berkowitz pollack brant advisors and accountants

Monthly Archives: December 2015

Are you Offering Employees Affordable Minimum Essential Coverage under Obamacare? by Adam Cohen, CPA

Posted on December 29, 2015 by Adam Cohen

Beginning January 1, 2016, employers, including non-profits, with 50 or more full-time equivalent employees will be required to comply with the shared responsibility provisions of the Affordable Care Act (ACA) and provide “minimum essential” health insurance coverage to 95 percent of their full-time workforce and dependent children under the age of 26, up from 70 percent in 2015. Failure to do so will result in a penalty equal to $2,000 for every non-covered employee after the first 30 as well as a $3,000 penalty for each full-time employee that purchases insurance through the federal marketplace because the employer’s coverage did not meet the “minimal essential” requirements.

How does an employer know if the health insurance it offers meets the minimum essential criteria? The employer should first assess two things: affordability of the plan and the value the plan provides to the employer’s full-time and full-time equivalent employees.

Affordability

Under the ACA, an affordable employer-sponsored health insurance plan is defined as one for which the employee contribution is less than 9.5 percent of the employee’s annual household income. However, most employers will not know their employees’ household incomes. As a result, the regulations offer employers three safe harbors to use based on information employers will know. These include:

  1. The employee’s W-2 wages
  2. The employee’s rate of pay
  3. The federal poverty line

More specifically, to be considered affordable, the plan must cost the employee less than 9.5 percent of his or her W-2 wages. Alternately, the plan will be considered affordable if the employee’s contribution for the year is less than 9.5 percent of the federal poverty line. Employers offering multiple health insurance options must apply the affordability test to the lowest-cost self-only option they make available to employees.

Minimum Value

When an employer-sponsored health plan covers at least 60 percent of the total cost of an average employee/patient’s medical services, including physician and inpatient hospital is considered to meet the minimum value standard. Employers may use a minimum value calculator offered by Health and Human Services to confirm they meet the standards.

Minimal essential coverage is just one hurdle that applicable large employers with 50 or more full-time equivalent employees must pass to avoid the employer shared responsibility payment of the ACA. The regulations contain a range of additional provisions and nuanced requirements that employers must understand to comply with the law and minimize their exposure to any penalties.

The advisors and accountants with Berkowitz Pollack Brant’s Tax Services practices work with individuals and businesses of all sizes to understand and comply with the provisions of the Affordable Care Act.

About the Author: Adam Cohen, CPA, is an associate director in the Tax Services practice of Berkowitz Pollack Brant, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via e-mail info@bpbcpa.com.

Government Launches myRA to Help More Americans Save for Retirement by Jack Winter, CPA/PFS, CFP

Posted on December 23, 2015 by Jack Winter

The U.S. Department of the Treasury has officially introduced its myRA retirement savings plan to provide more citizens with a free and easy way to begin putting money aside for the future. Aimed at workers who lack access to employer-sponsored 401(k) plans, myRA plans are government-sponsored Roth IRAs that allow qualifying participants to contribute as little as $1 or as much as $5,500 a year into accounts invested solely in new U.S. savings bonds that are backed by the Treasury and guaranteed to never lose their value. While these investments have yielded 3.19 percent returns over the past 10 years, investors should note that past performance is not a guarantee of future performance.

 

Effective immediately, single workers without access to a retirement savings plan through their employer and who earn less than $131,000, or $193,000 for married couples filing jointly, may apply online at www.myra.gov to set up a myRA account. Savers have the option to fund their accounts through direct deposits from their paychecks, direct contributions from a personal bank account or through a rollover from an income-tax refund. In addition, the Treasury urges employers to share myRA information with their employees to encourage workers to get into the habit of saving for retirement with no costs or administrative headaches for employers or employees.

 

A myRA follows the same contribution and withdrawal rules as a typical Roth IRA, however, these accounts may not be held for more than 30 years after the date they are opened and lifetime balances may not exceed $15,000. When either of these thresholds are reached, investors will need to transfer their savings to a private-sector Roth IRA.

 

About the Author: Jack Winter, CPA/PFS, CFP, is an associate director in Berkowitz Pollack Brant’s Tax Services practice, where he works with individual taxpayers and entrepreneurs on estate planning, tax structuring and business consulting. He can be reached in the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via email info@bpbcpa.com.

 

Businesses Face New Lease Accounting Standards by Shea A. Smith, CPA

Posted on December 21, 2015 by Shea Smith

In an effort to increase transparency in financial statement reporting, the Financial Accounting Standards Board (FASB) on November 11 voted to proceed with new lease-accounting standards for businesses.  The final update, which is expected to be published in early 2016, will be effective for fiscal years (and interim periods within those fiscal years) beginning after December 15, 2018 for public companies, and annual period beginning after December 15, 2019, for private companies. Early adoption will be permitted upon issuance of the final standard.

