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Monthly Archives: September 2016

Are You Financially Prepared for an Emergency? by Brendan T. Hayes

Posted on September 29, 2016 by Richard Berkowitz, JD, CPA

It can be assumed that the more wealth individuals have, the better equipped they are to cover unplanned expenses.  However, according to a recent poll conducted by the Associated Press-NORC Center for Public Affairs Research, 38 percent of households earning more than $100,000 a year admitted that they would have some difficulty coming up with $1,000 to pay for an emergency.


No one can predict the future with 100 percent certainty. Even the best laid plans can be derailed by an unforeseeable event, whether it be minor damage to a car or home or a more serious illness or loss of a job.  However, little thought is often given to these all-too common situations, leaving a large number of individuals vulnerable and unprepared to deal with an unexpected financial crisis.


An emergency fund is an important component of a sound financial plan and key to an individual’s long-tern financial and emotional well-being. Ideally, an emergency fund should contain three to six months of living expenses, including costs for housing, utilities, transportation, child care and food. For retirees, an emergency fund should cover expenses over a longer timeframe to make up for the lack of wages to replenish the fund.


An emergency fund should be kept liquid, in a savings account or other vehicle, separate from retirement plans or investment accounts, where they may risk a tax penalty on early withdrawals or potential losses due to market swings.  Diligence is required to start building the fund and avoid spending the stash of cash on anything other than important, life-sustaining expenses.  After an emergency occurs and money is taken to pay for needed living expenses, individuals should develop a plan to replenish these funds to cover the next unexpected surprise.


Like most things in life, building an emergency fund requires advance planning and organized preparation.  While no one can plan for every possible situation, failing to have a plan could result in significant damage to one’s lifestyle and survival.


About the Author: Brendan T. Hayes is a financial planner with Provenance Wealth Advisors, an independent financial services firm affiliated with Berkowitz Pollack Brant Advisors and Accountants, and a registered representative with Raymond James Financial Services. 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.


Looking to Change Jobs? You May Qualify for a Tax Break by Nancy M. Valdes, CPA

Posted on September 27, 2016 by

The Internal Revenue Service (IRS) allows U.S. taxpayers to deduct costs for certain expenses they incur while searching for new jobs.


To qualify, a taxpayer must seek employment in his or her current line of work. Expenses incurred searching for a job in an entirely new field are not deductible.  Similarly, taxpayers cannot deduct job-search expenses when they are looking for their first jobs nor when there is a long break in time between when one job ends and the search for new employment begins.

Examples of deductible job-search expenses include costs for preparing resumes, including writing and copy services, as well as any hotel and transportation costs incurred when the search requires out-of-town travel.   If a taxpayer pays fees to an employment agency, headhunter or staffing firm, he or she may deduct those costs only when those fees are not paid by a future employer at a later date.


Taxpayers may deduct job search expenses as miscellaneous deductions on IRS Form 1040, Schedule A, Itemized Deductions, only when the amount exceeds two percent of their individual adjusted gross income.

About the Author: Nancy M. Valdes, CPA, is a senior manager with Berkowitz Pollack Brant’s Tax Services practice, where she focuses her practice on tax strategies for business owners and high-net-worth individuals and families. She can be reached at the CPA firm’s Miami office at (305) 379-7000 or via email at


Students, Families Face Earlier Federal Financial Aid Application Deadline in 2016 by Joanie B. Stein, CPA

Posted on September 22, 2016 by Joanie Stein

Students planning to attend college for the 2017-2018 academic year may begin applying for federal financial assistance as early as October 1, 2016. In prior years, students were required to wait until after January 1 to complete the Free Application for Federal Student Aid (FAFSA) and subsequently wait until the Spring to determine their eligibility for federal and state grants, scholarships, loans and work-study programs. With the earlier start date, students will now have a better idea of what financial aid packages are available to them, if any, far in advance of their final enrollment decision.

