berkowitz pollack brant advisors and accountants

Monthly Archives: October 2016

What to Know When Children Earn Investment Income by Joanie B. Stein, CPA

Posted on October 31, 2016 by Joanie Stein

The IRS has special rules for families to report the investment income their dependent children earn during the year from interest, dividends and capital gains distributions as well as unearned income derived from trusts.  The related tax liabilities and decisions to file a separate tax return for the child will depend on several factors, including the amount of the child’s investment income and his or status as a qualifying dependent.


Qualified Dependent Children Defined

To be considered a qualifying dependent child, a person must meet the following criteria:

  1. Be under the age of 19, or 24 for full-time students, at the end of the year
  2. Be any age if permanently and totally disabled
  3. Lived with parents for more than half of the year
  4. Failed to provide more than half of his or her own financial support during the year


Tax Rate

For 2016, the first $1,050 of a dependent child’s unearned income is tax-free. The next $1,050 is taxed at the child’s tax rate. When a qualifying dependent’s ordinary dividends, capital gains, taxable scholarships or other forms of unearned income exceed $2,100, a portion of that income may be taxed at the parent’s higher tax rate, which can be as high as 39.6 percent. This is what is often referred to as “Kiddie Tax”.


To determine a child’s tax liabilities, he or she must file IRS Form 8615, Tax for Certain Children Who Have Unearned Income, which may subject the child to the 3.8 percent Net Investment Income Tax (NIIT) on the lesser of net investment income or the excess of a child’s modified adjusted gross income above a specific amount.


Parent or Child’s Tax Return

If a child’s investment income from interest, dividends and capital gain distributions is less than $10,500 for 2016, he or she may include this information on a parent’s tax return. When doing so, the parents must complete and file Form 8814, Parents’ Election to Report Child’s Interest and Dividends.


When dependent children have annual investment income of $10,500 or more, they must file their own tax returns along with Form 8615. It is important for families to recognize that separate tax returns for dependents should also be considered when children have jobs and income taxes withheld from their paychecks.


When filing a tax return separate from a parent, a child may qualify for certain tax credits, which may reduce the amount of his or her income subject to taxes.  Conversely, including a child’s income in the parents return may increase the parents’ NIIT and reduce the available credits or deductions the adults are able to apply to their taxable income.


For some families, the filing of a separate tax return for a qualifying child is dependent on IRS regulations.  For other families, the decision should be based on sound tax planning strategies. For this reason, it is important for families to seek sound advice from a tax expert to determine which filing option is best for them.


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






Unmarried Taxpayers Living Together Get a Significant Tax Break by Nancy M. Valdez, CPA

Posted on October 31, 2016 by

Under a recent ruling from the U.S. Court of Appeals for the 9th Circuit, unmarried taxpayers who live together in a jointly owned property may deduct double the amount of home mortgage interest that married homeowners may deduct.

In its decision, which the IRS agreed to adopt, the court clarified that the mortgage interest deduction applies to each taxpayer who owns a home, rather than to each residence. Previously, the IRS followed the section of the tax code that limits the deduction to up to $1 million of mortgage debt and/or $100,000 in a home equity line of credit per residence. As a result of the ruling, unmarried couples, including those in domestic partnerships, who co-own homes and reside in them together may deduct up to $2.2 in home mortgage interest; $1.1 million for one homeowner and $1.1 million for the second homeowner.

While the IRS does not plan to dispute the court ruling, it advises taxpayers to be careful when applying it to their individual circumstances. Like a private letter ruling, the decision applies specifically to the facts and circumstances of this particular case. Yet, it behooves taxpayers in similar living situations to consult with certified professional accountants and, in most cases, claim the higher deduction.

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

IRS Audit Guide Provides Benefits to Businesses Applying Tangible Property Regulations by Angie Adames, CPA

Posted on October 26, 2016 by Angie Adames

On September 16, 2016, the Internal Revenue Service released a highly anticipated Audit Techniques Guide intended to help IRS examiners identify potential tax issues that arise when businesses apply the final Tangible Property Regulations (TPR) that were issued in September 2013.  As an added benefit, the manual serves to guide countless businesses struggling to comply with the regulations through the process of deducting and capitalizing expenses related to tangible assets, including real property, such as buildings and physical plants; and personal property, such as operating equipment, tools, and materials and supplies.