 

The new guidelines will require businesses to record lease obligations on their balance sheets, something companies currently disclose in footnotes to financial statements.  As a result of the change, businesses with a large portfolio of lease agreements, such as retailers, banks, transportation and shipping companies, will need report on their books increased amounts of debt they owe on lease obligations.  This will essentially change the way investors and lenders view a business’s assets and liabilities.

 

While the adoption of the new reporting standard is not required for a few years, all businesses should meet with their accountants to determine what, if any, impact the changes will have of their operations and develop plans now to ensure a smooth transition in the future.

 

About the Author: Shea A. Smith, CPA, is a director in the Audit and Attest Services practice of Berkowitz Pollack Brant, where he provides accounting, audit and consulting services to privately held businesses in the real estate, manufacturing and retail industries. He can be reached in the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via email at info@bpbcpa.com

End-of-Year Tax Considerations for Real Estate Professionals by John G. Ebenger, CPA

Posted on December 18, 2015 by John Ebenger

As congressional lawmakers head into their winter break, a range of tax issues remain unresolved.  With so many proposals floating around the nation’s capital, real estate professionals must have a keen understanding of how these plans may affect them and how they may prepare to address the resulting impact on their corporate and personal tax liabilities in 2015 and beyond.

 

Disguised Property Sales

Partnership contributions of assets, such as land or buildings, from one partner and cash from another partner, are both considered non-taxable transactions. However, when property or cash is subsequently distributed to either partner within a two-year period, the transaction is presumed to be a disguised sale of property that is subject to taxation. This presumption may also hold true if the transfer occurred after the two-year period but was included in the original partnership plan. To avoid falling into disguised sale treatment, real estate partners should preplan and consider the exemptions under the law, including the use and treatment of guaranteed sales, preferred returns on capital, distributions of operating cash flow, and reimbursement of pre-formation expenditures.

 

Consider Charity

Real estate professionals may avoid recognizing a gain on highly appreciated property when they give an interest in the property to a qualified charity before the contract to sell. In addition to the exclusion of a capital gain, professionals may also receive a deduction for the property’s fair market value.

FIRPTA

The Foreign Investment in Real Estate Property Act of 1980 (FIRPTA) places significant costs and complexities of non-U.S. investors in U.S. real estate who are subjected to a filing requirement and a tax of greater than 40 percent on gains from sales of an interest U.S. real property, including shares in U.S. corporations whose assets are in real property. Proposed legislation to reform or repeal FIRPTA, including expanding the availability of exemptions to small foreign portfolio investors, is a bright spot that could open the door to increased foreign investment in U.S. real estate to help finance new development or renovate existing properties.

Tax Do-Overs

Real estate professionals may put a deal to bed, perhaps without the counsel of an experienced accountant, and later in the year realize the transaction would result in an adverse tax consequences.   Under certain circumstances, including agreement among all parties involved in a transaction, these taxpayers may turn back the clock and undo the deal through a rescission, if they act before December 31. Real estate professionals should consult with their tax advisors to identify if they have an opportunity to rescind a transaction, and, if yes, the implications of such action.

 

The uncertainty over tax reform is a challenge for real estate professionals. While there is no silver bullet to help developers and property owners prepare to address the various proposals of reform, the best defense is an educated offense with the assistance of tax professionals who are ready to take action on a moment’s notice.

 

About the Author: John G. Ebenger, CPA, is director of Real Estate Tax Services with Berkowitz Pollack Brant where he works closely with developers, landholders, investment funds and other real estate professionals as well as high-net-worth entrepreneurs with complex holdings. He can be reached can be reached in the CPA firm’s Boca Raton, Fla., office at (561) 361-2000 or via email at info@bpbcpa.com.

 

 

Congress Revives Expired Tax Provisions by Karen A. Lake, CPA

Posted on December 17, 2015 by Karen Lake

With the end of the year ticking away, Congressional lawmakers finally agreed on a tax-extenders package that would make some expired tax provisions permanent in the Internal Revenue Tax Code, while providing others with a temporary revival. Here’s a brief recap of just some of the tax breaks included in the Protecting Americans from Tax Hikes Act of 2015 (PATH Act).

 

Provisions Made Permanent for Businesses

Increased Section 179 Limits. Eligible businesses may continue to take an immediate deduction of $500,000 for the costs expended to purchase qualifying equipment and property, including computer software and qualified leasehold, retail and restaurant improvements, with a phase-out beginning after $2 million. There was a threat that the deduction would decrease to $25,000 up to a phase-out beginning at $200,000.

