berkowitz pollack brant advisors and accountants

Monthly Archives: August 2016

Reminder: Some Foreign Individuals May Need to Renew Individual Taxpayer Identification Numbers by Lewis Kevelson, CPA

Posted on August 30, 2016 by Lewis Kevelson

Beginning this fall, certain non-U.S. persons who hold Individual Taxpayer Identification Numbers (ITINs) issued by the Internal Revenue Service may need to renew their ITINs.


The IRS issues Individual Taxpayer Identification Numbers (ITINs) to individuals who do not have or are not eligible to obtain a Social Security Number for filing and processing of U.S. federal tax returns. Typically, ITINs are required for nonresident aliens and resident aliens required to file U.S. tax returns, dependents or spouses of U.S. citizens/resident aliens, and dependents or spouses of nonresident alien visa holders.


Beginning on January 1, 2017, ITINs issued before 2013 with the middle digits 78 or 79 (e.g. 9XX-78-XXXX) and those that have not been used at least once on a U.S. federal tax return in the last year years will become invalid.  Taxpayers with expired ITIN’s will need to begin renewing their numbers on October 1, 2016, in order to file U.S. taxes for the 2016 tax year, ensure eligibility for certain credits and avoid a delay in the processing of a tax refund. Affected taxpayers should begin receiving notices from the IRS via U.S. postal service beginning in August.


To renew an ITIN, a taxpayer must complete the most up-to-date Form W-7 and mail it to the IRS along with original identification documents or copies that have been certified by the agency that issued them. Alternatively, taxpayers may submit Form W-7 to an IRS-authorized Acceptance Agent or IRS Taxpayer Assistance Center located throughout the U.S. Certain U.S. embassy and consulate offices located outside the U.S. may be able to assist with the certification of original identification documents that accompany Form W-7.


To expedite the renewal process, the IRS is allowing individuals whose ITIN middle digits are 78 or 79 the option to renew the ITINs of all of the family members claimed on their tax returns at the same time, beginning on October 1, 2016, rather than renewing each family member’s ITIN over the next few years.


The international tax advisors with Berkowitz Pollack Brant work with domestic and foreign individuals and multi-national businesses on a range of residency issues and financial matters, including pre-immigration planning, wealth preservation and tax efficiency across borders.

About the Author: Lewis Kevelson, CPA, is a director with Berkowitz Pollack Brant’s International Tax practice, where he provides tax-compliance planning and business structuring counsel to real estate companies, foreign investors, international companies, high-net-worth families and business owners. He can be reached in the firm’s Boca Raton, Fla. office at (561) 361-2000 or via email at


Don’t Overlook Tax Issues when Planning a Wedding by Joanie B. Stein, CPA

Posted on August 28, 2016 by Joanie Stein

The excitement of planning a wedding should not take a back seat to the important tax and legal issues that newlyweds will face after they say I do. Following are five factors to consider when couples marry.

New Names. Taking a spouse’s last name requires an individual to legally change his or her name with government agencies, including the Social Security Administration, the IRS, the U.S. Postal Service and the Department of Motor Vehicles. With a certified copy of a marriage certificate, individuals can also change their names on their financial accounts and update information with their employers and the benefits-plan administrators. Remember, an individuals’ name and social security number must match on all of their legal and financial documentation.

New Address. If either spouse plans to move, he or she should advise the IRS via Form 8822 and also update this information with the U.S. Postal Service via its online tool at Similarly, a new address should be reported to both partners’ employers, health insurers and all institutions that hold their individual and joint financial accounts.

New Tax Bracket and Filing Status. Getting married may change an individual’s tax filing status and tax bracket, depending on the couple’s combined income and their ability to claim tax credits and deductions. In addition, newlyweds’ tax liabilities may become affected by the marriage tax penalty, which may require additional withholding tax or estimated tax payments during the year. A qualified tax professional is the best resource for figuring out potential tax liabilities and making the determination of whether it is more favorable to file taxes jointly or separately and whether it makes more sense to claim the standard deduction or itemize. Once the decision is made, both spouses may need to report their new marital status to their employers and complete new IRS Form W-4s, Employee’s Withholding Allowance Certificate.

New Insurance. A new marriage is considered a change in circumstances, for which individuals who purchased health insurance through a Marketplace must report a change in income, address and family size to the Marketplace. This is especially important for those taxpayers who receive advance payment of the premium tax credit in 2016. These payments, which lower the out-of-pocket costs taxpayers pay for your health insurance premiums, are made directly to the insurance company on a taxpayer’s behalf to. Reporting changes in circumstances will help to ensure taxpayers get the proper type and amount of financial assistance to which they are entitled.