By allowing families to file the FAFSA earlier, the Department of Education has also changed the information required for completing the form. Rather than relying on estimations of income based upon an individual’s not-yet-filed tax return from the most recent tax year, students and their families may instead rely on financial data contained in their already filed tax returns from the year prior. Therefore, a family applying for financial aid for the 2017-2018 tax year would be able to complete the FAFSA by looking at its federal tax returns from 2015. Should an applicant not have this information readily available, he or she may use the IRS’s online data retrieval tool to automatically fill in the necessary information.

The Department of Education urges all students to apply for financial aid at, regardless of their personal or family income. Not only is there no income cut-off to qualify for federal student aid, but failing to complete a FAFSA may prevent students from receiving academic scholarships from the college or university of their choice.

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


How Families Can Sustain Wealth Through Multiple Generations by Richard A. Berkowitz, JD, CPA

Posted on September 20, 2016 by Richard Berkowitz, JD, CPA

High-net-worth families who intend to transfer wealth from generation to generation face a harsh reality: 70 percent of family fortunes are destroyed by the second generation, and 90 percent by the third. As the story is often told, the first generation starts with nothing and works hard to create wealth. Subsequent generations either live lavishly or fail to take steps to preserve the family’s riches, too often because they did not receive guidance and training from the prior generation. The first example is regrettable; the second example is preventable with proactive planning. Individuals set examples for their children during their lives. Unless parents communicate an alternate plan, their children will expect to live the same way or better upon their parents’ demise.

Wealth management and estate planning involve much more than growing and protecting one’s assets. They require individuals to thoughtfully consider how they will manage their financial affairs during life and how they wish to distribute their wealth to protect loved ones after death. Estate plans are not static instruments. Rather, they require constant attention, care and updating along with individuals’ life transitions, including marriage, divorce and children, as well as changes in tax laws. Each of these milestones present opportunities for individuals to communicate with their children about their plans.

One of the most damaging threats to wealth preservation is the failure to consider a family’s non-financial assets, including knowledge, values and family relationships. How will individuals protect spouses and heirs? How will individuals prepare heirs to avoid squandering their future fortune? How will the next generations carry on the family business and be trained and trusted to make the right decisions?

Plan and Train Family Members Early

The excitement of starting and building a business should not be overshadowed by the fact the, at some point, the founder(s) will leave the enterprise, hopefully to enjoy the fruits of their labor. Without properly preparing for this exit in the beginning stages of a business’s lifecycle, an entrepreneur’s initial hopes and dreams for the future can be quickly dashed.

An exit strategy is a key component of a comprehensive business and estate plan. It is the entrepreneur’s endgame. It will shape how the business is formed, how it grows, operates and manages its finances. Keeping this aim in sight during the growth stages of a business will help to ensure the owner is prepared to successfully transition out of the business at whatever time he or she chooses.

When an owner intends to pass the business onto family members, a number of business succession issues should be addressed and documented. Are heirs willing and able to take over the family business? Will they need specific training, either on the job or through independent coaching, to help them acquire new skills? At what point can the owner relinquish all control of the entity? Will the owner give up control early enough to be in a position to mentor and allow his/her offspring to develop into a leader and innovator to shepherd the family business to future success?

On a more personal front, a family’s financial patriarch or matriarch should consider the strengths, weaknesses, interests, capabilities and potential for his or her heirs to carry on the management of the family’s finances after he or she is gone. Is a child prepared to handle a financial windfall? Does he or she have a relationship with a trusted accountant, lawyer and/or financial planner who has experience with the family’s unique situation? Has the family member had ample opportunities to learn from the family’s financial leader? Is a family member interested and capable of taking on the responsibility to sustain the wealth of the entire family, or should a third-party trustee be engaged?

Engage in Difficult Conversations

No one wants to talk about the intricate details of finances, death or what will happen after a family member retires or dies. However, by engaging in these conversations during life, first generations can make their wishes known and pass along to future generations the knowledge, values and behaviors that are required to sustain wealth. It can help to ensure that all family members are on the same page and working together toward a shared vision or goal. What legacy does the family’s financial leader wish to leave behind? How important is charitable giving to preserving that legacy? Will adult children need a temporary financial bridge to help them support themselves or will they be permanently financially dependent on the bank of mom and dad?