Research and Development Tax Credit. Beginning in 2016, businesses with less than $50 million is gross receipts will be permitted to apply the dollar-for-dollar R&D credit against their alternative minimum tax liabilities. In addition, some early-stage businesses lacking income tax liabilities may apply the credit to offset payroll taxes. Expenses that qualify for the R&D credit include those related to the investment of time and resources to design, develop or improve products, processes, techniques or technology.

Abbreviated Straight-Line Cost Recovery for Qualified Leasehold Improvements. Under certain circumstances, real estate owners may depreciate qualified retail and restaurant leasehold improvements over a reduced 15-year period, rather than the extended 39-year recovery life of those assets.

Reduced Recognition of S Corporations’ Built-In Gains. S Corporations will be subject to corporate-level tax on the disposition of appreciated assets over a five year period, rather than the extended 10 years required under previous law.

Provisions Made Permanent for Individuals and Families

 

Increased Child Tax Credit. Taxpayers’ whose income falls below $75,000 for single head of household or $110,000 for married couples filing jointly may continue to claim a credit of $1,000 per qualifying child as well as a refundable credit of 15 percent of earned income above a now permanent $3,000 threshold.

Increased American Opportunity Tax Credit. Congress made permanent the maximum annual credit of $2,500 per student for taxpayers with modified adjusted gross income of $80,000 or less, or $160,000 or less for married couples filing a jointly, who are paying college qualified college expenses.

Increased Earned Income Credit. Congress made permanent an increased credit for low-income families with three or more children.

Itemized Deduction for State and Local Sales Taxes. Taxpayers may reap substantial savings by electing to take an itemized deduction for state and local sales tax instead of the itemized deduction for state and local income tax.

Deductions for Teachers. Kindergarten through 12th grade teachers who purchase classroom supplies will be entitled to a $250 annual deduction, indexed for inflation.

Tax-Free Charitable Distributions from IRAs. Taxpayers over age 70 ½ will be permitted to rollover required IRA distributions directly to charities and exclude the amount from their income. The maximum amount allowable is $100,000.

 

Extended Provisions

Congress voted to extend many of the additional provisions that had expired last year, including a one-year revival of mortgage debt relief, which allows married taxpayers filing jointly to exclude of up to $2 million of canceled or forgiven debt related to mortgage modifications, short sales and foreclosures.

 

Other provisions, such as allowing businesses to take a first-year bonus depreciation of up to 50 percent on the costs of equipment as well as the Work Opportunity Tax Credit for businesses that employ the disabled or economically challenged individuals, were extended for five years.

 

About the Author: Karen A. Lake, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant, where she helps businesses and individual navigate complex federal, state and local taxes, credits and incentives. She can be reached at the Miami CPA firm’s office at (305) 379-7000 or via email klake@bpbcpa.com info@bpbcpa.com.

Over 70 ½? Remember to Take a Required Retirement Distribution by Jack Winter, CPA/PFS, CFP

Posted on December 17, 2015 by Jack Winter

The IRS requires taxpayers born before July 1, 1945, to take a required minimum distribution (RMD) from their traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k), 403 (b) and 457(b) retirement plans by December 31, 2015, or risk a penalty of 50 percent of the undistributed amount. Taxpayers born between June 30, 1944 and July 1, 1945, can wait to take their first RMDs as late as April 1, 2016; and those taxpayers who still work past their 71st birthday may wait until April 1 of the year following their retirement, if permissible by their retirement plan providers.

RMD’s are considered taxable income, excluding any amount that was previously taxed. Taxpayers with multiple IRAs must calculate the RMD for each account, but they may opt to withdraw the total amount required from only one account. Conversely, taxpayers who have money in both an IRA and a 401(k) plan must take separate RMDs for each account.

When a retirement account owner passes away, the required minimum distribution will depend on the designated beneficiary.

A surviving spouse has the option to treat a deceased spouse’s IRA as his or her own and base RMDs on his or her age or on the decedent’s age at time of death or withdraw the entire account balance by the end of the fifth year following the account owner’s death, if the account owner died before taking an RMD.

When the beneficiary is someone other the decedent’s spouse, he or she may withdraw the entire account balance by the end of the fifth year following the account owner’s death, if the account owner died before taking an RMD. Alternatively, the beneficiary may calculate RMDs based on his or her age at the end of the year following the year of the owner’s death. If an account owner passes away after receiving any RMDs, the beneficiary may calculate RMDs based on the longer of his or her remaining life expectancy or that of the account owner at death.