New Estate Planning Documents. After exchanging vows, couples should review and update their wills and other estate-planning documents to account for their change in marital status. This may include naming a new spouse as beneficiary of retirement plans and life insurance contracts as well as granting him or her power of attorney over financial and medical decisions.

About the Author: Joanie B. Stein, CPA, is a senior manager with Berkowitz Pollack Brant’s Tax Services practice, where she helps individuals and businesses implement sound tax-planning strategies. She can be reached at the CPA firm’s Miami office at (305) 379-7000 or at

Managing Finances When the Kids Move Back Home by Brendan T. Hayes, CPA

Posted on August 25, 2016 by Richard Berkowitz, JD, CPA

For the first time since the Great Depression, the number of young adults who live with their parents has reached record levels. In fact, according to the Pew Research Center, adults between the ages of 18 and 34 are now more likely to live under their parents’ roofs than they are to live on their own.

While moving in with mom and dad helps children pay off student loans and save money in order to eventually become financially independent, boomerang children also have the potential to put undue pressure on their parents’ future financial security. Following are some tips to help empty-nesters make their children’s homecoming a welcome and successful venture.

Establish Boundaries

Before agreeing to allow adult children to move back to their childhood homes, parents should discuss their expectation for the new living arrangement. For how long should the child be allowed to stay in the home? What chores should the child be prepared to do while living at home? Should the child share the responsibility of paying household expenses? Are there certain expenses the parents are willing and able to pay to help the child get on his or her feet? Should the child be expected to work while living under the parents’ roof? By answering these questions up front and addressing issues of privacy, both parents and children will have an easier transition when offspring move back home.

Don’t be a Piggy Bank

Giving an adult child the family credit card or a handful of spending money on a regular basis is a recipe for disaster. Similarly, parents should think twice before cosigning for an adult child’s loan or taking out a loan themselves to help their children establish financial footing. Both decisions could jeopardize a parent’s own financial stability in the future.

Give Children Financial Responsibilities

If parents expect children to become financially independent, they must allow those children to bear some of life’s financial burdens. This can include creating a budget, paying expenses and living within their means. An employed child who moves back home should have the ability to pay for some, if not all of their own expenses, whether it be food and entertainment, clothing or gas and transportation costs. Similarly, parents may consider asking the child to pay “rent” and contribute some of their earnings to cover shared household expenses, especially when a child’s stay extends beyond a year or another pre-determined time limit. Remember, supporting an unemployed child or one who is just entering the workforce should be done with the end goal in mind: helping children become financially, emotionally and physically independent.

Ensure they have a Plan

It’s very easy for an adult child to become comfortable in the pampered surroundings of a parent’s home. They may receive homemade meals and cleaning services free of charge and the freedom to spend their time enjoying recreational activities rather than the responsibilities of adulthood. Rather than being idle, children should establish a plan to work or look for work and earn money during the time they live in the family home. Similarly, when a child moves back home while pursuing a graduate degree, there should be some expectation for the how the child will spend time outside of the classroom. Perhaps the child has time for a part-time job or a full-time position with an employer who will pay some or all of the educational expenses.

Keep your Retirement Plans in Sight

Many parents have worked hard, provided for their families and sometimes struggled over their lifetimes to save enough money to enjoy their eventual plans for retirement. An adult child moving back home should not ruin a parent’s retirement plans. Rather, with the help of experienced financial advisors, parents may make minor adjustments to their estate plans without giving up on their dreams for a secure future.

About the Author: Brendan T. Hayes is a registered representative with Raymond James Financial Services and a financial planner with Provenance Wealth Advisors, an independent financial services firm affiliated with Berkowitz Pollack Brant Advisors and Accountants. He can be reached in the firm’s Boca Raton, Fla., office at 561-361-2001 or via email at

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

Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC.

Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors and Accountants.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of PWA and not necessarily those of Raymond James. You should discuss any tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.



Did You Forget Your Mid-Year Financial Check-Up? It’s Not Too Late by Scott Montgomery, CLU, ChFC

Posted on August 18, 2016 by Richard Berkowitz, JD, CPA

The past seven months have demonstrated just how unpredictable and volatile the global markets can be. A strong U.S. dollar combined with weak corporate earnings, low energy prices, low interest rates and uncertainty over China, the fallout from the Brexit vote and the upcoming U.S. elections have contributed to a rollercoaster year for investors thus far. However, with the year more than halfway behind us, now is a good time for investors to meet with their financial advisors to review their portfolios and plan for the balance of 2016. A mid-year check-up will help investors ensure their long-term plans remain on track and their finances in tip-top shape. Here’s a checklist of topics to consider:

Are my investments still aligned with my long-term goals? Whether saving for retirement, a child’s college education or a future vacation home, investors’ long-term goals should always be considered before reacting to market swings. A mid-year review of an investment portfolio provides an opportunity to assess recent asset performance against historic trends and future market outlook, and identify whether the asset mix continues to meet the investor’s time horizon and risk tolerance. Perhaps an asset rebalancing is needed to stay on track.

