The Affordable Care Act does not require small businesses with 25 or fewer employees to offer health care coverage to their employees. However, those that do offer workers medical insurance may benefit from a tax credit of up to 50 percent of the costs of premiums paid in 2014, up from 35 percent in 2013. Despite this incentive to help small businesses afford health care benefits for employees, the law requires employers meet very specific standards and conduct very complex calculations to qualify for the tax credit.
To claim the small-business tax credit, employers must first meet the following criteria:
• Have fewer than 25 full-time-equivalent employees (FTEs) during the tax year
• Pay annual wages of less than $50,800 per FTE (inflation-adjusted for tax years beginning in 2014)
• Pay at least 50 percent of the premiums for each employees’ qualified health plan coverage
• Claim the credit for a maximum of two consecutive tax years after 2013.
While these conditions of eligibility appear simple and straight-forward, small-business owners will find additional restrictions to consider and provisions they must meet in order to take advantage of the available credit. For example, the maximum number of 25 allowable FTEs excludes business owners, their spouses and family members, even if they work for the business. Additionally, when computing employees’ hours of service, small businesses may not include the hours of employees who work less than 120 days or more than 2,800 hours per year. Conversely, tallying hours of service may include the hours for which employees receive paid vacation, sickness and disability.
Small-business owners focused on growing their enterprises have neither the time nor the patience to jump through all of the complex hoops associated with meeting the eligibility requirements of the small-business health care tax credit. The Tax Services practice with Berkowitz Pollack Brant helps businesses of all sizes understand and comply with the Affordable Care Act, including helping small businesses determine their eligibility and the calculation of a potential tax credit, whether it is a full or partial benefit.
About the Author: Adam Cohen CPA is an associate director in the Tax Services practice of Berkowitz Pollack Brant. For additional information, call (954) 712-7000 or e-mail firstname.lastname@example.org.
In his January 2014 State of the Union Address, President Obama introduced MyRA, a new savings instrument intended to help more Americans set aside money for retirement.
According to the U.S. Treasury Department, approximately half of all workers and only 25 percent of part-time workers have access to employer-sponsored retirement plans. Equally staggering, a mere 10 percent of eligible workers contribute to retirement accounts, such as IRAs, when left to do so on their own accord. To improve these statistics and help more people build a future of financial security and stability, the President signed an executive order creating My Retirement Account (MyRA), “a starter retirement savings account, backed by the U.S. government.”
Under the terms of the presidential order, employers who choose to participate will be able to offer MyRA accounts to their employees. However, employers will not own the plans nor will they bear the responsibility of managing nor contributing to them. Rather, employees will maintain sole control over their individual plans, which they may take with them when they move from one job to the next or roll into traditional IRAs at any time.
Participating in MyRA plans requires initial investments of as little as $25 and minimum contributions as low as $5 per paycheck. Contributions deducted from after-tax pay through automatic payroll deductions would be invested in government-backed savings bonds earning the same interest rate available to federal employees and providing a safe assurance that principal investments would not be lost with market fluctuations. While investors would be allowed to withdraw principle contributions without penalty, withdrawals of accrued interest prior to age 59-1/2 would be taxed.
About the Author: Jack Winter CPA/PFS CFP is an associate director in the Tax Services practice of Berkowitz Pollack Brant. For more information, call 954-712-7000 or email email@example.com.
Identity theft and tax refund-related fraud are among the fastest-growing crimes nationwide. According to Miami U.S. Attorney Wilfredo Ferrer, the incidence of identity-theft in Florida outpaces the rest of the country, with Miami taking the top spot in the state.
Identify theft can have far-reaching consequences, from damaging victims’ credit histories to wiping out hard-earned savings accounts. While most individuals believe that they take appropriate precautious to prevent themselves from becoming victims of these crimes, the fact is that criminals are getting smarter and sneakier in their methods.
With the 2013 tax season underway, now is the ideal time for taxpayers to review their strategies for safeguarding personal information and consider implementing the following precautionary steps, if they are not doing so already.
• Do not carry Social Security cards or any documents or devices that include Social Security numbers or Federal Tax Identification Numbers
• Do not give out Social Security numbers to any businesses, including doctor’s offices and retail stores, unless applying for a credit card or financing
• Do not give personal information to anyone over the phone, through the mail, email or on the Internet unless the taxpayer initiated the contact
• Do not leave mail in mailboxes outside homes. Drop off mail in collection boxes or at a USPS office.