The Tangible Property Regulations apply to the treatment of expenses that taxpayers incur to acquire, produce, improve, repair and/or maintain tangible assets used in a trade or business.  More specifically, the regulations help taxpayers identify when they may capitalize or deduct expenses based upon the activity and the unit of property that is being acted upon. The rules are complex and require many businesses to file for an accounting method change based on their interpretation of the regulations and the safe harbor elections afforded to them.


Compliance with the TPR is an ongoing process. Property owners that adopted the regulations in 2014 must maintain detailed records to support their accounting method changes and demonstrate their position under IRS exam. While many businesses adopted the regulations in 2014, new transactions commenced in 2016 have yet to adopt the TPR accounting method changes. By consulting with the IRS audit guide, property owners and their advisors may identify new tax-saving opportunities and gain insight into how the agency would approach TPR compliance issues upon a potential IRS examination, thereby reducing their tax risks.

The tax advisors and accountants with Berkowitz Pollack Brant work with individuals and businesses across a broad range industries to comply with frequently evolving regulations, maximize tax efficiencies and minimize tax risks.
About the Author: Angie Adames, CPA, is an associate director in the Tax Services practice of Berkowitz Pollack Brant, where she provides tax and consulting services to real estate companies, manufacturers and closely held business. She can be reached at the firm’s Miami office at (305) 379-7000 or via email at




October to December Tax Deadlines

Posted on October 24, 2016 by Richard Berkowitz, JD, CPA

October 31: Deadline for businesses to file Quarterly Payroll Reports

October 31: Deadline for businesses to file Form 941, Employer’s Quarterly Federal Tax Return, for the third quarter of 2016

November: Schedule meetings with your accountant and financial advisor to begin planning year-end strategies to help minimize tax liabilities for 2016.

November 1: Open enrollment begins for healthcare coverage under the Affordable Care Act and runs through January 31, 2017.

November 15: Deadline for tax-exempt organizations to file an annual return, when a second extension was previously filed

December 7: Last day Medicare beneficiaries may enroll in new plans for 2017.

December 15: Deadline to file Form 1040 NR, U.S. Nonresident Alien Income Tax Return, if an extension was previously filed

December 15: Deadline for calendar-year Corporate 4th Quarter Estimated Tax Payment

December 31: Deadline for individuals over age 71½ to take a required minimum distribution (RMD) from traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k), 403 (b) and 457(b) retirement plans

How Real Estate Professionals Can Demonstrate Proof of Material Participation to Bypass Passive Activity Loss Rule by Steven G. Messing, JD, CPA

Posted on October 20, 2016 by Steve Messing

The U.S. tax courts have been very busy addressing a multitude of recent cases involving real estate professionals’ applications of the passive activity loss (PAL) rules.

Under Internal Revenue Code 469, taxpayers may use losses from passive activities in which they do not “materially participate” to offset income only from similarly passive activities. Therefore, taxpayers may not attempt to shield earnings and lower their tax liabilities by deducting from active wage income those losses incurred from passive activities, such as investments and other trade or business activities in which the taxpayer does not participate regularly, continuously and substantially. To make the distinction between active income and passive income, individuals must assess whether or not they meet certain tests on an annual basis to determine their amount of “material participation” in income-generating activities.

Material Participation

The IRS assumes an individual materially participates in an activity when he or she has a “significant non-tax economic profit motive” for intentionally taking on a profit-making activity. Generally, taxpayers can turn passive activities into active activities when they meet one of seven material participation tests.

  1. They work 500 hours or more in the activity during the year
  2. They do all or most all of the work in the activity
  3. They work 100 hours or more in the activity during the year, and no other person works more in the activity than the taxpayer
  4. They materially participated in the activity during any five or the prior 10 years
  5. The activity is a significant participation activity (SPA), and the sum of SPAs in which the taxpayers work 100 to 500 hours exceeds 500 hours for the year
  6. The activity is a personal service activity, and the taxpayer materially participated in that activity in any3 prior years
  7. Based on all of the facts and circumstances, the taxpayer participate in the activity on a regular, continuous, and substantial basis during a tax year. This test only applies if the taxpayer works at least 100 hours in the activity, no one else works more hours than the taxpayer in the activity, and no one else receives compensation for managing the activit

Additionally, there is a special subsection of the tax code that allows real estate professionals to qualify rental activities as active, and exempt from the PALs rules when they can demonstrate that:

  1. More than one-half of the personal services performed in trades or businesses by the taxpayer during the tax year are performed in real property trades or businesses in which the taxpayer materially participates, and
  2. The taxpayer performs more than 750 hours of services during the tax year in real-property trades or businesses in which the taxpayer materially participates. Real-property trades or businesses may include real estate development or development; real estate construction or reconstruction; real estate acquisition or conversion; real estate rentals, leasing or brokerage; and real estate operation or management.