Is my estate plan up to date? Life events, such as changes to marital status, death of a spouse or birth of a child, can affect financial plans. These events may trigger a change in assets and income and/or require updates to wills and trusts, insurance policies, retirement plans, beneficiaries and a rebalancing of portfolio investments.

Am I making good use of all of the investing tools available to me? Financial advisors are excellent sources to assess an individual’s current financial position and provide recommendations on how he or she may better allocate assets for maximum savings, wealth preservation and tax-efficiency. Is the investor contributing to a tax-advantaged retirement plan or health savings account? Is he or she saving for a child’s education through a 529 plan? Has the investor established a special needs trust to safeguard assets and allocate money for the continuous care of special-needs children without jeopardizing those children’s eligibility for need-based government aid? Does the investor have ample insurance to protect family members in the event he or she passes away? Is the investor using life insurance in the most beneficial manner to meet his or her goals?

Am I maximizing tax savings opportunities? A mid-year financial check-up provides an opportunity for investors to forecast their tax liabilities for the year and identify strategies to minimize their 2016 tax bill through the use of tax-advantaged accounts, charitable giving or tax-loss harvesting. Additionally, the middle of the year is a good time for taxpayers to take an inventory of their tax and financial records, including receipts for donations and business expenses, copies of estimated tax payments and confirmations of investments and stock sales. Keep them organized in a safe and easily accessible location.  Documents that are scanned and stored electronically should be password-protected and backed up on external drives or in the cloud.

About the Author: Scott Montgomery, CLU, ChFC, is a director with Provenance Wealth Advisors, an independent financial planning services firm affiliated with Berkowitz Pollack Brant Advisors and Accountants, and a registered representative with Raymond James Financial Services.  For more information, call (954) 712-8888 or email


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

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.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of PWA and not necessarily those of Raymond James. Financial advisors of Raymond James Financial Services are not qualified to render advice on tax or legal matters. Investments mentioned may not be suitable for all investors. Investing involves risk and you may incur a profit or loss regardless of strategy selected. You should discuss any tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete

How to Build Business Value Before a Sale or Merger by Richard A. Pollack, CPA

Posted on August 18, 2016 by Richard Pollack

Business owners may erroneously assume that the value of their companies is the same as their profits, which is calculated by subtracting expenses from total revenue. While profits certainly play a role in establishing how much an enterprise is worth, it is not the sole determinant. Other factors come into play that may enhance or dilute a business’s value, or the estimated monetary amount that a willing buyer will pay a willing seller to assume ownership of the business and all the benefits, risks and liabilities that transfer with such ownership.


A business’s value is related to the use of its financial and nonfinancial resources, as well as other non-monetary elements influencing the entity’s health and well-being in the long-term. While value may be maximized when profits are at their peak, other subjective and intangible factors play an important role in enhancing or diminishing value.


Controllable Factors

Building business value is a long-term, ongoing philosophy that business owners should adopt, preferably at inception, in order to optimize value throughout their business’s lifecycle, in both good times and bad. Selling a business at “the most opportune time” is not always possible. Therefore, business owners should have a firm understanding of the following factors typically considered in determining the value of a business:


  • The nature and history of the business since its inception;
  • The book value of the stock and the business’s financial position;
  • The company’s earning capacity;
  • Determination of whether the enterprise has goodwill or other intangible value;
  • Sales of the company stock and size of the block to be valued;
  • The economic outlook in general, and the condition and outlook of the company’s specific industry; and
  • The market price of stocks of corporations engaged in the same or similar line of business currently having their stock actively traded in a free and open market, either on an exchange or over the counter.


The last two determinants of value are out of the business owner’s control. However, the owner has the ability to focus on improving the first five factors while remembering that those improvements must be made within the context of the uncontrollable elements. This can include managing the following:


  • The company’s profit margin;
  • The company’s growth and outlook;
  • The quality of the business’s earnings stream (including concentration of customers or suppliers);
  • The business’s ability to continue past earnings performance into the future;
  • The quality of the company’s balance sheet (liquidity); and
  • The capabilities of the entity’s management team, including key management characteristics and succession plans.


