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Monthly Archives: November 2014

Development-Stage Businesses Face Simpler Reporting Requirements by Christopher Cichoski, CPA

Posted on November 26, 2014 by Christopher Cichoski

Development-stage businesses traditionally have been burdened with financial reporting requirements that exceed those of more established companies.  However, in June 2014, the Financial Accounting Standards Board (FASB) recognized the challenges faced by these growing entities and issued Accounting Standards Update (ASU) 2014-10: Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, to help them reduce the costs and complexities of incremental financial reporting requirements under U.S. Generally Accepted Accounting Principles (GAAP).

Currently, U.S. GAAP defines development-stage entities as those that devote all of their efforts to establishing a new business and for which either principal operations have not commenced, or principal operations have commenced but the business is not generating significant revenue.

Under the new standards, the FASB has removed the definition of a development-stage entity from the Accounting Standards Codification, thus removing the financial reporting distinction between development-stage entities and others. In addition, the amendments in ASU 2014-10 no longer require development-stage entities to prepare statements of income, cash flows and shareholder equity from the date of inception.  The new standards also eliminate the requirements that development-stage entities label and disclose the status of their entities and descriptions of their development-stage activities.  In addition, ASU 2014-10 removes an exception for determining whether a development-stage entity is a variable-interest entity (VIE).   As a result, the same guidance will be applied for determining whether an entity is a VIE and whether the VIE should be consolidated, regardless of whether the entity has commenced principal operations or generated revenues from principal operations.

About the Author: Christopher Cichoski, CPA, is a senior manager in Berkowitz Pollack Brant’s Audit and Attest Services practice.  He can be reached at the CPA firm’s Fort Lauderdale office at (954) 712-7000 or via email at

Pre-Immigration Planning: Understanding U.S. Income Tax Residency Status by Joseph L. Saka, CPA/PFS

Posted on November 24, 2014 by Joseph Saka

Immigration laws in the United States differ from tax laws, which require individuals to report and pay income taxes based upon the government’s classification of their residency status. While it is not uncommon for an individual to live in the U.S. for a significant amount of time without establishing residency for tax purposes, identifying when residency begins is an important step to consider before spending time in the states or pre-planning for immigration to the country. Moreover, with adequate planning, foreign citizens considering U.S. immigration may prepare properly for greater tax efficiencies stateside and avoid costly mistakes down the road.

In the most general terms, the U.S. presumes foreign citizens to be nonresident aliens for tax purposes until they file for a green card, meet a substantial presence test, or make a special first-year election. Once they meet either of these thresholds, immigrants coming to America are considered resident aliens and subject to U.S. taxes on their worldwide income. Yet, the U.S. Tax Code is quite complex and includes ever-changing exceptions and exclusions to this and other rules for which immigrants must remain mindful and plan accordingly.

Green Card Test

Foreign citizens granted green cards from the U.S. Citizenship and Immigration Services (CIS) are considered U.S. residents for tax purposes from that point forward, regardless of how much time they spend or have been present in the country. When immigrants receive green cards in the middle of a calendar year, they may be considered dual-status citizens and subject to U.S. taxes only during the portion of the year after they were earned tax residency.

Should an immigrant voluntarily surrender his or her green card, he or she may be subject to a U.S. Expatriation Tax, for which all property held by expatriates is considered sold for fair market value on the date prior to expatriation and thus subject to capital gains taxes in the current tax year.

Substantial Presence Test

The substantial presence test of U.S. tax residency relies on a three-year weighted formula based upon the number of days one is physically present in the U.S. Specifically, immigrants pass the test when they are present in the U.S. for either 183 days in the current year or for a minimum of 31 days during the current tax year and 183 days over a three year period. This includes days present in the current tax year, 1/3 of the days in the prior year and 1/6 of the days in the year before that. Special care should be taken to recognize that days coming into the U.S. and days leaving the U.S. are usually considered full days when computing the substantial presence formula.

The date of one’s U.S. tax residency typically begins on the first day that he or she is present in the U.S. However, there are exceptions for days in which the individual commuted to the U.S. from a residence in Canada or Mexico, days in the U.S. in transit between two foreign countries, a de minimus exception, and the days in which an individual is unable to leave the country due to medical reasons that occurred while in the U.S. Additional exceptions to the substantial presence test exist for specific students, teachers, foreign-government officials and those with “closer connections” to another foreign country where they maintain “tax homes” during the calendar year. Further analysis is often required to establish these tax home and closer connection exceptions, which are often based on vague definitions.