However, qualifying as a real estate professional, in and of itself, is not sufficient to allow a taxpayer to deduct rental losses from ordinary income. Rather, qualifying taxpayers must also show material participation in rental activities to deduct rental losses.

Consider a recent case, in which a taxpayer’s status as a real estate professional did not automatically allow her to deduct from ordinary income losses generated from rental property investments. Despite the Code’s specification that rental activities are per se passive, the rule does not apply to real estate professionals. Rather, the court required the taxpayer to prove she materially participated in those activities in order to permit her to deduct rental losses from her active income.

More specifically, qualified real estate professionals whose rental income is not subject to the per se rule must still demonstrate material participation in rental activities before deducting rental losses. Failure to do so will not only disallow passive activity losses in excess of income, it will also subject passive activity gains to an addition 3.8 percent tax on Net Investment Income (NII).

Proving Material Participation

When the IRS questions a taxpayer’s netting of losses against other income, the agency is presumed correct in its challenge. The burden to prove material participation in an income-producing trade or business activity rests with the taxpayer. Unfortunately, IRS guidance on the methods taxpayers may use to demonstrate proof of meeting the participation standard is remarkably vague. The Tax Code specifies that taxpayers use “reasonable means” to establish material participation while specifically rejecting the requirement that taxpayers rely on “contemporaneous time reports and logs.” It is this ambiguity and absence of specific record requirements that causes confusion and leads many taxpayers before the courts.

Demonstrating material participation requires taxpayers to engage in careful planning and diligent record keeping, despite the Tax Code’s guidance otherwise. Timely diaries of activities with attention to detail on everything including specific dates and descriptions of activities, time spent conducting the activities, and lists of potential and current customers and vendors called or visited will go a long way toward defeating an IRS challenge. In addition, taxpayers should consider retaining supporting documentation, such as phone records, emails, appointment books and other proof of regular, continuous and substantial participation in the management of the business, in order to and substantiate claims of material participation and avoid what the Tax Courts refer to as “ball-park guesstimates.” Similarly, the courts have permitted taxpayers to rely on the testimony of credible third-party witnesses to support claims of material participation.



The passive activity loss rules are complicated and require taxpayers to carefully consider the scope of their business or trade income-generating activities and implement new methods for documenting their level of participation. Upon IRS audit, a lack of supporting materials can result in a taxpayer’s inability to deduct passive losses and incur an added 3.8 percent tax liability on passive investment gains.

About the Author: Steven G. Messing, JD, CPA, is a director in the Tax and Real Estate Services of Berkowitz Pollack Brant, where he provides tax and business advisory services to real estate developers and investors. He can be reached at the CPA firm’s Miami office at (305) 379-7000 or via email at


End-of-Year Tax Planning Tips for Businesses by Laurence Bernstein, CPA

Posted on October 18, 2016 by Laurence Bernstein

With the start of the fourth quarter,  business owners have little time before the end of the year to take action and maximize their tax efficiency for 2016.

Accelerate Deductions in 2016 and Delay Income until 2017. Business owners expecting to remain in their current tax bracket or move into a lower bracket in 2017 should consider postponing taxable income until after January 1, 2017. This may involve delaying year-end bonuses or waiting to bill clients for products or services after the New Year. Similarly, businesses should consider pre-paying expenses in 2016 and identifying deductions, credits and other breaks that can reduce their taxable income. This can be accomplished by prepaying real estate taxes and interest payments, selling loss-generating assets or using credit cards to pay deductible expenses in the current year.

Alternatively, a thriving business that expects a substantial increase in income in 2017 might consider taking the opposite approach of accelerating income in 2016 and delaying the recognition of deductible expenses until 2017.