In general, the valuation methodologies applied to a closely held business are a function of the specific risks applicable to its earnings stream and its capital structure. Value is increased by minimizing risks, increasing growth opportunities and managing financial leverage.  Common methodologies for determining value include the income approach, the market approach and the asset approach.


The Income Approach. A business’s value is based on the expected future benefits to the owner or owners, based on historical results or management’s income statement projections, which are discounted back to the present using a discount rate that reflects the time value of money and the risk associated with procuring these benefits. These future benefits are usually identified in terms of cash flow or earnings.  The discount rate is customarily measured by means of the build-up method or the Capital Asset Pricing Model (CAPM), both of which are based on a risk-free rate (using a rate from U.S. Treasury securities as a proxy), various levels of market risk, and the specific risks of the business being valued.


The Market Approach. Businesses employing the market approach mainly focus on their income statements. They base the value of a business on comparisons to purchase and sale transactions for companies in the same or similar industry and/or by comparing the company to either publicly-traded companies in the same or similar industry and applying a multiple of revenues and/or earnings to the subject company’s revenues and/or earnings.


The Asset Approach. The asset approach to business valuations focuses on the balance sheet. The value of the subject business will be based on the current value of its individual assets, both tangible and intangible, less the current of its liabilities. This approach is typically employed as the basis for valuing an asset-holding company, such as those owning real property and/or marketable securities.


Build Value, Build the Future

Adopting strategies to manage controllable risks, be aware of uncontrollable risks, and assess opportunities will help business owners establish and maintain a strong foundation on which they can build value for an eventual sale or merger of their businesses.


About the Author: Richard A. Pollack, CPA/ABV/CFF/PFS, ASA, CBA, CFE, CAMS, CIRA, CVA, is director-in-charge of the Forensic and Business Valuation Services practice with Berkowitz Pollack Brant, where he has served as a litigation consultant, expert witness, court-appointed expert, forensic accountant and forensic investigator on a number of high-profile cases. He can be reached in the CPA firm’s Miami office at 305-379-7000 or via email at


Can Your Small Business Use the Research Credit to Offset Payroll Taxes? by Karen A. Lake, CPA

Posted on August 17, 2016 by Karen Lake


Thanks to the Protecting Americans from Tax Rate Hikes of 2015 (PATH Act) the research and development (R&D) tax credit is now a permanent fixture in the Internal Revenue Code. As a result, businesses that incur qualifying research expenses (QREs) in the development, design or improvement of products, techniques, services or software may claim a tax credit against those expenditures. What many businesses may not know is that, under the PATH Act, they may also qualify to apply up to $250,000 of their R&D credits to offset their payroll tax liabilities beginning in the 2016 tax year.


The ability to use the R&D credit to offset payroll tax, rather than income tax, is a boon for small businesses. First, the credit can be applied against payroll taxes for an immediate benefit, therefore improving a company’s cash flow. Second, the credit may go unused, as would be the case for a small, start-up business that does not generate enough revenue to trigger a corporate tax liability, which the R&D credit may be used to offset.


Who Qualifies to Apply the R&D Credit as a Payroll Tax Credit?

The PATH Act specifies that the application of the R&D credit against payroll tax liabilities is reserved for qualified small businesses (QSBs) that had gross receipts of less than $5 million for the taxable year and that did not have any gross receipts in more than four preceding tax years. To qualify as a QSB, a business must be structured as a partnership or a corporation, including an S Corporation.


How Can Small Businesses Apply the R&D Credit to a Payroll Tax Credit?

Qualifying small businesses must make a Section 41(h) election on a timely filed income tax or informational return, including extensions, to apply a portion of their R&D credit against its FICA tax liabilities on wages paid for the first calendar quarter beginning after the return filing. In other words, the credit, which can be as high as $250,000, will be applied proactively to reduce the business’s payroll tax liabilities in the quarter after a return is filed. The earliest a calendar-year business may make the election is for tax-year ending December 31, 2016. Assuming that the business files its corporate return during the first quarter of 2017, the research credit would be applied to offset the business’s second-quarter 2017 payroll tax liability. Any unused credit may be carried forward and applied to the following quarter’s payroll taxes.


Application of the payroll tax election is limited to five years and may not be revoked without the consent of the IRS.


The advisors and accountants with Berkowitz Pollack Brant work with businesses of all sizes and across a broad range of industries to maximize tax-savings opportunities throughout the year.