Relationships between parents and children will play an important role in these difficult conversations. Failure to address these issues early on may lead to years of family discord and destruction of wealth. To facilitate these conversations, families should consider bringing in third-party experts, such as accountants, financial planners or estate planners, who can lend their knowledge and experience to provide family members with a reality check, answer difficult questions, temper emotions and provide an independent assessment of relevant issues and opportunities for preserving wealth and long-term best interests. For example, these experts can develop tax-efficient estate plans, budgets and sustainable spending strategies that can carry the family’s wealth through multiple generations.

Rely on Trusted Estate Planning Tools

There is a fairly comprehensive toolbox of estate planning strategies that families can employ to preserve wealth through multiple generations. This can include the establishment of family offices or family limited partnerships, charitable foundations, 529 college savings plans for minor children, special needs trusts for children with special needs, and a wide variety of different trust instruments to effectuate estate and financial-planning strategies.

In general, trusts provide families with tax-efficient strategies for protecting assets from lawsuits and claims from creditors and divorce settlements while allowing the family patriarch or matriarch to specify how they wish family members to receive and manage inherited assets. This can include the age at which an heir may begin receiving distributions of trust assets, the rate of distributions, conditions for preventing distributions and limitations on an heir’s access to the trust principal. There are many different types of trusts, and the one that is right for one family may not be appropriate for another.

Preserving family wealth for multiple generations requires attention to the finer details of appropriate planning and communication as well as making use of tried and true estate planning tools. An accountant or financial planner is an excellent source to begin this process and provide counsel on ways to avoid losing a family’s financial legacy. Making the decision to establish a generational wealth plan for a family will only succeed if the plan is well conceived, understood and executed by loved ones.

About the Author: Richard A. Berkowitz, JD, CPA, is founder and CEO of Berkowitz Pollack Brant Advisors and Accountants, where he works with individuals, families and entrepreneurs to develop a comprehensive approach to income, estate, investment and business planning to meet the goals and objectives of and to improve the tax consequences for high-net-worth individuals and their families. He can be reached at the CPA firm’s Miami office at 305-379-7000 or via email at

It’s Not too Early to Begin Adopting New Non-Profit Financial Reporting Standards by Megan Cavasini, CPA

Posted on September 15, 2016 by

On August 18, 2016, the Financial Accounting Standards Board (FASB) issued its latest update relating to how not-for-profits (NFPs) communicate their financial stories. While the new standards will not go into effect until after December 15, 2017, nonprofit charities, foundations, associations, museums, universities and religious organizations should take the time now to become familiar with Phase 1 of the update and begin taking steps to adopt the initial changes before the release of Phase 2 standards in the near future.

Financial statements are critical to help not-for-profit organizations inform key stakeholders about their fiscal health. Donors, grantors, lenders and creditors rely on the information contained in these documents to understand how and where a NFP will spend its financial contributions, which ultimately support the NFP’s mission and fund the programs and services it provides to help those in need. However, the FASB identified concerns about the “complexity, insufficient transparency and limited usefulness” of the current model of NFP financial reporting that has been in place for more than two decades. After six-years of planning, the FASB issued proposed regulations to simplify the way in which NFPs quantify and qualify their financial performance, their liquidity and cash flows, and their classification of net assets. The latest update aims to achieve this goal.

Two-Class System for Reporting Net Assets

Under Phase 1 of the new accounting standards for nonprofits, the existing three-class system of classifying net asset as unrestricted, temporarily unrestricted and permanently restricted, will be replaced with a simpler two-class structure. Going forward, NFPs will differentiate net assets solely between those net assets with donor restriction and net assets without donor restrictions. With this change, NFPs will still be required to disclose, on the face of financial statements, the nature and amounts of donor-imposed restrictions. However, this information will be supported with enhanced footnote disclosures detailing the limitations that governing boards and donors place on net assets and how the NFPs will ultimately allocate those assets in the future.