Invest In Equipment and Other Long-Term Assets. Section 179 of the Internal Revenue Code allows businesses to deduct up to $500,000 of the cost to acquire qualifying equipment and property used in a trade or business during the tax year. That amount is reduced, dollar for dollar, by all section 179 property put into place exceeding $2 million. Combining the Section 179 deduction with a first-year 50 percent bonus-depreciation deduction provides businesses investing in needed assets with a significant tax benefit for 2016.

Revisit Your Capitalization Policy and Boost Year-End Deductions. The tangible property capitalization regulations (also known as the tangible property regulations) contain a safe harbor election that allows taxpayers to expense rather than capitalize certain lower costs assets if they are treated the same way for book purposes – commonly referred to as book-tax conformity. For 2016, taxpayers can expense rather than capitalize up to $2,500 per item per invoice (or $5,000 if covered by applicable financial statement). Businesses should spend the time now reviewing their capitalization policies and considering the impact any increase to these policies will have on their financial statements. When providing financial statements to banks or investors, a business may decide that a threshold lower than the maximum is more appropriate for its situation.

Accelerate Property Depreciation with a Cost Segregation Study. Taxpayers who own real property should consider conducting a cost segregation study to break down the property’s total cost into separate and distinct components that may be depreciated over shorter lives than the building itself. The result of the study often translates into accelerated depreciation deductions and a dramatic decrease in income taxes.

Take Bonus Depreciation and an Abbreviated Cost Recovery for Qualified Building Improvements. The 2015 PATH Act introduced a new category of depreciable property called Qualified Improvement Property (QIP), which includes most improvements to the interior portions of a nonresidential building after the building is first placed in service. Fifty percent bonus depreciation is available for QIP with the remaining cost depreciable over 39 or 15 years. Qualified leasehold improvement, qualified restaurant, and qualified retail improvement property are eligible for the shorter 15-year depreciation period. The expanded definition of bonus depreciation for qualified improvement property allows taxpayers to claim bonus depreciation starting in 2016. Previously, bonus depreciation was limited to qualified leasehold improvements, which required the building to be at least 3 years old and the improvements to be made subject to a lease.

Invest in Research. The now permanent research and development (R&D) tax credit is available to businesses with $50 million or less is gross receipts that invest time and resources to design, develop or improve products, processes, techniques or technology. Qualifying businesses may claim the deduction against their alternative minimum tax (AMT) liabilities while small, start-up businesses may apply the credit to offset payroll taxes. New for 2016 is the ability for companies to apply the credit for certain software they develop for their own internal use “in general and administrative functions that facilitate or support the conduct of the taxpayer’s trade or business.” Businesses may also elect to deduct research expenditures as they are incurred, or they can may defer and amortize those costs.

Don’t forget other Deductions for Business Owners. Self-employed taxpayers may deduct up to 100 percent of health insurance costs for themselves, their spouses and their dependent children age 26 or younger, depending on their self-employment income. Above the line deductions may also be applicable to retirement plan contributions, health savings account contributions, home office expenses, and the employer portion of Social Security and Medicare tax.

Consider a Grouping Election to Reduce Tax Liabilities and Leverage Passive Losses. Taxpayers may avoid the 3.8 percent Net Investment Income tax on passive income, or rental real estate income for non-real estate professionals, when they can demonstrate material participation in a trade or business activity. Taxpayers that previously made elections to group together separate trade or businesses activities (and avoid the passive loss limitations and deduct passive losses from passive income), should review their new activities for 2016 and consider adding them to the prior groupings.

Plan for an Eventual Retirement. Business owners have until April 15, 2017, to establish and contribute to retirement savings accounts, including a plethora of 401(k) and IRA programs, which provide taxpayers with big tax breaks. For the 2016 tax year, a taxpayer can contribute up to $18,000 ($24,000 for individuals age 50 and older) into a 401(k) plan. The contribution is made with pre-tax dollars, meaning that individuals may deduct the contribution amount from their taxable income in the current year and defer paying taxes until they take withdrawals after retirement, when they will often be in a lower tax bracket.  Depending on taxpayers’ filing status and adjusted gross income, they may be permitted to contribute up to $5,500 in a traditional IRA ($6,500 for individuals age 50 and older) or a Roth IRA and escape taxes on the contribution or a withdrawal in retirement.