About the Author: Karen A. Lake, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant, where she helps individuals, businesses and non-profit entities 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 at




Proposed Regulations Threaten Valuation Discounts, Spur Immediate Estate Planning Need by Barry M. Brant, CPA

Posted on August 15, 2016 by Barry Brant

High-net-worth families may have a more difficult time transferring real estate and business assets to their heirs under proposed regulations recently issued by the U.S. Department of Treasury. At risk are the tax-saving discounts that entrepreneurs have used for decades to transfer ownership interests in closely held businesses and real estate, either by gift or at death. These valuation discounts, which could be as high as 35 or 40 percent, have been a source of ire for the IRS because, the agency believes, they “understate the fair market value of assets” and allow some taxpayers to completely escape estate and gift taxes on intra-family asset transfers.


The use of valuation discounts is based on the principle that a partial ownership interest in an asset is worth less than its comparative share of the entire asset. More specifically, because individuals who hold minority interests in corporations or partnerships do not have the power to exercise their shares to control the entity’s ongoing operations or its potential sale, they should be entitled to a discount on the value of those interests. Due to this lack of control and lack of marketability of privately held companies, assets owned by entities that are not controlled by a grantor/decedent may be in a structure that allows for discounting. As a result, owners of the non-controlling interests may absorb less of their $5.45 million per-person gift and estate tax exclusions, or $10.9 million exclusion for married couples.


To illustrate how this works, consider a family with $100 million in business assets held in a limited partnership, limited-liability company or corporation. A gift, sale or other transfer of the non-voting or non-controlling interests to family members has been generally eligible for a discount of up to 40 percent of the transferred assets’ value, thereby removing from the estate of the transferor up to $40 million in taxable assets. For gift and estate tax purposes, the transferred interests would be valued at $60 million, and the family would pay less estate taxes than it would have on the $100 million of undiscounted value.


Under the proposed regulations, which, if adopted, are likely to be challenged in court, all minority and lack of control discounts for closely held interests would be eliminated, essentially putting some taxpayers’ existing succession plans in disarray. When valuation discounts are an important part of taxpayers’ existing estate and business-succession plans, prompt action should be taken to maximize the existing tax savings strategies as soon as possible. This could include expediting the implementation of discounted wealth transfer strategies, restructuring the way family assets are held and/or making use of specific trust instruments.

The advisors and accountants at Berkowitz Pollack Brant and Provenance Wealth Advisors work extensively with business owners, real estate investors and high-net-worth families to develop estate plans that meet wealth-preservation and tax-efficiency goals. Implementation of estate plans utilizing discounts for intra-family transfers should be considered prior to the formal adoption of the proposed regulations, which is expected later this year or early 2017.


About the Author: Barry M. Brant, CPA, is director of Tax, Consulting and International Services with Berkowitz Pollack Brant, where he leads the firm’s private client group and provides guidance on complex tax matters and issues related to multi-national holdings, cross-border treaties and wealth preservation and protection. He can be reached in the CPA firm’s Miami office at 305-379-7000, or via email at

Social Media Platforms Help Non-Profits Raise Funds and Awareness by Megan Cavasini, CPA

Posted on August 11, 2016 by

Most non-profit organizations recognize the power social media can wield to increase awareness and engagements among potential donors.  For proof, look no further than the Ice Bucket Challenge, which successfully raised interest, excitement and millions of dollars for ALS research.


Social media platforms are now making it easier for 501(c)(3) organizations to request and process charitable donations from fans and followers directly on the non-profits’ social media pages.  Both Facebook and Instragram recently introduced a feature that allows not-for-profits to add a “Donate Now” button directly to their Pages and link ads. By adding the “Donate Now” button, nonprofits can expedite the fundraising process and allow their supporters to make donations without ever leaving Facebook. Alternatively, nonprofits may use the “Donate Now” button to redirect donors to their own charitable websites. With both options, donors will be prompted to share the nonprofit’s Page and invite their friends to make a donation as well.  This feature not only expands the nonprofits exposure to the public, it also advances the organization’s goal of fulfilling its mission one dollar at a time.


Berkowitz Pollack Brant has deep experience working with many Florida-based not-for-profit entities, including tax-exempt social and civic organizations, private foundations, hospitals, religious organizations and education institutions. The firm’s advisors and accountants provide tax compliance, audit and attest, and business-advisory services to help these organizations better manage risks, improve efficiently and operate with the highest levels of fiscal responsibility.