• Do not leave documents containing personal information in the trash. Shred records, including credit card offers, receipts, credit applications, bank statements, medical statements, etc.
• Store personal information securely in homes or in safe-deposit boxes at the bank
• Annually or biannually, order free copies of credit reports from each of the three major credit-reporting agencies at www.annualcreditreport.com
The pervasiveness of technology brings with it various risks and threats to users’ personal information. Practicing safe use of technology requires:
• Protecting computers, mobile phones and tablets with passwords, firewalls, anti-spam and anti-virus software
• Regularly updating computer security patches
• Using password keeper programs or storing digital data in the cloud rather than writing down passwords on paper or maintaining them on desktops
• Using strong passwords that include capital letters, lowercase letters, symbols and numbers
Additionally, the IRS advises taxpayers to be aware of various scams conducted by criminals purporting to be agency officials. For example, identity thieves posing as the IRS often call or email victims requesting personal information under the guise of a potential tax refund or due payment. Taxpayers should note that under no circumstances would the IRS initiate contact with them via email or telephone nor would it ask taxpayers for PINs, passwords or similar confidential information.
As an added layer of protection against tax return-related fraud, the professionals at Berkowitz Pollack Brant advise their clients to consider the following:
• File tax returns electronically
• When available, use your accounting firm’s client portals to share personal records safely and confidentially
• Never pay for accounting services up front
• Never sign a blank tax return
• If identity-theft is suspected, call a tax professional who may help guide you through the process of reporting and resolving
About the author: Joseph L. Saka CPA/PFS is director in charge of the Tax Services practice at Berkowitz Pollack Brant. For more information, call (305) 379-7000 or e-mail firstname.lastname@example.org.
Successful businesses evolve over time. Their leaders continuously learn, adapt and manage through a series of internal and external issues that can affect their day-to-day operations and their long-term business goals. While some issues are easy to identify, others are harder to detect. In fact, it is quite common for some issues to go uncovered for long periods until they ultimately affect multiple areas of a business. This is especially true for leaders of growing small and mid-size businesses, who may find comfort in the status quo of doing things the same way they always have, or they may be so busy managing daily tasks that they loose sight of their long-term objectives.
To sustain growth, business leaders must take the time to continuously assess their operations and be nimble enough to act upon issues and opportunities and flexible enough to swiftly implement change as needed.
Consider the car enthusiast who spends years saving money to buy a prestigious, luxury vehicle. While he or she enjoys the comfortable and high-performing driving experience, he or she fails to bring the car in for regular tune-ups. Without looking under the hood, he or she is oblivious to problems that may be percolating beneath the smooth ride and equally unaware of minor issues that could result in a major breakdown in the future.
Similarly, small and medium-size businesses need to take the time to kick the tires of their enterprises to ensure all of their parts are performing efficiently, effectively and at their optimal levels. This requires business leaders to become adept at identifying the strengths, weaknesses, opportunities and threats facing their organizations and doing so with brutal honesty.
The factors that can contribute to a business’s success or failure include the internal strengths and weaknesses that are within the business’s control and the external opportunities and threats that are outside its control. By taking stock of these issues, management can shine a light on problem areas that impede business performance and operational opportunities that, when properly leveraged, can further growth.
To identify a business’s strengths and weaknesses, management should ask questions such as:
• What does the company do well, and what does it do poorly?
• What does the company do better than its competition, and in what areas does the competition excel?
• Is the company maximizing its competitive strengths?
• Is the company making the best use of the resources available to it, or is it relying on insufficient, outdated resources?
• Are employees making the best use of their time or is additional manpower needed to reach objectives?
• Do the company’s employees share the same vision and perceptions as management?
• Does the company have an effective corporate governance structure that outlines employees’ roles and responsibilities, establishes appropriate checks and balances and ensures operations, accounting, IT, sales and marketing are integrated and working in synch?
Identifying a business’s external opportunities and threats requires answers to questions that can include:
• Is the business aware of and adopting new technology, including ERP systems, cloud computing and internet marketing tools, that can help business operations?