Meet with your Accountant Now. The tax laws are constantly changing, leaving many business owners adrift in a sea of complicated regulations and missed opportunities. Before making financial decisions that can affect their businesses and their personal lifestyles, taxpayers should take the time at the end of the year to meet with their accountants to review actions they already took in 2016 and identify tax-efficient strategies for the remainder of the year and into 2017.

The advisors and accountants with Berkowitz Pollack Brant work with domestic and international businesses to meet regulatory compliance obligations, optimize profitability and maintain tax efficiency. The firm’s Accounting Intelligence group provides cloud-based accounting services that enable it to dive deep into the books and records of entrepreneurial businesses and develop performance reports that identify emerging trends, risks and opportunities that influence management’s decision-making processes.


About the Author: Laurence Bernstein, CPA, is an associate director in the Tax Services practice of Berkowitz Pollack Brant, where he provides tax and consulting service to entrepreneurs and privately held business owners.  He can be reached at the CPA firm’s Miami office at (305) 379-7000 or via email at


IRS Offers Tax Relief to Victims of Hurricane Hermine, Hurricane Matthew by Angie Adames, CPA

Posted on October 18, 2016 by Angie Adames

As individuals in the Southeast take steps to recover from the damages of Hurricane Hermine in August and Hurricane Matthew in October, certain residents may qualify for an extension in meeting their tax filing obligations.

When the president of the United States declares a federal disaster area, the IRS is permitted to postpone tax deadlines automatically for residents and businesses located or working in the affected state, county or region. More specifically, affected taxpayers include:

  • individuals whose principal residence, and any business entity whose principal place of business, is located in the counties designated as disaster areas;
  • individuals whose principal residence, and any business entity whose principal place of business, is not located in a covered disaster area, but whose records necessary to meet a filing or payment deadline are maintained in a covered disaster area;
  • any estate or trust whose tax records required to meet a filing or payment deadline are located in a covered disaster area;
  • spouses of affected taxpayers who file joint tax returns; and
  • individual relief workers assisting in a covered disaster area, regardless of whether he is affiliated with recognized government or philanthropic organizations

Victims of Hurricane Hermine

Victims of Hurricane Hermine who live or operate businesses in Citrus, Dixie, Hillsborough, Leon, Levy Pasco and Pinellas counties along Florida’s Gulf automatically received an extension of those tax filing obligations that have a deadline of August 31 or later. As a result, the existing filing deadlines for individuals making quarterly estimated tax payments (September 15) and those individuals on an extension to file their personal tax returns on October 17, have been postponed until January 17, 2017. The January 17 deadline also applies to businesses filing payroll and excise tax returns as a well as those entities that had existing extensions to file corporation and partnerships tax returns by September 15. In addition, the IRS has waived the failure-to-deposit penalties for employment and excise tax deposits due on or after August 31st, as long as the deposits were made by September 15, 2016.

Victims of Hurricane Matthew

The IRS has postponed the tax filing and payment obligations occurring on or after October 4, 2016, to March 15, 2017, for taxpayers affected by Hurricane Matthew who live in the following regions:

  • Florida: Brevard, Duval, Flagler, Indian River, Nassau, St. Johns, St. Lucie and Volusia counties.
  • Georgia: Bryan, Camden, Chatham, Glynn, Liberty and McIntosh counties.
  • North Carolina: Beaufort, Bertie, Bladen, Brunswick, Camden, Carteret, Chowan, Columbus, Craven, Cumberland, Currituck, Dare, Duplin, Edgecombe, Gates, Greene, Harnett, Hoke, Hyde, Johnston, Jones, Lenoir, Martin, Nash, New Hanover, Onslow, Pamlico, Pasquotank, Pender, Perquimans, Pitt, Robeson, Sampson, Tyrrell, Washington, Wayne and Wilson counties.
  • South Carolina: Beaufort, Berkeley, Charleston, Colleton, Darlington, Dillon, Dorchester, Florence, Georgetown, Horry, Jasper, Marion, Orangeburg and Williamsburg counties.


With this extension, affected individuals who already received a tax-filing extension will have more time to file their 2015 individual income tax returns and make their quarterly estimated tax payment for the fourth quarter of 2016. For businesses, the extension to March 15, 2017, will apply to the Oct. 31 and Jan. 31 deadlines for quarterly payroll and excise tax returns and employee benefit plan. It will not apply to the filing of information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027 nor employment and excise tax deposits.