About the Author: Megan Cavasini, CPA, is an associate director with Berkowitz Pollack Brant’s Audit and Attest practice, where she works with real estate businesses and non-profit organizations. She can be reached at the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via email at


Learn How Your Children Can Lower Your Tax Bill by Joanie B. Stein, CPA

Posted on August 09, 2016 by Joanie Stein

Raising children can be expensive.  However, the IRS provides families with some financial relief through several tax benefits that help parents reduce the amount of taxes they owe each year.


Dependent Deductions.  Parents may reduce their annual income by claiming a dependent deduction of up to $4,050 in 2016 for each child under the age of 19, or 24 if the child is a full-time student.  The amount of the deduction decreases as parents’ adjusted gross income increases above $311,300 for married couples filing jointly, $285,350 for head-of-household taxpayers or $259,400 for single filers. The exemption phases out completely when adjusted gross income reaches $433,800 for married couples filing jointly, $407,850 for head-of household taxpayers or $381,900 for single filers.


Child Tax Credit. Parents may reduce their federal tax bills by $1,000 annually for every child under the age of 17 who lives with them for at least one-half of the year. The credit, which is limited by the amount of income tax and alternative minimum tax (AMT) owed, phases out completely for taxpayers whose income exceed $110,000 for married couples, $55,000 for couples filing separately and $75,000 for all other taxpayers.


Adoption Credit. Taxpayers who adopted a child in 2016 may offset some of the related expenses they incurred by claiming this credit of up to $13,400 per child.  The adoption credit phases out for taxpayers whose income exceeds certain thresholds.


Child and Dependent Care Credit. Families that pay for someone else to care for their dependent children under the age of 13 while the parents work or look for work may claim a credit for a percentage of the expenses paid to the caregiver. For 2016, the total expenses used to calculate the credit may be up to $3,000 for one dependent or up to $6,000 for two or more qualifying dependents. The allowable percentage of the credit depends on the taxpayer’s adjusted gross income.


Higher Education Credits.  The American Opportunity Credit and the Lifetime Learning Credit provides parents with the ability to offset some of the costs they pay for their children’s’ college and non-degree expenses.  Families may claim only one of the credits, both of which are subject to modified adjusted gross income thresholds.


Student Loan Interest. Qualifying families may deduct up to $2,500 in interest paid on student loans during the tax year.  The deduction is reduced when taxpayers’ modified adjusted gross income exceeds $65,000 for single heads of household or $130,000 for married filing jointly.  The deduction phases out completely at $160,000 for married taxpayers filing jointly and $80,000 for single filers.


Self-Employed Health Insurance. Parents with their own businesses who paid for health insurance for children under age 27, may deduct the premiums they paid during the year.


It is important that families pay attention to the income thresholds for which these deductions and credits apply. In some instances, it may be prudent for high-net-worth families to consider filing separate tax returns for children, rather than claiming them as dependents. At the very least, a family should meet with a tax accountant to compare the benefits of each.


About the Author: Joanie B. Stein, CPA, is a senior manager with Berkowitz Pollack Brant’s Tax Services practice, where she helps individuals and businesses implement sound tax-planning strategies. She can be reached at the CPA firm’s Miami office at (305) 379-7000 or at


Export Activities Benefit from Often-Overlooked Tax Incentive by Jim Spencer, CPA

Posted on August 07, 2016 by James Spencer

Astute exporters are no strangers to the tax-savings opportunities presented by Interest Charge-Domestic International Sales Corporations (IC-DISCs). However, few companies understand the benefits of this tax incentive, its reach outside of the exporting industry and the ease with which one can establish such an entity to reap substantial savings.

IC-DISC Defined

A closely held U.S. business that sells or leases qualified property or provides specific services overseas may create a separate, related entity, known as an Interest Charge-Domestic International Sales Corporation (IC-DISC), to act as its foreign sales agent. As a domestic entity that operates as an export tax incentive, the use of an IC-DISC can result in a tax reduction that can equal 16 percentage points below the top income-tax rate.

While it does not require an office, employees or tangible assets, an IC-DISC must comply with the following regulations:

  • Be incorporated in one of the 50 states or the District of Columbia,
  • Enter into a commission agreement with the operating company, and
  • File an election with and receive approval from the IRS to be treated as an IC-DISC for federal tax purposes.

What Businesses Can Benefit from an IC-DISC?

Businesses that export domestically produced products can take advantage of IC-DISC structures, even if they do not manufacture the products themselves. Therefore, it is not restricted solely to export businesses. Rather, distributors of U.S.-manufactured products or their components, software companies and architects, engineers and contractors who provide services for certain overseas projects can also qualify for an IC-DISC election.

How and when do the Tax Benefits of IC-DISC Apply?