Required minimum distribution can be complex. Taxpayers should meet with their CPAs and financial advisors before the end of the year to determine the most tax-efficient manner for complying with the law and maximizing their retirement savings.

About the Author: Jack Winter, CPA/PFS, CFP, is an associate director of Berkowitz Pollack Brant’s Tax Services practice, where he works with individual taxpayers and entrepreneurs on estate planning, tax structuring and business consulting. He can be reached in the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via email info@bpbcpa.com.

 

 

Florida Bar Rejects Daubert Standard of Expert Testimony by Richard A. Pollack and Scott Bouchner

Posted on December 16, 2015 by Richard Pollack

 

In December, the Florida Bar challenged the 2013 legislative adoption of the Daubert standard governing the admissibility of expert testimony in cases involving lost damages. In a vote of 33-9, the Florida Bar board of governors rejected the strict Daubert standard used by Federal courts and 27 states in favor of the Frye standard of expert testimony that was in place in Florida two years ago.

 

The Frye standard contains a Pure Opinion Exception (POE) that, unlike Daubert, allows an expert to provide testimony that relies solely on his or her experience and training without any regard for scientific fact.  This exception is so inclusive that Florida state courts infrequently heard challenges to the admissibility of expert testimony.  Conversely, the Daubert standard for expert testimony requires a rigorous three-part test to determine the scientific reliability of such testimony that would be admissible in a court of law.  As a result, plaintiffs relying on Daubert face greater scrutiny in building the facts of their cases, while defendants benefit from new opportunities to challenge the basis of those facts.

 

Since Florida Adopted the Daubert standard in 2013, Florida attorneys have filed numerous challenges to expert testimony under the Daubert guidelines, which, in some instances, have led to the Court’s exclusion of expert opinions. It is unclear whether the Florida Bar’s recent rejection of Daubert would or could have any impact on these decisions in the future, of if they would have been different under Frye.

 

The final decision regarding which standard the state will apply will rest in the hands of the Florida Supreme Court.

 

About the Authors: Richard A. Pollack, CPA, ABV, CFF, PFS, ASA, CBA, CFE, CAMS, CIRA, CVA, is director-in-charge of Berkowitz Pollack Brant’s Forensic and Business Valuation Services practice, where Scott Bouchner, CMA, CVA, CFE, CIRA, serves as a director. Both are frequent lecturers and published authors on topics related to forensic accounting and litigation support, and they served as litigation consultants, expert witnesses, court-appointed experts and forensic investigators on a number of high-profile cases. They can be reached in the CPA firm’s Miami office at 305-379-7000 or via email at info@bpbcpa.com.

Tax Provisions get Inflation Adjustments in 2016 by Joseph L. Saka, CPA/PFS

Posted on December 15, 2015 by Joseph Saka

The IRS announced its annual inflation adjustments for more than 50 tax provisions during the 2016 tax year. Taxpayers will apply these adjustment to tax returns they file on April 16, 2017.

 

Tax Rates. The highest tax rate of 39.6 percent will apply to married couples whose incomes exceed $466,950 and to singles with income of more than $415,051. Inflation adjustments will apply to other marginal rates as well.

 

Standard Deduction. The standard deduction will remain at $12,600 for married couples and $6,300 for singles. The deduction will increase slightly for heads of household to $9,300, from $9,250 in 2015.

 

Income Limit for Itemized Deductions. Itemized deductions for taxpayers whose adjusted gross income exceeds $309,900 for married couples and $258,250 for singles will be limited to an amount equal to the lessor of 3 percent of the amount for which their adjusted gross income exceeds the limit or 80 percent of itemized deductions excluding medical expenses, investment interest, casualty or theft losses and gambling losses.

 

Personal Exemptions. The personal exemption amount will rise to $4,050 and will be subject to a phase-out with incomes of $311,300 for married couples and $259,400 for singles. Exemptions will phase out completely for incomes of $433,800 for married couples and $381,900 for singles.

 

Alternative Minimum Tax Exemption. The AMT exemption will increase to $83,800 for married couples filing jointly and $53,900 for singles.

 

Estate Tax Exemption. Estates of decedents who die in 2016 will be able to exclude $5.45 million exclusion from estate taxes, up from $5.43 million in 2015. For married couples, the exclusion amount will be $10.86 million. The annual gift tax exclusion will remain at $14,000.

 

Foreign Earned Income Exemption. The foreign earned income exclusion will increase to $101,300 in 2016, from $100,800 in 2015.

 

Contributions to Qualified Retirement Plans. The maximum annual amount taxpayers may contribute to an employer-sponsored 401(k), 403(b) and most 457 plans, will remain at $18,000. Similarly, catch-up contributions for employees over age 50 will remain at $6,000.

