it’s too good to be true… it generally is.  

David Siegel, CPA

David Siegel is an associate director and forensic accountant in Berkowitz Pollack Brant’s Litigation and Business Valuation Services practice. His diverse practice includes bankruptcy and receivership matters, fraud cases, calculation of damages and professional malpractice. For more information, call 305-379-7000 or e-mail

IRS Expands Relief Program for Misclassified Workers

Posted on March 13, 2013

The issue of classification of workers is of interest to the IRS. The agency has laid out specific definitions of what separates employees from independent contractors.

In 2011 the IRS launched the Voluntary Classification Settlement Program (VCSP) to allow eligible employers to voluntarily reclassify workers as employees rather than independent contractors for future tax periods. In exchange, the employers’ liability for past payroll tax obligations is minimized. The program is intended to increase tax compliance and reduce the tax and administrative burdens on employers with misclassified workers.

In March 2013 the IRS temporarily expanded eligibility through June 30, 2013. In addition, it modified the program to allow employers facing an IRS audit, other than an employment tax audit, to participate.

Please contact us to learn the pros and cons of taking advantage of the extension. We can assist with all your tax compliance and controversy needs.


Berkowitz Pollack Brant Makes Accounting Today’s Top 100 List

Posted on March 12, 2013

Accounting Today’s annual list of the top 100 firms in the country was released this week. We are proud to be included on both the top 100 list and the top firms in the region list. The narrative noted our rebrand, expanded strategic planning group and management of upcoming director retirements.

BPB Firm Members Speak More than 10 Languages

Posted on March 11, 2013

Barry Brant, director in charge of our tax, consulting and international services practice, was recently interviewed for a profile story in an industry publication. He mentioned that firm members speak more than 10 languages, including Portuguese, Italian, Russian, Hebrew and German. We solve problems all around the world.


Litigation Support Practice Honored

Posted on March 07, 2013

Congratulations to our Litigation team and our colleagues at Berger Singerman. A matter we worked on together won Chapter 11 Turnaround of the Year at the M&A Advisor Awards last night.

The Forensic Accountant’s Role in Due Diligence by Richard Fechter

Posted on March 05, 2013 by Richard Fechter

A business acquisition is typically comprised of several phases.  Once the parties reach a general understanding and agree to the initial financial terms of the transaction, a critical next step is the acquisition due diligence phase, which enables the potential buyer to conduct a comprehensive analysis of the subject business. 

 What is Acquisition Due Diligence?

 Due diligence refers to the care that a reasonable person would take prior to committing to an acquisition, focusing on the research, investigation and analysis of material facts that could impact the acquisition decision and obtaining answers to such key questions as:

  •  Do we buy?
  •  How much do we pay?
  •  What are the risk factors that could impact value – positively or negatively?
  •  How do we optimally structure the acquisition?


What are the Goals of a Due Diligence Engagement?

An acquisition due diligence engagement often includes the following objectives:

  •  Analyzing the strengths and weaknesses of the target business.
  •  Minimizing post-closing surprises by uncovering information that may create risks or liabilities to the potential buyer.
  •  Renegotiating the purchase price or, in some cases, rescinding the agreement altogether if the information found is not acceptable to the potential buyer.
  •  Enabling the parties to close the transaction while maintaining a positive relationship with current management, especially in those instances where only a partial interest in the business is purchased and / or existing management remains with the company.
  •  Assisting the buyer to begin implementing a clear strategy going forward.


 Why should a Forensic Accountant be Involved in a Due Diligence Engagement?

 Historically, forensic accountants were not retained until after an acquisition closed and problems began to emerge.  Pre-acquisition financial due diligence was conducted before the fact by traditional accountants, either in-house or external.  Nowadays forensic accountants are often brought in as soon as the term sheet is signed, usually at the same time as the lawyers.  The analysis conducted by the forensic accountant generally includes, but is not limited to, the following:


  • Financial Analysis
    • Analyze whether the financial statements of a business represent actual performance and assess the reasonableness of future projections.


  • Operational Analysis
    • Analyze revenue and cost levels, supplier contracts and customer relationships to determine efficiency issues and potential cost reductions.


  • Cash Flow Review
    • Analyze the projections in light of historical results, competitors, market share and industry trends.


  • Tax Structuring:
    • Analyze tax structure to minimize tax burden.


  • Background Investigations into Key Employees
    • When conducted properly, a background investigation is a relatively small cost item that can save a client from dire consequences and uncover facts not apparent on the face of the financials or discoverable through traditional audit methodologies. 


  • Acquisition Disputes
    • Analyze the issues relating to Generally Accepted Accounting Principles (“GAAP”) or changes to the consistent application accounting practices and policies.  Determine the effect on the closing balance sheet and historical profit and loss statements.  Determine how these GAAP issues may affect the purchase price and closing balance sheet.


Analyses provided by the Forensic Accountant may often lead to purchase price adjustments both before and after the closing of the transaction.  Sometimes the biggest adjustments come after the transaction closes and a more complete review is performed by the buyer and their internal and external accountants.

  Avoiding Post-Acquisition Disputes

 By identifying and focusing on risk areas, forensic accountants can identify deal-breaking, price and financial exposure issues, including:

 Misrepresentation or non-disclosure of material facts,

  • Unrealistic financial projections,
  • Unrecorded/understated liabilities,
  • Overstated revenues and/or understated expenses,
  • Overstated assets,
  • Hidden ownership interests,
  • Related party transactions, and
  • Managerial deficiencies and other business issues.

  The work of the forensic accountant on due diligence matters generates information that allows the buyer (and the seller) to make more informed decisions and create a meeting of the minds, ensuring transparency and thereby limiting potential pitfalls and conflicts.


 Richard Fechter JD CAMS is an associate director in the Litigation and Business Valuation Services practice of Berkowitz Pollack Brant. For more infromation, call (305) 960- 1235 or e-mail


Official Accounting Firm of Non-Profit Academy Awards

Posted on March 04, 2013

Berkowitz Pollack Brant is the official accounting firm of 211-Broward’s Non-Profit Academy Awards. At the recent awards program, Richard Berkowitz had the honor of delivering the envelopes with the winners’ names.


The members of our Not-For-Profit practice were out in full force and it was a great day for recognizing the unsung heroes of  the non-profit world.


Pin It on Pinterest

Menu Title