The First Year Choice

Immigrants who do not pass the green card test or who arrive in the U.S. too late to pass the substantial presence test may make a special, first-year election to be treated as a resident alien beginning on their date of arrival when they meet the following conditions:

  • Not otherwise considered a resident alien for the year or at any time during the preceding year
  • Be present in the U.S. for a minimum of 31 consecutive days during the year in which the election is made
  • Be present in the U.S. a minimum of 75 percent of the total days beginning at the start of the 31-day period and December 31 of the tax year
  • Be a resident alien under the substantial presence test for the following year

With this election, an immigrant is considered a dual-status alien who may also make the resident alien election on behalf of his or her children. As dual-resident taxpayers, individuals are bound by the tax laws of both the United States and their home countries. When tax treaties exist between the two countries, conflicting claims of residence are resolved via tie-breaker provisions that aim to prevent double taxation and attempts by one country’s residents to avoid paying taxes on income they earned from sources within and outside that country.

There is no one-size-fits-all tax rule that applies equally to all U.S. residents. Rather, different tax laws will apply differently to each individual’s unique circumstances. For this reason, foreign citizens should seek the advice of professional legal and accounting counsel to assess their personal circumstances and identify strategies to help improve tax efficiencies domestically and in other jurisdictions where they maintain homes or hold assets. Pre-immigration planning is the best option to meet this goal, protect one’s assets and avoid the potentially unpleasant consequences of the U.S. tax system.

About the author: Joseph L. Saka, CPA/PFS, is director in charge of the Tax Services practice at Berkowitz Pollack Brant. He may be reached in the Miami CPA firm’s office at (305) 379-7000 or via e-mail at


IRS Eases Reporting Requirements for Canadian Retirement Plans by Adam Cohen, CPA

Posted on November 17, 2014 by Adam Cohen

Effective Oct. 7, 2014, U.S. citizens and resident aliens who hold interest in Canadian Registered Retirement Savings Plans (RRSPs) and/or Registered Retirement Income Funds (RRIFs) will get more favorable tax treatment and simplified reporting requirements from the IRS.


Under a decades-old income tax treaty between the U.S. and Canada, income that accrues in a Canadian RRSP or RRIF is subject to U.S. tax, regardless of whether or not that income is distributed. However, U.S. citizens or resident aliens may elect to defer this income until they make distributions from these plans using IRS Form 8891.   Unfortunately, many eligible taxpayers failed to make this election and subsequently faced a time- and cost-intensive process to correct the error.


With the most recent update, however, the IRS eliminated Form 8891 and the requirement that taxpayers report annually on contributions, earned income and distributions from these plans. In addition, taxpayers who did not make appropriate elections in the past may now receive retroactive relief from the IRS. As a result, these taxpayers may qualify for tax deferral on retirement plan income as long as they continue to file U.S. tax returns and report RRSPs and RRIFs distributions as income.


About the Author: Adam Cohen, CPA, is an associate director in the Tax Services practice of Berkowitz Pollack Brant. He can be reached at the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via e-mail



5 Keys to Effective Succession Planning by Richard A. Berkowitz, JD, CPA

Posted on November 13, 2014 by Richard Berkowitz, JD, CPA

Growing family-owned businesses demands years of constant attention and consistent nurturing. Owners take on these responsibilities proudly to grow what will often become their largest assets. Unfortunately, it is the rare owner who puts equal amount of thought and care into how he or she will transfer ownership of the business upon his or her retirement or at the point he or she is no longer able to lead the company. This element of time is a critical factor in succession planning. It requires owners consider their own needs and desires, and those of the next generation, sooner rather than later. Addressing these matters and taking the following steps while the business is thriving improves the likelihood that one’s entrepreneurial legacy will continue under new ownership well into the future.


Decide. Owners of family businesses must consider if the next generation is willing and able to succeed them in running the business, or if it is a better decision for them to sell the companies and provide the sales proceeds to their heirs. Willingness and ability are subjective terms that encompass far more than they appear to imply.   Business owners should make honest assessments of family members’ competencies and capabilities in the same manner and using the same benchmarks they would use to promote a current executive into a senior leadership position.