 

Contributions to IRAs. Taxpayers may contribute up to $5,500 to an Individual Retirement Plan (IRA) in 2016, the same as for 2015. Catch-up contributions for taxpayers over age 50 will remain at $1,000.

 

Taxpayers should meet with their accountants early in 2016 to discuss these and other adjustments in tax rates, deductions and credits, and begin to prepare for tax efficiency in 2016.

About the author: Joseph L. Saka, CPA/PFS, is director in charge of the Tax Services practice at Berkowitz Pollack Brant, where he provides income and estate planning, tax consulting and compliance services, business advice, and financial planning to entrepreneurs, high-net-worth families and family companies and business executives in the US and abroad. He may be reached in the CPA firm’s Miami office at (305) 379-7000 or via e-mail at info@bpbcpa.com.

 

Do You Qualify for an Exemption from an Obamacare Shared Responsibility Payment? by Adam Cohen, CPA

Posted on December 14, 2015 by Adam Cohen

Most taxpayers who failed to have minimum essential healthcare insurance in 2015 will be required to pay with their tax returns an individual shared responsibility penalty equal to $325 per adult and $162.50 per child or 2 percent of income, whichever is greater, for every month they went without qualifying coverage. However, under the provisions of the Affordable Care Act (ACA), some taxpayers will be able to qualify for a health care exemption when they meet certain criteria, which includes, but is not limited to the following:

  • The taxpayer was uninsured for less than two consecutive months during the year (Note: Taxpayers are considered to have minimum essential coverage during any month when they are covered for even one day during that month)
  • The lowest-priced health insurance plan that was available to the taxpayer through his or her employer or a marketplace cost more than 8 percent of his or her household income
  • The taxpayer was incarcerated

Additionally, taxpayers may qualify for a hardship exemptions when they experienced any of the following situations during the tax year:

  • Homelessness
  • Eviction or the threat of eviction or foreclosure in the past six months
  • Bankruptcy filing in the past six months
  • Receipt of a shut-off notice from a utility company
  • Significant property damage due to a natural or human-caused disaster
  • Domestic violence
  • Death of a close family member
  • Substantial debt resulting from unpaid medical bills
  • Increased expenses due to the care for an ill, disabled or aging family member
  • Pending or successful resolution of a qualified healthcare plan eligibility appeals decision
  • Ineligible for Medicaid because the taxpayer’s state of residence did not expand Medicaid coverage
  • Cancellation of an individual insurance plan and perceived unaffordability of a Marketplace plan

In addition to these circumstances, the ACA, also referred to as Obamacare, allows taxpayers to file an exemption for any another hardship, as long as they support their claims with proper documentation.

 

Taxpayers should meet with their accountants to better understanding their responsibilities under the Affordable Care Act and take action to avoid the shared responsibility penalties that will more than double in 2016.

 

About the Author: Adam Cohen, CPA, is an associate director in the Tax Services practice of Berkowitz Pollack Brant, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via e-mail info@bpbcpa.com.

 

Six Tips for Year-End Charitable Giving by Adam Cohen, CPA

Posted on December 14, 2015 by Adam Cohen

For many, the end-of-the year is a time of reflection and thankfulness for all that one has as well as an opportunity to recognize those who are less fortunate. In fact, according to Charity Navigator, 50 percent of all non-profit organizations earn the bulk of their revenue during the fourth quarter of the year, and 30 percent of all U.S. charitable donations occur in December.

In addition to the altruistic benefits of philanthropic giving, charitable donors may receive dollar-for-dollar tax deductions for their gifts of cash or other assets, which may reduce their taxable income.   The tax savings apply to taxpayers whose total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction based. For others, claiming a standard deduction may be preferable.

Before making any charitable donations, individuals should consider the following:

  1. Research the Charities. Individuals may only deduct those gifts given to qualified tax-exempt organizations, which include churches, synagogues, temples, mosques and organizations that can be found on the IRS’s Exempt Organization Select Check online tool.
  2. Choose Your Gifts. Donors have the option to make charitable gifts of money, appreciated assets, household items or physical items, such as cars, boats or planes, for which special rules will apply. Monetary gifts include those made by cash, check, credit card or payroll deductions, and household goods can include donations of clothing, toys or furniture. Gifts of appreciated assets, including stock or land that has appreciated in the last 12 months, may provide donors with the ability to avoid capital gains taxes on those assets and reduce the amount of their adjusted gross income that is subject to the Alternative Minimum Tax (AMT).
  3. Time Your Gifts. Donations made in 2015, including those charged on a credit card or mailed before December 31, 2015, are deductible on taxpayers’ 2015 returns, even if the organization does not deposit the donation until the following year. Those taxpayers who wait until the last minute may take advantage of online giving opportunities on their selected charities’ websites, as long as they make their donations before midnight on December 31.
  4. Keep Records. To claim a tax deduction, individuals who make monetary gifts must demonstrate proof via a written statement from the receiving non-profit that includes the name of the charity, the name of the donor and the date and amount of the contribution. Taxpayer may substantiate payroll deductions with a pay-stub or Form W-2 wage statement that shows the total amount withheld for charity and the name of the receiving organization.