Another change intended to improve how stakeholders read and understand NFPs’ financial statements is the required disclosure of underwater endowment funds. When the fair market value of a donor-restricted endowment is less than the original gift amount or the amount the NFP is required to maintain by the donor or by law, NFPs will be required to also report the amount of the deficiency and their governing boards’ policies or decisions to reduce or spend from these funds.

Reporting on Expenses and Investment Returns

The new accounting standards require non-profit entities to report on either the face of financial statement or in disclosure notes not just the function of their expenses (as presently required by generally accepted accounting principles) but also the nature of those expenses. In addition, financial statement notes will need to include an analysis of how the NFP’s apply this information to allocate costs among their programs. This will provide readers of financial statements with more accurate detail about whether an NFP’s expenses are fixed or discretionary, how the expenses relate to the NFP’s mission and how the NFP allocates resources to pay those expenditures.

With regard to investment return, NFPs will no longer be required to disclose investment expenses. Rather, investment return should be presented net of all related external and direct internal investment expenses. This is expected to provide a more comparable measure of investment reporting across all not-for-profits, regardless of their investment activities. Moreover, this new method for presenting investment return will eliminate the difficulties and related costs that NFPs have faced in the past when identifying embedded fees and reporting this information.

Reporting on Liquidity and Availability of Resources

Understanding how a nonprofit manages its liquidity and liquidity risk is an important indication of how it makes use of the resources available to it and how well it maintains adequate cash flow to continue its operations. To make this information more transparent to readers of financial statements, the accounting standards update will require NFPs to disclose in financial statement notes quantitative information regarding how they will manage available liquid resources to meet cash needs for general expenses for the year following the balance sheet date. In addition, NFPs will be required to provide on the face of financial statements or in disclosure notes detailed quantitative information regarding their availability of financial assets at the balance sheet date to meet cash needs for the next year.

Reporting of Operating Cash Flows

Not-for-profits may continue to present the statement of cash flows using either the direct or indirect method of reporting. However, under the new reporting standard, NFPs employing the direct method to report cash flow will no longer be required to take the extra step of reconciling net income to the cash amounts presented under the indirect method.

Early Adoption

While the effective date of the new accounting standards for nonprofits will not begin until fiscal years after December 15, 2017, and for interim periods with fiscal years beginning after December 15, 2018, it behooves NFPs to begin adopting Phase 1 of the new model early. Non-profits will be facing quite a few accounting changes in the coming years, including Phase 2 of the NFP reporting model as well as new standards for accounting for leases and recognizing revenue, both of which will also impact private businesses.  This confluence of change will require NFPs to reassess and update their current processes and legacy accounting systems, including engaging in more in-depth and detailed analysis of their net assets and availability of resources, their expenses and their liquidity risk. According to the FASB, the new guidance, once adopted, will ultimately improve a not-for-profit’s ability to communicate its true financial health with its stakeholders and save the NFP additional costs and complexities when preparing their financial statements in the future. Not-for-profit entities should meet with their tax and audit professionals now to begin the process of adopting the new changes.

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 efficiency 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 non-profit organizations and real estate businesses. She can be reached at the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via email at



Can Foreign Investors Be In The U.S. Without Being Here For Income Tax Purposes? by Joseph L. Saka, CPA/PFS

Posted on September 13, 2016 by Joseph Saka

A fragile global economy and political uncertainty continue to fuel the United States’ status as the world’s most attractive location for foreign investment. However, investors chasing positive returns, high yields and portfolio diversification face a tricky U.S. tax system that may provide tax-savings opportunities in some instances and significant income-tax traps in others.

Contrary to popular belief, the U.S. system of taxation is not based on an individual’s immigration status nor does it imply that a resident for tax purposes is a permanent resident of the United States. For example, while it is true that non-U.S. persons will generally pay U.S. income tax only on U.S.-source income or income effectively connected with a U.S. trade or business, foreign individuals may inadvertently become subject to U.S. taxes on their worldwide income when they meet certain tax residency tests. Similarly, a foreign investor may escape U.S. taxation on their worldwide income when they plan appropriately in advance of stepping on U.S. soil.

For income tax purposes, foreign individuals are categorized as resident aliens or non-resident aliens based on whether or not they meet certain tax residency thresholds, including the primary Substantial Presence Test.