Doing so may require the opinion of unbiased third-parties, such as accountants, lawyers or other business consultants. It may also require business owners to look beyond the circle of their immediate children to their extended family members or existing employees, who may be better suited or more interested in leading the businesses. The owners must clearly examine their bias and listen to objective opinions of those they trust.


Plan and Prepare. Succession planning requires years of advance preparation. All parties must agree upon a series of dynamic and fluid arrangements to ensure a smooth and orderly process of transition from one owner to the next.   It may require employing the assistance of professional counsel familiar with the various tactics and instruments for transferring ownership (i.e. estate plans, life insurance, etc.) and with the ability to weigh the pros and cons of each against the business’s unique circumstances. It may also require the establishment of adequate reserves, based on the needs of the businesses, which will enable the next generation to avoid fear of failure and provide financial benefits to those heirs that are not actively involved in the businesses’ ongoing operations. Most importantly, the plan needs to be built by both generations, taking into consideration the ideas of each. The innovations that will ensure a business’s long-term sustainability may not be welcomed by the founder, who must trust the leadership of the next generation.


Teach and Train. Just as businesses provides training to their employees, they must also devote substantial time and resources to teaching, coaching and preparing family members to take over control of their companies as early in the succession-planning process as possible. Every individual learns differently and at a different pace. For this reason, delegating responsibilities and allowing the next generation to sink or swim while founding owners are still actively involved in the business provides a safety net to all parties and the ability to invest in additional training, as needed, before transitions of ownership.


In addition to mastering new skills, the next generation of business owners must understand the strengths, weaknesses, opportunities and challenges of the businesses, the industries in which they operate and those of their customers. The relationships upon which the business is built must be transitioned effectively to ensure continuity of essential customers, suppliers and vendors. To ensure a business’s ongoing relevance and profitability, the next generation must be ready, competent and confident enough to anticipate these hurdles and lead the company through them in the future.


Allow Time to Transition the Transfer. When transferring ownership from one generation to the next, special care should be taken to ensure attentiveness to those factors that influence retention of employees and clients. By maintaining transparency and making the transition over a set period of time, all parties, including owner, family members, employees and clients, are allowed time to adapt to the change in leadership. Moreover, additional allotment of time allows the parties to make adjustments to strategies and adapt to revised plans that impact the business’s future direction.


Mentor and Support. On a personal level, business owners must address their own willingness and ability to relinquish control over their life’s work. They must be able to take a back seat and allow the next generation the opportunity to lead and make decisions on behalf of their companies. This does not mean that first generation owners walk away from the business. On the contrary, their ongoing support, advice and mentorship to the next generation are perhaps the most valuable gift they can provide in supporting future generations and the ongoing success of the business.


About the Author: Richard A. Berkowitz, JD, CPA, is founder and CEO of Berkowitz Pollack Brant Advisors and Accountants. He can be reached at the CPA firm’s Miami office at 305-379-7000 or via email at

Seven Tips to Avoid Last-Minute Tax Surprises by Joseph L. Saka, CPA/PFS

Posted on November 07, 2014 by Joseph Saka

April 15 is closer than one may think. In fact, there are mere weeks left in the year to take action that can affect one’s 2014 tax liabilities. By taking the following steps now, taxpayers can avoid a larger tax bill than they had planned for and may even end up with an unexpected and welcome refund.