Donations of household items require receipts or written statements from the qualifying organizations that describe the property and its fair-market value (FMV) at the time of the donation. Taxpayers must also provide the method they used to determine FMV of property valued above $250 as well as an independent appraisal for any property exceeding $500 in value.

  1. Don’t Forget to Give the Gift of Time. There is hardly any non-profit organization that is not under-staffed or open to volunteers donating their time to help and further the charity’s mission. While volunteer hours do not provide any tax benefits, the miles one travels to provide those services are tax deductible at a rate of $0.14 per mile.
  2. Protect Yourself from Scams. Criminals are constantly looking for new ways to take advantage of benefactors’ generosity by creating bogus charities and soliciting monetary donations via telephone, email, social media and other online sources. Prospective donors should remember to never reply to or click on links or attachments that come from unsolicited emails. Before opening one’s heart and wallet, he or she should research the charity via the IRS’s Exempt Organization Select Check online tool or a reputable website, such as charitynavigator.org.

About the Author: Adam Cohen, CPA, is an associate director in the Tax Services practice of Berkowitz Pollack Brant, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via e-mail info@bpbcpa.com.

 

Berkowitz Pollack Brant’s Forensic Accounting Testimony Proves Pivotal in Case against Donald Trump

Posted on December 11, 2015 by Richard Berkowitz, JD, CPA

 

When Donald Trump sought to terminate a lease agreement between his Trump National Doral resort and Pritikin Longevity Center, legal counsel for Pritikin turned to Berkowitz Pollack Brant’s Forensic and Litigation Support practice.

 

The firm’s team of forensic accountants conducted analysis to refute Trump’s request for a 10 percent increase in room rates charged to Pritkin guests. Rich Pollack delivered testimony in Miami-Dade Circuit Court demonstrating that, based on the resort’s historic revenue per available room rate (RevPar), Pritikin should be entitled to a 15 percent decrease in room rates.

 

Ultimately, Pritikin and its team prevailed, securing a 15 percent rent reduction through 2020.

 

Berkowitz Pollack Brant’s Forensic Accounting and Litigation Support professionals have the technical skills and business acumen to analyze large quantities of financial data to uncover a trail of facts to support legal matters involving complex business litigation and business disputes, bankruptcy and reorganization, and claims of fraud brought by corporations and governmental regulatory agencies.

 

Year-End IRA Reminders from the IRS by Rick Bazzani, CPA

Posted on December 10, 2015 by Rick Bazzani

Individual Retirement Accounts (IRAs) are powerful tools that allow taxpayers to set aside pre-tax dollars to save for retirement. The money invested in a traditional IRA grows tax-free until account owners begin taking distributions at age 70 ½. While income, dividends and capital gains generated from investments in Roth IRAs also grow free of taxes, Roth IRA account owners are taxed up front on their contributions rather than on withdrawals, which can be taken before age 70 ½.

As the 2015 tax year comes to a close, the IRS reminds taxpayers to consider the following rules regarding traditional IRAs:

Contribution Limits. Taxpayers may contribute up to $5,500 to either a traditional or Roth IRA in 2015. Any amount over this threshold is subject to a 6 percent tax for each year that the excess amount remains in the account.

Contribution Deadline. Taxpayers have until April 18, 2016, to make contributions to traditional or Roth IRAs.

Tax Deductions. Taxpayers may take a full deduction on their contributions to a traditional IRA only when they (and their spouses) are not covered by a retirement plan at work. If the taxpayer is covered by an employer-sponsored retirement plan, the deduction may be limited. Contributions to Roth IRAs are not tax deductible.

Required Minimum Distributions. Owners of traditional IRAs who are at least 70 ½ year old must take required minimum distributions (RMDs) from their accounts by December 31, 2015. Owners who turned 70 ½ in 2015 have until April 1, 2016, to take their RMDs. Owners should note that RMDs are taxable and increase their household income.