Substantial Presence Test

A foreign person will be considered a U.S. tax resident subject to the same income tax laws as U.S. citizens when they have a “substantial presence” in the U.S. More specifically, the U.S. will impose taxes on a foreign individual’s worldwide income when he or she is physically present in the states for 183 days or more during a tax year, or a minimum of 31 days during a calendar year and 183 days or more over the past three years. According to the Tax Code, an individual need not spend the requisite 183 days consecutively; rather the Internal Revenue Service (IRS) relies on a three-year weighted formula to determine one’s substantial presence in the country. Moreover, the U.S. often counts an individual’s travel days coming into or leaving the country towards his or her physical presence, unless the individual is commuting for work to the U.S. from a residence in Canada or Mexico.


While foreign individuals may be diligent in counting and limiting the number of days they spend in the U.S. to avoid meeting the substantial presence threshold, there are a number of other ways that they may qualify as exempt from this rule.


Exceptions to the Substantial Presence Test


Closer Connection/Tax Home. Foreign persons who meet the Substantial Presence Test may be treated as non-resident aliens for U.S. income tax purposes when they maintain a tax home in a foreign country during the year and can demonstrate that they had a closer connection to that country than they had to the U.S.


A tax home may be a house where one permanently resides or it may apply to the location of one’s business or employment. The IRS’s definition of a closer connection is more ambiguous, but it does consider a number of facts and circumstances to determine if such a link exists. They include the types of forms filed by the individual, the country of residence designated on those forms and the following:

  • The location of an individual’s permanent home, which must be available to the individual at all times during the calendar year
  • The location of the individual’s family members
  • The location of the individual’s personal belongings, such as clothing, jewelry and automobiles
  • The location of the social, political and religious organizations with which the individual associates
  • The location where the individual conducts business activities, other than his or her tax home
  • The location of the jurisdiction where the individual holds a driver’s license
  • The location of the jurisdiction where the individual votes


Meeting these qualifications should prove simple for many foreign investors seeking to maintain their status as non-resident aliens for U.S. tax purposes. However, it is prudent for investors to seek the advice of a U.S.-based tax accountant before taking any action that could lead to significantly different tax liabilities than they had planned.


Regardless of whether the facts substantiate the utilization of the closer-connection exception, if a taxpayer surpasses 182 days in the year that he or she desires the exception to apply, the non-resident will not be able to utilize the exception and would be taxed on worldwide income.


Tax Treaties. If the closer-connection exception is not an option because of the number of days an individual spent in the U.S., he or she may have another chance to qualify as a non-resident for U.S. income tax and avoid having to file and pay taxes on worldwide income. For example, an individual who qualifies as a resident of the U.S. and of another country may be subject to the tax laws of both jurisdictions. When a tax treaty exists between the two countries, investors should identify if there is a tie-breaker provision that resolves the conflict and allows them to benefit from potentially more advantageous tax treatment in the foreign country. When this is the case, the investor will need to file a U.S. tax return to make the election. However, it is important to remember that while the taxpayer will not be considered an income-tax resident for paying tax on worldwide income, the taxpayer may instead be considered an income tax resident for other provisions of the Tax Code. As a result, he or she may need to file information reporting forms in addition to a U.S. tax return.


Students, Teachers and Trainees. Citizens of a foreign country may exclude some of the days and years they are present in the U.S. if they or their immediate family members have visas, including F visas, J visas, M visas or Q visas, to study, teach or train in the United States. Generally, the exemption is available for five years; however, any portion of a calendar year counts as an entire year. For example, if an individual enters the U.S. on a qualifying student visa in August of 2016 and stays until May 2021, he or she would be considered to utilize the exemption for six years, even though the actual time is less than five years.


To qualify for an F-1 visa, individuals must be enrolled as full-time students in a U.S. college or university, high school, elementary school, seminary, conservatory or other academic institution that culminates in a degree, diploma or certificate of completion. In addition, foreign investors may qualify for an F-1 visa and exclude the days they are present in the U.S. when they are enrolled in a language-training program, which applies to any language, be it English, Spanish, Hebrew or Mandarin. However, the student visa exception can get tricky. U.S. tax authorities may review an individual’s compliance with the visa requirement, and they reserve the right to disallow the exemption.