  1. Confirm W-4 Accuracy and Adjust Withholding.  Taxpayers starting new jobs must complete IRS Form W-4, Employee’s Withholding Allowance Certificate, to help employers figure out the appropriate amount of federal income tax to withhold from the employees’ pay. The more federal income tax one withholds from his or her pay, the less he or she will owe at tax time. To reduce the risk of an unexpected tax liability in April, employees may increase their withholding during the last few weeks of the year by submitting to their employers a revised IRS Form W-4.
  2. Ensure Tax Records Reflect Changes in Life Events. Marriage, divorce, the birth of a child and changes in one’s job and residence all have an impact on one’s tax liability. When a life event occurs, employees should submit to their employers a revised IRS Form W-4 reflecting the change.
  3. Pay Estimated Taxes.       Individuals who receive income that is not subject to withholding, such as earnings from self-employment, interest, rent, alimony and sales of assets, may be required to make quarterly estimated tax payments each year. Now is a good time for taxpayers to check their estimated tax payment history for underpayments and late payments and make corrections, as needed, to avoid penalties and a tax surprise in 2015.
  4. Accelerate Deductions in 2014 and Defer Income to 2015. There is still time to apply this golden rule of tax planning by seeking opportunities to take deductions, such as payments of interest and real estate taxes, before the end of the year and delay the recognition of income, such as bonuses, until after Jan. 1, 2015. Additionally, taxpayers should seek professional advice to uncover the tax benefits of often ignored or forgotten activities, including moving for employment purposes, maintaining a home office, making alimony payments or contributing to a Health Savings Account.
  5. Max Out Tax Advantage Retirement Accounts. For 2014, taxpayers under 50 years of age may reduce their taxable income by contributing up to $17,500 to their 401(k) plans and up to $5,500 to their IRAs. The deadline for making these tax-advantages contributions vary depending upon the type of plan and the way in which taxpayers make their contributions.
  6. Give Gifts. In 2014, taxpayers can gift up to $14,000 free of gift and estate tax. For married couples, the gift tax exclusion is $28,000 per beneficiary.
  7. Get a Financial Checkup. The end of the year is an ideal time to plan for the following year. Taxpayers should meet with professional advisors to review business operations, investments, wills and estate plans, health care options and expectations for future changes in circumstances that could affect future tax liabilities.

The Tax Services and Estate Planning professionals with Berkowitz Pollack Brant have s 35 years of experience helping individuals and businesses implement tax-efficient planning strategies that minimize liabilities and meet desired results.

About the author: Joseph L. Saka, CPA/PFS, is director in charge of the Tax Services practice at Berkowitz Pollack Brant. He may be reached in the Miami CPA firm’s office at (305) 379-7000 or via e-mail at

‘Tis the Season for Annual Benefit Plan Notices by Sean Deviney, CFP

Posted on November 05, 2014 by Richard Berkowitz, JD, CPA

The fourth quarter is an important time of year for businesses that administer 401(k) plans on behalf of their employees. Among their fiduciary responsibilities under the Employee Retirement Income Security Act of 1974 (ERISA), plan sponsors must distribute to plan participants important notices detailing relevant information that helps participants make informed decisions about their retirement accounts. For many businesses, the fourth quarter also marks the 401(k) open-enrollment period, the time when new employees sign up for benefits and existing employees review their plans and make changes to their investment choices, as needed. This period comes with its own set of reporting requirements for which plan sponsors must take the time to act accordingly to meet their fiduciary responsibilities.


Beginning with the 2014 tax year, 401(k) plans must recognize the court’s June 2013 decision regarding the Defense of Marriage Act and update their procedures to include same-sex couples by Dec. 31. In addition, plans considering adopting or renewing a Safe Harbor provision in 2015 have 30 days before the start of the plan year to notify employees of this election or risk exposure to discrimination testing and potential limits or refunds of contributions by highly compensated employees.


Before ringing in holiday cheer, plan sponsors should consider their reporting responsibilities and review the following summary of notices to distribute to eligible employees during the fourth quarter of the year.


Notice Description timing
Summary Plan Description (SPD) Vital information describing the name, type and benefits of the plan and the rights and responsibilities of plan participants  Within 90 days of a new employee becoming eligible for participation in the planand

Every 10 years to existing plan participants or every 5 years when sponsors amend plans

Automatic Enrollment (for plans that automatically enroll participants) How eligible employees are automatically enrolled in the plan and how their pay will be automatically contributed For new participants, 30 to 90 before the employer automatically enrolls the employee. 

For existing plan participants, Dec. 1 for calendar-year plans, or

no less than 30 days before the first day of the plan year for non-calendar plans

Eligible AutomaticContribution



Employees rights to make apermissive withdrawal and the

procedures for electing the withdrawal

30 to 90 days before thebeginning of the plan year
Qualified Default Investment Alternatives (QDIA) The rights of plan participants to direct their plan investments information about how contributions will be invested when participants do not make investment elections  For new employees, at least 30 days prior to plan participant date or date participant makes fist contribution 

For existing employees, 30 to 90 days prior to the start of the plan year

Participant Fee and Investment Notice (ERISA Section 404) Information regarding plan investment options, plan fees and expenses 30 days prior to a participant’s first contribution for investment, and 

Annually for existing participants with a plan balance

Safe Harbor Provisions (for plans that elected safe harbor provisions) Whether the employer will make matching or non-elective contributions, the amount of the contribution and the amount of compensation eligible for employer contributions 30 to 90 days prior to the beginning of the plan year
Summary Annual Report (SAR) Explanation of plan expenses and value of plan assets Within nine months of the plan’s year-end or December 31st, if extention is filed.