An IC-DISC is the last permanent tax-savings opportunity available to exporters and related entities that conduct their business overseas. The tax benefits on export sales are available only after the IC-DISC is established; businesses may not make a retroactive election to apply the benefits to prior years.

For pass-through businesses, such as partnerships, S Corporations, or LLCs, the IC-DISC may be formed as a subsidiary that pays dividends to the parent company. For C Corporations, however, realizing the tax savings of an IC-DISC structure requires shareholders form a sister company, rather than a subsidiary, through which shareholders may benefit from a lower tax rate on dividends.

How to Maximize Savings Opportunities with IC-DISC

As an example, a business that generates $10 million of export sales with a 5 percent net operating profit margin and uses an IC-DISC can save as much as $64,000 in taxes per year.

However, despite the ease and minimal expense required to establish and operate an IC-DISC, these tax-beneficial structures are too often underutilized by qualifying businesses. Businesses that conduct sales or provide services overseas should consult with professional counsel to identify how they may take advantage of significant IC-DISC savings opportunities.

The accountants and advisors with Berkowitz Pollack Brant’s International Tax Services practice work closely with domestic and foreign businesses to maximize tax savings opportunities while complying with international laws and regulations.

About the Author: Jim Spencer, CPA, is a director with Berkowitz Pollack Brant’s International Tax practice, where he focuses on IC-DISC and other tax-advantaged business strategies, such as transfer pricing and pre-immigration planning for foreign nationals. He can be reached in the CPA firm’s Miami office at (305) 379-7000 or via email at




Small Businesses May Qualify for a Health Care Tax Credit by Adam Cohen, CPA

Posted on August 05, 2016 by Adam Cohen

The Affordable Care Act provides some small businesses with an opportunity to recoup up to 50 percent of the insurance premiums they paid on behalf of employees enrolled in a health plan offered by the Small Business Health Options Program (SHOP) Marketplace.


To qualify for the Healthcare Tax Credit, businesses must have less than 25 full-time employees earning average wages of less than $50,000.  The credit, which is available for two consecutive taxable years, may be carried forward or back as a business expense that employers can deduct from tax liabilities in the past or future.


For tax-exempt employers that meet the definition of a qualifying small business, the available credit can be up to 35 percent of premium contributions paid on behalf of employees. In most instances, not-for-profits without taxable income may receive the credit as a refund when it does not exceed income tax withholding and Medicare tax liabilities.

The amount of the Healthcare Tax Credit a business or charity may receive depends on the number of its full time equivalent employees (FTEs) and their average wages. It is important to remember that the IRS counts two half-time employees as one FTE. So, an organization with 60 half-time employees will essentially be counted as having 30 FTEs. The larger the organization, the smaller the credit.


Small business and charities that failed to apply the health care tax credit on their 2015 tax returns still have time to make a claim by filing of an amended tax return with Form 8941, Credit for Small Employer Health Insurance Premiums, within three years of the original filing date.


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, including the Affordable Care Act. He can be reached at the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via e-mail


Assessing Long-Term Care Insurance Options by Scott Montgomery, CLU, ChFC

Posted on August 03, 2016 by Richard Berkowitz, JD, CPA

When most people think of retirement, they imagine spending their time traveling and pursuing the hobbies and activities that bring them the greatest joy.  Few consider that according to the Department of Health and Human Services, more than 70 percent of Americans over the age of 65 will, at some point, require long-term care to assist them with daily living activities. Ignoring this reality puts many in the precarious position of giving up control over their quality of life and instead relying on family members without ample resources or forethought to manage their care and, in many cases, their finances.


According to the most recent Genworth Cost of Care Study, the national median annual cost for a private room in a nursing home is $92,378 and $46,332 for an in-home health aid.  Medicare will only cover a limited number of days in a nursing home and similarly restricts approval of costs for in-home care.  To prepare for the rising costs of long-term care (LTC) and ensure individuals continue to have a say in the care they receive, proper time should be spent budgeting and investigating the changing landscape of long-term care insurance options.


When to Get Started.  When an individual should begin thinking about long-term care insurance will depend on his or her lifestyle and genetics. The annual costs for long-term care policies increase as individuals age and their health deteriorates. However, the younger the insured, the more premiums he or she will pay over a lifetime.  Conversely, the longer one waits to get insured, the more likely he or she will have a medical condition that may make it more difficult to secure coverage. In most instances, it is prudent for individuals to begin thinking about their long-term care when the turn 50.


What Options are Available. There are two basic types of long-term care insurance: annual pay and asset-based policies.