As the Federal Emergency Management Agency (FEMA) continues to assess the damages of Hurricane Matthew, the IRS is prepared to extend tax relief to residents and businesses located in additional counties and states. The IRS advises that taxpayers who are affected by the storm but not located in an already declared federal disaster area may qualify for relief from penalties for failing to meet the October 17 deadline for filing 2015 tax returns. Should these affected taxpayer receive a penalty notice, they may request from the IRS an abatement of the penalties. However, it is recommended that tax payers outside declared disaster areas make their best efforts to meet existing filing deadlines.

Taxpayers who suffer disaster-related losses should reach out to their accountants to understand their tax filing rights and responsibilities, to quantify damages to property and interruption of business operations losses and to identify opportunities to qualify for a casualty loss deduction.

About the Author: Angie Adames, CPA, is an associate director in the Tax Services practice of Berkowitz Pollack Brant, where she provides tax and consulting services to real estate companies, manufacturers and closely held business. She can be reached at the firm’s Miami office at (305) 379-7000 or via email at


Expiring Tax Deductions to Keep on your Radar by Karen A. Lake, CPA

Posted on October 14, 2016 by Karen Lake

As taxpayers prepare for the end of the year, they should be aware of a number of tax provisions that are currently scheduled to expire on December 31, 2016. With this in mind, it is recommended that taxpayers consult with their accountants to maintain tax efficiency into next year, barring any last-minute Congressional action.

Medical expense deduction. Individuals and their spouses who are age 65 and older will no longer benefit from a lower threshold for claiming itemized medical expenses. The adjusted gross income floor will increase from 7.5 percent to 10 percent.

Deduction for qualified tuition and related expenses. This above the line deduction paid by taxpayers for themselves, their spouses or dependents could reduce one’s taxable income by up to $4,000. Qualifying taxpayers may still be eligible to claim the Lifetime Learning Credit or the American Opportunity Credit, which offer up to $2,000 and $2,500, respectively, for qualifying education expenses.

Mortgage Insurance Premiums. Amounts taxpayers pay for qualified mortgage insurance will no longer be treated as deductible home mortgage interest.

The advisors and accountants with Berkowitz Pollack Brant work with individual taxpayers and businesses 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


Innovative Businesses Offer a Compelling Financial Benefit to Employees by Sean Deviney, CFP

Posted on October 13, 2016 by Richard Berkowitz, JD, CPA

Over the past few years, forward-thinking businesses have embraced corporate wellness programs to improve workers’ physical and mental health and its impact on their companies’ bottom lines.  Now, as workers of all ages and across all income levels are suffering under the weight of the nation’s student loan debt problem, these businesses are taking notice and incorporating financial wellness into their existing benefit offerings.

The Issue

According to the Center for Retirement Research at Boston College, total student loan debt of $1.2 trillion in 2015 exceeds all other forms of non-mortgage debt and is preventing more than half of today’s workers from becoming financially prepared for their eventual retirement.  Too often, these workers are unable to afford the benefits of compounding interest through contributions to employer-sponsored 401(k) savings plans, and they miss out on the added opportunity to receive an employer match on their retirement plan contributions. In fact, an individual who waits 10 years to begin contributing to a retirement-savings plan will need to contribute twice as much to that plan over his or her lifetime to make up for a loss in compounding interest needed to meet their retirement savings goals. This, coupled with other economic issues, is causing financial stress that not only affects workers’ overall well-being, it also undermines productivity and results in increased employee turnover and rising healthcare costs for employers.

How Employers Can Help

Savvy businesses recognize that in order to stay competitive, they must invest in programs that support their workers’ current and future well-being.  Because stress over money ultimately affects employees’ mental health and their ability to prepare for retirement, financial wellness should not be a forgotten piece in the wellness puzzle.

According to the Society for Human Resource Management, 3 percent of employers offered their workers reimbursements for student loans in 2015. However, unlike a corporate match to a worker’s 401(k), these payments are considered taxable income to the worker.  Many businesses are recognizing that there is a better option that allows workers to pay down student loans without sacrificing retirement savings. Here’s how businesses can combine their existing 401(k) plans with a student-loan repayment program.