The fiduciary responsibilities of 401(k) plan sponsors are many. To act in the best interest of plan participants, rather than the employers sponsoring these plans, fiduciaries must remain vigilant in meeting their reporting requirements and keeping participants informed, if not excessively so. During this time of year, businesses may benefit from the counsel of retirement plan advisors, who can assist in minimizing compliance risks through reviews of year-end qualified-plan reporting deadlines and the delivery of notices to plan participants. Similarly, this time of year is ideal for employees to review their accounts, often with the help of professional investment advisors, to ensure their retirement savings are on track and aligned with their financial circumstances and goals.


The professionals with Provenance Wealth Advisors have extensive experience helping businesses of all sizes design, assess performance, improve employee participation and institute best practices in managing compliance with employer-sponsored benefits plans.

About the Author: Sean Deviney, CFP, is a financial advisor and retirement plan advisor at Provenance Wealth Advisors, an independent financial services firm affiliated with Berkowitz Pollack Brant Advisors and Accountants. For more information, call (954) 712-7000 or email

Provenance Wealth Advisors, 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.


The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

Securities offered through Raymond James Financial Services, Inc., Members FINRA/SIPC. Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors and Accountants.

Tips for Making Estimated Tax Payments by Dustin Grizzle (updated)

Posted on November 03, 2014 by Dustin Grizzle

U.S. taxes are based on a pay-as-you-go system for which individuals are required either to have taxes withheld from their paychecks if they are employees, or to make estimated tax payments directly to the IRS throughout the year. These quarterly tax payments typically apply to self-employed taxpayers, who are also subject to a self-employment tax, as well as to individuals who may not have enough taxes withheld from an employer. This can include individuals who earn investment interest, dividends, alimony, rent, royalties and gains from asset sales who may or may not have exposure to the Alternative Minimum Tax (AMT).

To help taxpayers meet their estimated payment liabilities, the IRS offers the following tips:

  1. Who Must Pay Estimated Taxes? Individuals who meet both of the following conditions must make estimated quarterly tax payments:
    • They expect to owe $1,000 or more in federal income taxes, and
    • They expect their withholding and refundable credits to be less than the smaller of 90 percent of the tax to be shown on their 2017 tax returns, or 100 percent of the tax shown on their 2016 tax returns

These qualifications may also apply to resident aliens and nonresident aliens as well as to estates and trusts.

  1. How Much to Pay? IRS Form 1040-ES, Estimated Tax for Individuals, provides instructions to help taxpayers determine the amount of estimated taxes they will owe based on their prior year income minus the deductions and credits they are eligible to claim. In addition, individuals should remember that the calculation of their estimated tax liabilities will change based on major life changes, such as the birth of a child or a marriage or divorce, at which point they should adjust the amount of their payments.
  1. When to Pay? For the 2017 tax year, estimated quarterly tax payments are due on April 18, June 15, Sept. 15 of this year and on Jan. 16 in 2018.
  2. How to Pay? The IRS accepts payments by check, money order, credit or debit card or via telephone of U.S. postal mail. In addition, taxpayers may make payments via the IRS’s secure online service Direct Pay or the Electronic Federal Tax Payment System (EFTPS). Alternatively, if a taxpayer made an overpayment of taxes in 2016, he or she may apply that amount as a credit to his or her 2017 estimated tax liabilities.
  3. What’s the Penalty for Failing to Pay? Taxpayers who do not pay enough in taxes throughout the year may have to pay an underpayment penalty, unless they qualify for an exemption.

About the Author: Dustin Grizzle is a senior manager in Berkowitz Pollack Brant’s Tax Services practice, where he provides tax planning and compliance services to businesses and high-net-worth individuals. He can be reached at the CPA firm’s Boca Raton, Fla., office at (561) 361-2000 or via email at



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