 

Distributions and the Premium Tax Credit. Taxpayers who take a distribution from their IRAs in 2015 and who also expect to claim the premium tax credit should note that the distribution may disqualify them from the credit. More specifically, if an IRA distribution causes a taxpayer’s annual household income to rise more than 400 percent over the federal poverty line, he or she must repay the entire amount of the premium tax credit that were made to your health insurance provider on your behalf.

 

About the Author: Rick D. Bazzani, CPA, is a senior manager with Berkowitz Pollack Brant’s Tax Services practice, where he provides individuals with a broad range of tax-efficient estate-, trust- and gift-planning services. He can be reached in the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or at info@bpbcpa.com.

What Parents Need to Know about Reporting a Child’s Income by Joanie B. Stein, CPA

Posted on December 07, 2015 by Joanie Stein

Parents of children under 19 years of age (or 24, if the child is a fill-time student) encounter unique tax reporting requirements depending on a range of factors, including those children’s earned and unearned income.

 

A child that can be claimed as a dependent on his or her parent’s tax return, will, in most cases, be required to file a tax return when they meet either of the two requirements:

 

  • Earned income, including salary, wages, tips, taxable scholarships and fellowship grants exceeds $6,200, or
  • Unearned income, including taxable interest, ordinary dividends and capital gain distributions from investments, or distributions of interest, dividends, capital gains and survivor annuities from a trust, exceeds $1,000.

 

However, parents may elect to include and report their child’s unearned income on the parent’s tax return as long as the child’s gross income derived only from interest and dividends totals less than $10,000. If the child’s investment income exceeds this threshold, then the child must file his or her own tax return.  In these instances, parents should be aware that their children may be subject to a 3.8 percent Net Investment Income Tax (NIIT) when net investment income and modified adjusted gross income exceeds $200,000.

 

Similarly, parents should note that when they include a child’s unearned income on their returns, any amount over $2,000 will be taxed at the parents’ rate, which is calculated using IRS Form 8615, Taxes for Certain Children who have Unearned Income.

 

About the Author: Joanie B. Stein, CPA, is a senior manager with Berkowitz Pollack Brant’s Tax Services practice, where she provides individuals and businesses with sound estate and tax planning counsel. She can be reached in the CPA firm’s Miami office at 305-379-7000 or at info@bpbcpa.com.

 

The Tricky Tax Issues Employees Face with Stock-Based Compensation by Adam Slavin, CPA

Posted on December 04, 2015 by Adam Slavin

Businesses often use stock-based compensation to attract and retain employees, directors and other service providers at all levels of an organization. Along with the potential financial benefits these incentives provide comes a challenging personal income tax landscape that requires participants in these plans to have a clear understanding of their rights and responsibilities.

Non-Qualified Stock Options and Incentive Stock Options

There are two types of stock options that businesses use to reward employees, directors or other service providers: non-qualified stock options (NQSOs) and incentive stock options (ISOs). Both provide employees with the right to buy shares of stock in the company at a set price, during a specific period of time, thereby offering the employees the potential to earn more dollars and share in the upside of the success their work helps to create. That’s where their similarities end.

When participants in NQSOs exercise their options, they owe ordinary income tax on the difference between the exercise price and the fair market value of the stock on the date of exercise. The amount is reported by the employer on Form W-2 as if the employee had received a cash bonus and is subject to payroll and Medicare tax, regardless of whether or not the employee sells his or shares. The employee’s basis in the stock is established as the stock’s fair market value on the date of option exercise.

Conversely, the exercise of ISOs do not typically trigger a regular taxable event. However, for many high-earning workers it will trigger an alternative minimum tax (AMT) on the difference between the exercise price and the fair market value of the stock on the date of exercise. Because the employees, rather than their employers, are responsible for reporting and paying taxes on the amount due, it is important that participants plan appropriately. Additionally, it is up to the employee to determine and track his or her basis in the acquired stock, for both regular tax and AMT purposes in the future.

When employees sell shares in ISOs, they trigger a taxable gain, which may be taxed at a preferential long-term capital gains rate only when they meet the following requirements:

  1. Waiting more than 12 months after the exercise date before selling or disposing of shares
  2. Waiting more than two years after the date they are granted the ISOs before selling or disposing of shares

If the disposition does not meet these holding period conditions, it is considered to be disqualifying, and the employee must recognize on the date of disposition ordinary compensation income in an amount equal to the lessor of 1) the difference between fair market value of such shares on the date of exercise and the exercise price, and 2) the difference between the amount received in the disposition and the exercise price. Additionally, the employee will recognize capital gains on the sale if the sales price is greater than the fair market value on the exercise date. However, selling the stock at a profit will often allow the plan participant to recover the AMT through an AMT credit.