• Are the economic winds changing in a business’s favor or against it?
• Has the regulatory environment changed?
• What market trends are affecting the industry in which the business operates?
• Does the competition have vulnerabilities that the business can exploit?
• Does the company or its competition plan to introduce new products or services that meet market demands or improve market conditions?
For over-tasked entrepreneurs mired in the details that make their business engines purr, a SWOT Analysis is not an easy undertaking. In these instances, it is often necessary to seek the assistance of unbiased outside counsel with the time, resources and experience required to conduct top-to-bottom reviews of all aspects of a business’s operations and assess whether the business is performing at its maximum potential. With a fresh perspective, a trusted business advisory consultant can uncover a myriad of current and prospective risks and rewards, recommend and help to implement strategies that minimize costs and risks while optimizing strengths and opportunities that can generate more revenue.
The Consulting Practice of Berkowitz Pollack Brant has extensive experience helping companies of all sizes identify the strengths, weaknesses, opportunities and threats that impact business operations and putting into place best practices that optimize long-term performance.
About the Author: Steve Nouss is chief consulting officer with Berkowitz Pollack Brant. For more information, call (954)712-7000 or email email@example.com.
In today’s fast-paced, global environment, change is a concept that business leaders must accept and embrace. Increased competition, evolving customer demands and the rapid rate at which technology advances requires businesses to review their existing strategies and make alterations or restructure in order to thrive and survive.
Change may involve modifications to specific segments of a business, such as narrowing or expanding geographic distribution, products and service offerings; implementing new marketing and sales strategies; upgrading technology; or establishing new processes to comply with the latest regulations. Other times it calls for businesses to make drastic departures from their established business strategies and construct a new model from the ground up. In both cases, businesses must evolve with the times and identify additional revenue streams to remain viable.
Businesses do not change strategies overnight. Rather, their evolution requires a significant investment of time and resources and careful planning to conduct a 360-degree view of current operations, analyze feasible strategies, develop and implement plans, and allow employees, customers, business partners and all stakeholders the appropriate time to adapt. Doing so successfully is a team process, which requires the counsel of trusted business partners, including accountants, lawyers, business consultants and branding specialists. By relying on the experience and expertise of these professionals, businesses may align proposed transformations with appropriate legal and tax strategies that serve to mitigate risks and enhance value opportunities.
Along the path to transformation, businesses should consider the following questions to help design a game plan that they may turn into an operating reality:
• Will diversification require mergers, acquisitions or a partnering to bring about intended change? If yes, how will the transaction be structured? Will the new structure require a review or audit?
• How can businesses be structured to optimize capital, improve tax efficiencies and minimize liabilities?
• How will businesses ensure corporate strategies align with tax strategies?
• Will businesses need to divest themselves of current assets and, if yes, how will they do so and can they write off those assets?
• Will businesses need to invest in new assets, systems and technologies to improve productivity and sustain efficiency?
• Does implementation of new assets bring with it tax credits from which businesses may benefit?
• Will companies need to hire additional staff or outsource specific roles and responsibilities? If yes, how will they be integrated into the existing business structure?
• Are there newer or better technologies available to reduce costs and improve operating and management efficiencies, including product development, manufacturing, inventory management, logistics, payment processing and sales and marketing?
• Will new business models face international, federal, state and industry regulations with which companies will need to comply?
• How will businesses implement new protocols, rights and pricing terms?
• How will businesses structure their internal controls, including segregating duties and managing, recognizing and reporting transactions?
• How businesses monitor implementation of new plans and maintain intended goals?
• How will businesses roll out the new strategy and gain buy in from employees, customers and business partners?
Business model reviews and transformations are vital tools in the management-planning process. Often, market changes occur so quickly that businesses never see them coming. As a result, opportunities may be missed and previous strengths may morph into future weaknesses overnight. To avoid this common trap, businesses must keep an eye to the future, remain diligent in their constant efforts to challenge the status quo and work with their advisors to implement changes in the most efficient ways possible. Their survival depends on it.
The audit, tax and consulting services teams of Berkowitz Pollack Brant have extensive experience helping businesses assess their operations and guiding them through the processes of developing and implementing transformative strategies that achieve goals.