The J-1 visa is applicable for individuals who participate in a U.S. work-study exchange program that is sponsored by a nonprofit or educational entity, including an au pair program, summer camp, graduate medical school or research institutions. In addition, holders of J-1 visas may include foreign students spending time in the U.S. for an internship or foreign professionals in the U.S. for career training.


Medical Condition. While no one wants to become ill or incapacitated while visiting a foreign country, the IRS provides a narrow exception to the Substantial Presence Test for those individuals who require medical care and/or become unable to leave the U.S. due to a medical condition that occurred stateside. A foreign person who meets these rather restrictive regulations may exclude from the Substantial Presence Test those days that the medical condition preventing them from leaving the country.


Professional Athletes and Foreign Diplomats. Professional athletes who travel to the U.S. to participate in charitable sporting events may exclude from the Physical Presence Test those days that they actually compete; training days may not be excluded. Foreign persons considered diplomats or full-time employees of international organizations are excluded completely from the Substantial Present Test when they are in the U.S. on a temporary basis for official diplomatic activities.


Other Considerations

Individuals who are not classified as U.S. tax residents are generally considered nonresident aliens subject to U.S. tax only on U.S. source income and income effectively connected with a U.S. trade or business. When capital gains are not effectively connected with a U.S. trade or business, they are typically not taxable to the nonresident alien. However, there is an exception to this rule when the nonresident alien is present in the U.S. for 183 days or more in the current year. In general, if a nonresident alien is present in the U.S. for 183 days or more in the current year, his or her U.S. source capital gains are subject to a 30 percent tax.


Foreign persons must take the time to plan far in advance of their intent to invest, study, work or conduct business in the United States in order to minimize the risks of being classified as U.S. resident aliens for income tax purposes. Should they fail to do so, they may be liable for U.S. taxes on all wages, interest, dividends, rental income and income from all other sources they earn throughout the world, and not just those earned in the U.S. Advance planning is also beneficial for individuals who obtain a favorable visa and who may become subject to taxable capital gains and other potential pitfalls that will generate addition tax in the U.S. A certified public accountant (CPA) with experience in international tax issues for individuals and businesses is the best resource to begin the planning process.

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


Hospitals Brace for Increased Medicare Patient Readmission Penalties by Whitney K. Schiffer, CPA

Posted on September 09, 2016 by Whitney Schiffer

Beginning on October 1, 2016, more than half of the United States’ acute-care hospitals that are paid through the Inpatient Prospective Payment System (IPPS) will receive less money from Medicare due to a history of higher-than-expected patient readmissions within 30 days of discharge. The penalties, which can equal as much as a 3 percent reduction in a hospital’s Medicare rate, are a part of the Hospital Readmissions Reduction Program (HRRP), which was created under the Affordable Care Act (ACA), to pay hospitals for the value of care provided to Medicare beneficiaries, rather than volume of care. Under the ACA, certain hospitals are excluded from the penalties, including those serving veterans, children and psychiatric patients.


The Medicare payment adjustments are measured by a ratio based on the “appropriate” number of patient readmissions, as determined by Medicare and the number of actual readmissions that occurred between July 1, 2012, and June 30, 2015, for patients whose original care focused on certain conditions, such as heart attack, heart failure, coronary artery bypass graft surgery, pneumonia, chronic obstructive pulmonary disease (COPD) and elective total knee or total hip replacements. The reimbursement reductions are then applied prospectively to all of a hospital’s Medicare patient billing, regardless of the reason for patient admission, for fiscal year 2017, which begins in October 2016. The Centers for Medicare and Medicaid Services (CMS) annually provides hospitals with a 30-day window to review and correct confidential reports detailing the excess readmission calculations via its QualityNet portal. For the 2017 fiscal year, this period occurred in June 2016.