Restricted Stock Awards

A business may use restricted stock awards to reward employees who stay with the company for a set number of years or achieve specific performance goals. The share grants are vested over a specific period of time and later become unrestricted, at which point, they become taxable wages.

If the value of the stock has risen, so too will the taxable compensation to the employee. As a result, it may be wise for employees with restricted stock awards to make a Sec. 83(b) election within 30 days after receiving the awards in order to lock in the lower value of the stock at the time of the grant. The employee will recognize the income at a lower value in the year of the grant and convert what would otherwise be ordinary income into long-term capital gains when as the value of the shares appreciate in the future.

However, if an employee makes a Sec. 83(b) election and the value of the restricted shares decrease, there is a risk that the employee will not be able to sell his or her shares and recover the taxes already paid. In addition, the employee will risk paying tax on shares that never vest, which may be the case when he or she separates from service from the company before the vesting period ends.

Stock-based compensation plans are useful tools that can provide favorable benefits to both employers and their employees. The key to avoiding any potential tax traps is to understand the risks and rewards and seek the advice of professional accountants to help plan properly.

About the Author: Adam Slavin, CPA, is a senior manager in Berkowitz Pollack Brant’s Tax Services practices, where he provides tax planning and consulting services to high-net-worth individuals and closely held business. He can be reached in the CPA firm’s Boca Raton, Fla., office at (561) 361-2000 or via email at info@bpbcpa.com.

 

U.S. Citizens Face New Passport Rules and Risks for Delinquent Taxpayers by Christopher Galuppo, JD

Posted on December 03, 2015 by

Under a new law pending congressional approval, U.S. citizens with unpaid tax liabilities could lose their existing passports or be denied a passport beginning on January 1, 2016. The law will apply to Americans who owe at least $50,000 in unpaid federal taxes, including penalties and interest. It would not apply to those taxpayers who are currently working with the IRS to repay their debts or those who are challenging tax debts through the U.S. legal system.

U.S. citizens traveling or living outside the country should make every effort to identify their delinquent tax liabilities and take steps now to remedy them, before the new law goes into effect.

Also effective on January 1, 2016, U.S. citizens will no longer have the ability to request and pay for additional visa pages for existing passports that lacked enough space for entry and exit visa stamps. Rather, in an effort to improve passport security, the State Department will require frequent travelers to apply and pay for a new and larger 28- or 52-page passport beginning next year.  Americans have until December 31, 2015, to still order a 24-page visa insert to be stitched into their existing passports.

About the Author: Christopher Galuppo, JD, is a director with Berkowitz Pollack Brant’s International Tax Services practice, where he provides individuals and businesses with tax, legal and accounting counsel on a broad range of domestic and international transactions.  He can be reached at the CPA firm’s Miami office at 305-379-7000 or via email at info@bpbcpa.com.

 

Remember your Taxpayer Identity PIN in Advance of Filing Season by Joseph L. Saka, CPA/PFS

Posted on December 02, 2015 by Joseph Saka

In an effort to protect taxpayer identity and reduce the incidence of tax-return fraud, the IRS issued to eligible taxpayers in December 2014 a six-digit Identity Protection Personal Identification Number (IP PIN) that taxpayers should use to confirm their identify on their individual federal tax return filings in 2015.

Eligible taxpayers include previous victims of identity theft; residents of Florida, Georgia or the District of Columbia who filed federal income tax returns last year; and any taxpayer who received an IRS notice via postal mail inviting them to opt in to receive a PIN. Failure to include an IP PIN on an electronically filed tax return be rejected. Paper filings with missing or incorrect IP PINS will experience delays in the processing of returns and issuance of refunds that may be due, allowing the IRS ample time to verify taxpayers’ identities.

Eligible taxpayers who did not receive an IP PIN may visit the IRS’s Get an IP PIN tool to request one. For married filers filing jointly, only the primary taxpayer needs to enter his or her IP PIN on a tax return.   However, if both taxpayers received an IP PIN, electronic filers should enter both PINS on the return. Paper filers need only include the IP PIN for the taxpayer listed first on the return.

Taxpayers should take precautions to keep their IP PINs safe and avoid revealing them to anyone other than their tax preparers. Retrieving Lost or Misplaced IP PIN is possible through the IRS website.

About the author: Joseph L. Saka, CPA/PFS, is director in charge of the Tax Services practice at Berkowitz Pollack Brant, where he provides income and estate planning, tax consulting and compliance services, business advice, and financial planning to entrepreneurs, high-net-worth families and family companies and business executives in the US and abroad. He may be reached in the CPA firm’s Miami office at (305) 379-7000 or via e-mail at info@bpbcpa.com.

 

 

 

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