Just as companies allow their workers to participate in retirement and healthcare plans through payroll deductions, they may now contract with a third-party to facilitate student- loan payments directly from workers’ paychecks.  However, under this innovative model, the payroll deduction applied to an outstanding student loan balance is treated as an employee’s hypothetical 401(k) plan contribution. The benefit to workers are twofold: 1) employees automate their student loan payments through payroll deductions, and 2) their payments may be counted toward an employer-match program, which increases employees’ long-term savings opportunities. Businesses gain a compelling benefit to recruit and retain professional talent without incurring significant costs.

While this is an overly simplified explanation of an innovative benefit, it does underscore the importance financial health has on employees’ overall well-being. To understand how a student loan repayment program can be incorporated into an existing 401(k) plan and the potential impact it can have on the plan’s IRS nondiscrimination testing, companies should meet with qualified benefit consultants.

The professionals with Provenance Wealth Advisors work with businesses of all sizes, through start-ups, mergers and acquisitions, to design benefits plans and implement best practices to meet regulatory compliance and serve the needs of plan sponsors and participants.


About the Author: Sean Deviney is a CFP®* professional and retirement plan advisor with Provenance Wealth Advisors, an independent financial services firm affiliated with Berkowitz Pollack Brant Advisors and Accountants. For more information, call (800) 737-8804 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 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.

* Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.



IRS Provides Relief for Taxpayers who Miss the 60-Day IRA Rollover Deadline by Ken Strauss, CPA/PFS, CFP

Posted on October 11, 2016 by

Taxpayers who accidently missed the 60-day window to roll over account balances from individual retirement plans without incurring early distribution tax liabilities or penalties have a new option to qualify for a tax waiver.


Effective August 24, 2016, eligible taxpayers may self-certify for a waiver when they meet one or more of 11 circumstances and file a form with a retirement plan administrator or IRA trustee. Previously, taxpayers who missed the 60-day deadline were required to request relief through a private letter ruling from the IRS.


The 11 acceptable reasons for missing a rollover deadline include:

  1. The financial institution rolling over or receiving the taxpayer’s contribution made an error;
  2. The taxpayer misplaced and failed to cash a distribution made in the form of a check;
  3. The taxpayer deposited and kept a distribution in an account that he or she the mistakenly thought was an eligible retirement plan;
  4. The taxpayer’s principal residence was severely damaged;
  5. A member of the taxpayer’s family died;
  6. The taxpayer or a member of the taxpayer’s family was seriously ill;
  7. The taxpayer was incarcerated;
  8. Restrictions were imposed by a foreign country;
  9. A postal error occurred;
  10. The distribution was made on account of a levy under § 6331 and the proceeds of the levy have been returned to the taxpayer; or
  11. The party making the distribution to which the rollover relates delayed providing information that the receiving plan or IRA required to complete the rollover despite the taxpayer’s reasonable efforts to obtain the information.


In addition, qualifying taxpayers may not have received a prior denial from the IRS, and they must make the retirement plan contribution within 30 days after the acceptable excuse(s) no longer prevent them from doing so.


Eligible taxpayers wishing to transfer retirement plan or IRA distribution to another plan or account have the option to rollover the assets or request a direct trustee-to-trustee transfer, which eliminates many of the restrictions and time constraints of a direct rollover.


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


Do You Know When You Can Deduct Business Travel Expenses? by Dustin Grizzle

Posted on October 07, 2016 by Dustin Grizzle

There is a very fine line between business and pleasure when considering how business professionals treat travel-related expenses. The IRS allows taxpayers to deduct these costs as business expenses only when they are necessary, reasonable and directly related to the active conduct of a trade or business and with the general expectation of generating income or some future business benefit.  In other words, participants must discuss business immediately preceding, during or after they enjoy a meal or entertainment in order for the taxpayer to write off the related expenses. While this sounds simple, taxpayers must understand and follow specific rules for recording these expenses, demonstrating proof of business purpose and figuring the allowable amount of a deduction.


Qualifying Expenses

Individuals who leave their home or the primary location where they work for a minimum of one night may qualify to deduct 100 percent of travel-related expenses when the travel is required for business purposes.  This can include fares for air, train and bus travel; expenses for lodging, meals and transportation; fees for conventions, seminars and workshops; and certain tickets to charitable events or sporting events, when they are ordinary, necessary and directly related or associated with a business purpose.  Specifically excluded from this list of deductible expenses are those considered “lavish and extravagant” and those relating to the use of or membership to entertainment facilities, such as vacation homes, yachts, airplanes, country clubs or hunting clubs.