Since the HRRP program began in 2012, the rate of unplanned hospital readmissions have declined while CMS has increased the number of medical conditions the program measures. As a result, the number of hospitals being penalized in FY 2017 will not differ significantly from the prior year, but the penalties are expected to rise to $528 million, which is approximately $108 million more than last year.


Hospitals that are a part of the Inpatient Prospective Payment System (IPPS), must prepare for lower Medicare reimbursements while also aiming to reduce patient readmissions through quality control measures. Failure to do so will not only result in reimbursement cuts, it will also put hospitals’ reputations at risk when CMS posts readmission data on the publically accessible Hospital Compare website.


The advisors and accountants with Berkowitz Pollack Brant have extensive experience providing tax, audit, litigation support and consulting services to hospitals, physician practices, HMOs and third-party administrators.


About the Author: Whitney K. Schiffer, CPA, is a director with the Audit and Attest Services practice of Berkowitz Pollack Brant, where she works with hospitals, health care providers, HMOs and third-party administrators. She can be reached in the firm’s Miami office at (305) 379-7000 or via email at


Tax Breaks for Members of the U.S. Military by Jack Winter, CPA/PFS, CFP

Posted on September 07, 2016 by Jack Winter

The United States provides active members of its Armed Forces with unique opportunities to save money and exclude certain types of their pay from taxes. Lowering one’s tax liability requires members of the military to understand special rules that apply to them for applying tax breaks, credits and deductions.


Combat Pay Exclusion. Members of the military who are serving in a combat zone designated by an executive order from the President may exclude all or a portion of their pay from U.S. income taxes.


Earned Income Tax Credit (EITC).  Recipients of non-taxable combat pay have the option to include that amount in their taxable income in order to increase their EITC. The result could mean less taxes owed and the potential for a larger refund.  Members of the military should forecast which option benefits them the most.


Moving Expense Deduction. Members of the military may be able to deduct some of their unreimbursed moving costs when being transferred to a permanent change of station.


Uniform Deduction. Armed services members may deduct the costs they incur to purchase and maintain certain uniforms that they cannot wear while off duty. The deduction is reduced by any allowances received for those costs.


Reservist Travel Deduction. Reservists whose duties take them more than 100 miles from home may deduct unreimbursed travel expenses, even when they do not itemize their deductions.


ROTC Allowances. While active duty ROTC pay is taxable, ROTC students may exclude from their taxable income certain allowances for education and subsistence received during advanced training.


Civilian Life.  When members of the armed forces look for work outside of the military, they may be able to deduct some of their job search-related expenses, including costs for preparing a resume, job-placement agency fees or travel.


Military service takes individuals away from home making it difficult to sign a joint tax return with a spouse and/or meet the annual April 15th tax-filing deadline.  Under certain conditions, a spouse at home may sign a tax return on behalf of a military spouse. Alternatively, couples may be required to have a power of authority permitting such authorization.


When members of the military serve in a combat zone, they may have the ability to postpone their tax filing deadline. For these individuals, automatic filing extensions of between two and six months may apply.


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


Latest Tax Scam Targets Students by Joseph L. Saka, CPA/PFS

Posted on September 02, 2016 by Joseph Saka

Back-to-school should be an exciting time of year for students and their families. However, according to the IRS, families should be on alert to scammers taking advantage of this year’s back-to-school season and attempting to trick students and parents into making bogus payments for fake taxes.

In the latest scam, criminals impersonate IRS officials and demand immediate wire payment of a “federal student tax,” which does not exist. The calls that students receive can easily be mistaken as legitimate because the callers provide some piece of personal information about the student, including the student’s name or the name of his or her school. Moreover, the callers become aggressive and threaten legal action when students do not comply with their requests.  In a similar scam, criminals rely on threatening robo-calls that attempt to trick students and their families to call back and settle a fake tax liability.