With an annual pay policy, individuals pay annual premiums with the expectation that the policy will pay out benefits in the amount and for the amount of time outlined in the policy to meet their anticipated needs.  In certain circumstances, policyholders may deduct a portion of those premiums from their taxes. Individuals should consult with a tax professional to determine how tax-deductibility applies to their specific situation.


Owners of annual pay policies who do not use their benefits, perhaps because they pass away before requiring long-term care, typically forfeit the premiums they paid into the plan during their lifetime. However, policyholders have the option to pay higher premiums and add a nonforfeiture benefit rider that guarantees a partial refund of premiums to themselves or their beneficiaries should the policy lapse due to death or stopped payments.


Unlike an annual pay LTC policy, an asset-based long-term care policy that did not pay out benefits during an individual’s lifetime may return the policyholder’s initial payment. With these hybrid annuity and life-insurance based plans, individuals make one or multiple large premium payments, typically of substantial value. These upfront payments are invested in life insurance or annuity contracts paying a guaranteed rate of return. When long-term care is needed, insureds may access the life insurance death benefit or annuity value free of income taxes to pay for qualifying expenses. Should policyholders pass away without incurring long-term care expenses, the full death benefits may ultimately be returned to their heirs. Moreover, should policyholders surrender their LTC insurance policies, they may get back a substantial portion of the initial payment they paid into the plan.


As the long-term care insurance industry continues to evolve, new products will be introduced to better meet the needs of an aging population. While these policies will not be appropriate for everyone, the topics of how individuals should be cared for, who should deliver the care and how should the care be funded are important for the vast majority of the population to consider.  The guidance of an experienced financial planner is a good way to start the conversation and review the pros and cons of all long-term care options.


About the Author: Scott Montgomery, CLU, ChFC, is a director with Provenance Wealth Advisors, an independent financial planning services firm affiliated with Berkowitz Pollack Brant Advisors and Accountants, and a registered representative with Raymond James Financial Services.  For more information, call (954) 712-8888 or email


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

Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC.

Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors and Accountants.


This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of PWA and not necessarily those of Raymond James. You should discuss any tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.

Long-Term Care insurance policies have exclusions and/or limitations. The cost and availability of Long-Term Care insurance depends on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of Long-Term Care insurance. Guarantees are based on the claims paying ability of the insurance company.

Turning a Gift into a Non-Taxable Transaction by Kenneth J. Strauss, CPA/PFS, CFP

Posted on August 02, 2016 by

The IRS considers the transfer of money or property from one individual to another without the expectation of an equal transfer in return a taxable gift. However, taxpayers have a number of opportunities to avoid paying federal taxes on transfers they consider to be gifts.

Give less than the Annual Exclusion Amount. For 2016, taxpayers may gift up to $14,000 to as many people as they want free of gift and estate taxes. For married couples, the gift tax exclusion is $28,000 per beneficiary per year. Individuals are also limited to a lifetime exclusion amount of $5,450,000, or $10,900,000 for married couples in 2016. However, couples that split a gift will need to file a gift tax return, even when the amount is less than the annual exclusion threshold.

Give to a Spouse. Gifts made to a spouse are exempt from federal gift taxes, no matter the amount. However, this is not the case when one spouse is not a U.S. citizen. In these circumstances, a U.S. citizen may make an annual gift of up to $148,000 in 2016 to a non-citizen spouse. Similarly, gifts made to a spouse must be “present interest” gifts that do not “come with strings attached” or limit how and when the spouse may use or enjoy the gift.  Any gift to a spouse that is considered a “future interest” will be subject to federal gift taxes and will require the filing of a Gift and Generation Skipping Transfer Tax Return.

Give to Charity or a Political Organization. Gifts made to political organizations or charities are free of federal gift taxes. In addition, individuals who give to a qualifying non-profit organization gain the added benefit of having the ability to deduct the fair market value of their gifts from their taxable income.

Pay for the Education or Medical Expenses of another Person. Individuals who make direct payments to an educational institution or a medical provider on behalf of another person are exempt from gift taxes.

Taxpayers whose gifts do not meet these exemptions will be required to file IRS Form 709, Gift and Generation Skipping Transfer Tax Return.

About the Author: Kenneth J. Strauss, CPA/PFS, CFP, is a director with the Taxation and Personal Financial Planning practice of Berkowitz Pollack Brant, where he works with entrepreneurs and multi-generational family businesses to develop tax-efficient estate, succession and financial plans.   He can be reached in the CPA firm’s Fort Lauderdale, Fla., office at (954) 712-7000 or via email


Pin It on Pinterest

Menu Title