Mixing Business with Pleasure

The rules for deducting meals, entertainment and travel expenses get fuzzy when taxpayers mix business and pleasure.  For example, a taxpayer who extends a business trip for personal enjoyment may not deduct those expenses incurred for pleasure, including transportation costs to another city, tickets to sporting events or costs for meals and/or tours enjoyed for non-business reasons. Similarly, when a spouse joins a taxpayer on a business trip, expenses incurred on behalf of the spouse may not be deducted unless the spouse is an employee of the business and the taxpayer can demonstrate that the spouse’s presence was required for business purposes. While it might sound good to spend some extra days exploring a city where one is required for a business meeting or convention, taxpayers should take special care to calculate the correct ratio of their travel time spent for work and for pleasure to avoid IRS scrutiny and potential denial of travel deductions.


Record Keeping

To demonstrate that expenses are ordinary, necessary and related to a business benefit, taxpayers should keep receipts for all business-related expenses, including tickets for travel by air or train, contracts with rental car agencies, receipts from taxis or other forms of transportation, and bills from hotels, restaurants or other forms of entertainment.  Special care should be taken to make sure the receipts include the following details to support a business-expense deduction:

  • Dates of services
  • Names and addresses of service providers
  • Name of the person(s) being entertained
  • Nature of the business relationship
  • Business purpose or benefit gained or expected from the service.


To substantiate these expenses for business purposes, taxpayers may keep logs of their activities and receipts, canceled checks or credit card bills or they may make use of a long list of mobile apps or software solutions that make the record-keeping process easier.


The ability for taxpayers to deduct business expenses can be both rewarding and complex. The advisors and accountants with Berkowitz Pollack Brant have extensive experience working with professionals and business owners to understand and maximize a broad range of tax-savings opportunities available to them.


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


Know your AGI to File in October 2016 by Kenneth Strauss, CPA/PFS

Posted on October 05, 2016 by

Taxpayers who received an extension to file their returns on Oct. 17, 2016, may need to plan ahead and include the adjusted gross income (AGI) amount from their 2014 returns in order to file their 2015 returns electronically. This requirement adds another level of security to the IRS’s efforts to authenticate taxpayers’ identities and protect against identity theft and tax-related fraud.

Adjusted gross income is gross income minus certain adjustments. For 2014 tax returns, the AGI is found on line 37 of Form 1040; line 21 on Form 1040A and line 4 on Form 1040EZ. For taxpayers who rely on professional accountants to file their returns, finding this information is easy. For all others, this information can be found by either referring to their own files from 2014 or using the IRS’s online Get Transcript Tool at to receive a summary of the tax return or tax account. Taxpayers who cannot pass the online authentication process should call 800-908-9946, to request a transcript be delivered to their home address within five to 10 calendar days.

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


IRS Finalizes Compliance Rules for Social Welfare Organizations by Adam Cohen, CPA

Posted on October 05, 2016 by Adam Cohen

In following up with the IRS’s requirement under the Protecting Americans from Tax Hikes Act (PATH Act), the agency has finalized how prospective social welfare organizations seeking to operate as 501(c)(4)s may apply to be treated as exempt from income taxes.


Under the final guidelines, a social welfare organization established after July 8, 2016, will have 60 days from the date of its formation to electronically file with the IRS Form 8976, Notice of Intent to Operate Under Section 501(c)(4). Organizations formed before July 8, 2016, that have not applied for IRS determination and those that have filed at least one annual return face a deadline of September 6, 2016.


Information required on Form 8976 includes an organization’s name, address, state of organization, employer identification number and the month in which its accounting period ends. Organizations must also provide detailed information about their missions, purpose and the needs they fulfill in the community. In addition to completing the form, prospective organizations will be required to pay a $50 user fee.


The IRS will acknowledge electronically that it received the prospective 501(c)(4)’s notice within 60 days of the initial filing.


Should a social welfare organization fail to file an initial notice of intent within the required 60 days after it is established, it will be subject to a penalty equal to $20 for each day after the expiration of this time period, up to a maximum of $5,000.


The advisors and accountants with Berkowitz Pollack Brant work extensively with not-for-profit organizations, providing operational and strategic plan consulting services, tax compliance services, financial statement audits and reviews, and employee benefit plan services.


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



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