As scammers get more creative in their efforts to steal taxpayers’ money and identities, it is important for parents to educate their children and other young family members about the tell-time signs of fraudulent tax-related calls. Here are some tips to keep in mind:

  1. The IRS will never call taxpayer’s about owed taxes.
  2. The IRS will never demand payment without first giving taxpayers the opportunity to question or appeal.
  3. The IRS will never require taxpayers to use a specific payment method.
  4. The IRS will never request credit card or debit card information over the phone.
  5. The IRS will never threaten to call law enforcement and have taxpayers arrested for failure to pay taxes


Should students or any individuals receive calls from someone claiming to be with the IRS should report the call to the Treasury Inspector General for Tax Information at 1-800-366-4484 and to the Federal Trade Commission via its Complaint Assistant at They should also contact their accountant and tax advisor, if they have questions about the call or think they might owe taxes.

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


Is it Better to Rent or to Buy a Home? by Stefan Pastor

Posted on September 01, 2016 by Richard Berkowitz, JD, CPA

The long-held belief that owning a home is central to achieving the American dream may be coming to an end. According to Harvard University’s Joint Center for Housing Studies, U.S. homeownership is continuing on a more-than-45-year decline, while the share of U.S. families that rent housing is increasing. This shift has been attributed to a decline in household income, increased financial debt and stricter lending practices.  However, individuals pondering the decision to rent versus buy often consider a broader range of short-term and long-term issues.  The following factors should be included in individuals’ assessments of whether it is better to rent than buy.


Short-Term Affordability. Buying a home today often requires that many individuals make an initial down payment of 20 percent or more to secure bank financing.  As a result, homeownership may tie up a significant portion of one’s savings in one single asset.  Conversely, renters may have the freedom to invest a down payment into a portfolio of multiple assets, such as stocks, bonds, mutual funds, so that potentially strong performance in one investment may offset the impact of poor performance in another.  With a diversified portfolio, renters may be better able to update and rebalance their portfolios at any time to respond to market swings and to align with their changing individual goals, time horizons and comfort with risks.


Long-Term Affordability.  Homeownership allows individuals to lock in a fixed monthly payment over the life of a mortgage and hopefully build equity in the home over that timeframe. When homeowners pay off a mortgage, they own the property and remove from monthly payments to the bank from their budgets. However, this does not eliminate homeowners’ responsibilities to pay for the continual upkeep and repair of their properties.  Renters, on the other hand, must be prepared for the possibility that their rent will increase over time. Currently, consumers are faced with the conflicting fact that home prices throughout much of the U.S. have increased more than 30 percent since 2012, while rents are rising faster than wages.


On the affordability front, renters may not need to worry about the costs of regular maintenance to their homes, while homeowners typically will.  Additionally, homeowners should be prepared to cover the costs of property taxes, insurance and mortgage interest, as well as expenses for sprucing up their home and paying closing costs when it is time for a sale.  While homeowners may use tax credits to offset some of these costs, there is a risk that they will lose money on the deal, especially if they sell their properties during a down market or before they build any equity in the homes.


Mobility.  Renting provides consumers with more ease and flexibility to move than with homeownership. If a homeowner loses a job or is presented with a better employment opportunity in another area, he or she must deal with the hassles of selling the home before moving.  In an uncertain economy, a homeowner may not be able to make a profit on the sale due to a decrease in property value and the expenses of preparing the home for sale and closing costs.  A mortgage is typically a 30-year commitment. Renting, on the other hand, may provide a flexible alternative, especially for upwardly mobile young workers who do not expect to stay in one place for more than five years.


The question of renting versus buying is one of the largest financial decisions consumers will make in their lifetimes. Unfortunately, there is no one-size-fits-all answer to the question.  Rather, individuals should take the time to assess their current financial picture, crunch some numbers and forecast different scenarios for the unpredictable future.  A financial advisor can help to guide individuals through all of the important factors they should consider before making an ultimate decision.


About the Author: Stefan Pastor is a financial planner with Provenance Wealth Advisors, an independent financial services firm affiliated with Berkowitz Pollack Brant Advisors and Accountants, and he is a registered representative with Raymond James Financial Services. He can be reached at (954) 712-8888 or via 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 Stefan Pastor and not necessarily those of Raymond James. You should discuss any 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. Diversification and asset allocation do not ensure a profit or protect against a loss. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

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