About the author: Shea Smith, CPA, is an associate director of Berkowitz Pollack Brant’s Audit and Attest Services practice. For more information, call (954) 712-7000 or email firstname.lastname@example.org.
With 2014 underway, there is still time for trustees to take advantage of last-minute planning strategies to limit 2013 income tax liabilities for trusts and certain estates. Specifically, calendar year-end trusts may make distributions to beneficiaries before March 6, 2014, and treat those distributions as if made in 2013. By doing so, trusts have an opportunity to reduce their 2013 taxable income and related tax liability, with the goal of reducing the overall tax burden of the trust and its beneficiaries.
Trusts with undistributed income in excess of $11,950 are taxed at the highest federal rate of 39.6 percent for tax year 2013. In contrast, individual taxpayers do not reach the top bracket until their taxable income exceeds $400,000 or $450,000 for a filing status of single or married filing jointly, respectively. Trusts with undistributed income of $11,950 or more in 2013 are also subject to a new 3.8 percent tax on net investment income. This threshold is much lower than the adjusted gross income caps of $200,000 for single individuals and $250,000 for married couples filing jointly.
Therefore, by making distributions to beneficiaries who would otherwise have less than $200,000 in adjusted gross income, trusts may move taxable income and investment income to beneficiaries in lower tax brackets.
When considering the 65-day election, trustees should take into account several factors, including the terms of the trusts and whether or not they permit distributions to beneficiaries who have not reached a certain age. Additionally, trustees must weigh how distributions might influence income tax returns for not only the trusts but also for the beneficiaries. For example, because individuals often rely on income tax returns for reasons unrelated to taxes (i.e. proof of income, mortgage financing, government assistance, etc.), trust distributions may unintentionally create significant negative consequences for beneficiaries. Moreover, trustees need to be mindful of the potential asset protection the trusts provide their beneficiaries while the assets are in the trust. Any such protection disappears with the distribution of those assets.
Finally, trustees should also review the liquidity of trusts and their ability to distribute assets correlating to 100 percent of the income being distributed, rather than just paying the (up to) 43.4 percent marginal federal income tax rate, retaining the other 56.6 percent of assets inside the trust.
Making the decision to limit tax liabilities and take a 2013 trust distributions in 2014 requires careful balancing of costs and benefits. The Trust and Estate Planning practices of Berkowitz Pollack Brant have experience establishing, managing and consulting with trusts and estates to help preserve wealth and limit liabilities.
About the author: Jeffrey M. Mutnik CPA/PFS is a director of Taxation and Personal Financial Services with Berkowitz Pollack Brant. For more information, call (954) 712-7000 or email email@example.com.
Individuals, including entrepreneurial business owners, who do not secure health insurance by the Affordable Care Act’s March 31 open-enrollment deadline, may face a 2014 penalty of $95 per uninsured adult or 1 percent of adjusted gross income, whichever is greater.
The IRS bases the income calculation for the “individual mandate penalty” on 1 percent of adjusted gross income that exceeds standard deductions and personal exemptions. For example, a married taxpayer, with one child, filing jointly with a modified adjusted gross income of $100,000, should expect to pay a penalty of $1,000, which will accrue interest and be deducted from the taxpayer’s 2014 refund. Taxpayers should also expect penalties to increase significantly with each subsequent year for which they are not properly covered.
Should a taxpayer miss the March 31 deadline, he or she will not be abler to secure health insurance again until the next open-enrollment period, which begins on Nov. 15.
To weigh the pros and cons of maintaining coverage versus paying a penalty, taxpayers should first consult with their accounting professionals who are well-versed in all of the nuances of the healthcare reform compliance requirements and how they apply to each taxpayer’s unique situation.
About the Author: Adam Cohen CPA is an associate director in the Tax Services practice of Berkowitz Pollack Brant. For additional information, call (954) 712-7000 or e-mail firstname.lastname@example.org.
For the third consecutive year, the South Florida Business Journal recognized Richard Berkowitz among the region’s Top-100 Power Leaders whose innovation and expertise help to shape our flourishing business community.
In its January 31 issue, the newspaper reported that Berkowitz “leads a firm that is the fourth largest in South Florida, Top 100 in the country and the 15th largest corporate donor in South Florida.” Kudos to Richard!