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Monthly Archives: January 2017

Tax Breaks Expiring for 2017 by Karen A. Lake, CPA

Posted on January 31, 2017 by Karen Lake

With the New Year comes a range of expiring tax breaks that individuals and businesses can no longer count on in 2017. As a result, taxpayers should meet with their accountants to plan appropriately.

 

Expiring Tax Breaks for Individuals

  • Deduction for Qualified Tuition and Related Education Expenses
  • Deduction of Mortgage Insurance Premiums as interest for taxpayers whose adjusted gross income is greater than $54,500, or $109,000 for couples filing jointly
  • The 7.5 percent adjusted gross income floor for deducting medical expenses, applicable to individuals age 65 and older. The floor increases to 10 percent in 2017.
  • Exclusion from taxable income the cancellation of debt on a personal residence, unless the taxpayer entered into a contract to discharge or restructure a mortgage before December 31, 2016

Expiring Tax Breaks for Businesses

  • Deduction for income attributable to domestic production activities in Puerto Rico
  • A one-time, immediate tax deduction equal to $1.80 per square foot for building owners and tenants who make energy efficiency changes to new or renovated commercial properties
  • A $2,000 credit to eligible contractors who construct energy-efficient residential homes
  • An Energy Investment Tax Credit (ITS) that allows businesses a five-year cost recovery/depreciation deduction for property using renewable energy, such as solar and wind power
  • Three-year depreciation of race horses age two or younger, rather than a seven-year period

 

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. A state and local tax expert, she can be reached at the Miami CPA firm’s office at (305) 379-7000 or via email at info@bpbcpa.com.

21st Century Cures Act Helps Small Businesses Fund Employees’ Health Coverage by Adam Cohen, CPA

Posted on January 26, 2017 by Adam Cohen

In December 2016, President Barack Obama signed into law the 21st Century Cures Act, which, among other things, provides small businesses with an affordable option for reimbursing employees for healthcare expenses without the threat of incurring a tax penalty.

 

Under the new law, which goes into effect for 2017, businesses that have less than 50 full-time employees and that do not offer group health insurance may create a Health Reimbursement Arrangement (HRA) to help workers pay for medical expenses.  More specifically, Title XVIII allows small businesses to set aside pre-tax dollars to reimburse employees and their dependents for medical expenses, including out of pocket insurance premiums, when those expenses comply with the minimum essential coverage requirements of the Affordable Care Act (ACA).

To qualify, employers alone must fund the HRA with contributions that do not exceed $4,950 per year for individual coverage or $10,000 for family coverage.  In addition, employers must offer HRAs equally to all eligible employees, although the actual contribution amounts may vary.  In all cases, employers must report the benefit amount on employees’ W-2s. Ineligibility to participate in an HRA may occur when an employee is under age 25, when he or she is a seasonal worker, when he or she worked for the business for less than 90 days and when he or she is considered a non-resident alien.

In turn, employees of small businesses hoping to receive tax-free premium reimbursements through an HRA must have minimum essential coverage, as defined by the ACA. In some instances, the employee may not qualify for the Obamacare premium tax credits for self-coverage when the second-lowest Silver plan available on the Healthcare Marketplace is less than one-half of 9.5 percent of the employee’s household income minus the HRA premium contribution.

 

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

 

 

IRS Extends 5-Year Eligibility Waiver for Businesses Requesting Automatic Accounting Method Changes under the Repair Regulations by Angie Adames, CPA

Posted on January 23, 2017 by Angie Adames

Taxpayers wishing to change their method of accounting under the final tangible property regulations will get some relief from the IRS. Specifically, the IRS has extended by one year the waiver that allows taxpayers to file for an automatic accounting method change under the repair regulations. Effective immediately, taxpayers may qualify for an automatic change in accounting method for tax years prior to January 1, 2017, including 2016.

Under the Tangible Property Regulations, taxpayers will not qualify for automatic consent from the IRS to change accounting methods for an item when they made a request for the same item during any of the five tax years ending with the year of change. In these circumstances, taxpayers must rely on the non-automatic procedure, which requires a filing fee and consent from the IRS to make the change. Similarly, businesses in their final year of operations will be prohibited from making automatic changes.

The automatic accounting method changes included in the one-year extension, include the following:

  1. Changes in methods of accounting for tangible property
  2. Changes from a permissible method to another permissible method of Modified Accelerated Cost Recovery System (MACRS) for depreciating tangible property.
  3. Changes in accounting method for dispositions of tangible depreciated property, excluding buildings and their structural components
  4. Changes in methods of accounting for dispositions of tangible depreciating assets included in a general asset account.

The tax advisors and accountants with Berkowitz Pollack Brant work with individuals and businesses across a broad range industries to maximize tax efficiencies and comply with frequently evolving regulations.

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 info@bpbcpa.com.

U.S. Taxpayers Face an Earlier Deadline for Reporting Foreign Assets in 2017 by Andrew Leonard, CPA

Posted on January 19, 2017 by Andrew Leonard

The IRS reminds U.S. citizens and resident aliens of their responsibility to annually report their financial interest in or signature authority over foreign bank, securities or other financial accounts with an aggregate value exceeding $10,000 at any time during the tax year. New for the 2016 tax year is an expedited deadline for filing FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) on April 15, two-and-a-half months earlier than in prior years.

 

The new FBAR filing deadline corresponds with the due date for U.S. taxpayers to file their personal income tax returns, which in 2017 falls on April 18. In addition, the IRS will grant affected taxpayers an automatic six-month filing extension to October 16, 2017, without requiring a formal extension request.

 

Willful failure to file an FBAR may result in significant fines equal to the greater of $100,000 or 50 percent of the balance in the unreported account as well as criminal charges. To avoid these violation penalties, taxpayers should consult with a U.S. tax advisor or certified public accountant (CPA) to determine their specific reporting requirements.  For example, because FBAR reporting applies to individual taxpayers, married couples and minor children may need to file separate FBARs to report the entire value of all of their joint accounts.  In addition, the April 18, 2017, FinCEN Form 114 filing requirement applies to business entities, including corporations, partnerships, trusts and even single member LLCs, that have a financial interest in a foreign financial account.

 

Also new for the 2016 tax year is a requirement that certain taxpayers with foreign assets file for the first time Form 8938, Statement of Foreign Financial Assets, by the April tax filing deadline.

About the Author: Andrew Leonard, CPA, is an associate director with Berkowitz Pollack Brant’s International Tax Services practice, where he focuses on pre- and post-immigration tax planning for individuals from Asia, Latin America and Russia as well as filing disclosures for U.S. citizens with foreign interests. He can be reached at the CPA firm’s Boca Raton, Fla., office at (561) 361-2000 or via email at info@bpbcpa.com.

 

Tax Evasion Took Center Stage in 2016, Scrutiny Continues through 2017 by Arthur J. Dichter, JD

Posted on January 17, 2017 by Arthur Dichter

The United States enacted the Foreign Account Tax Compliance Act (FATCA) in 2010 in an effort to eradicate offshore tax evasion by requiring U.S. taxpayers and foreign financial institutions to report to the IRS the existence of foreign financial assets in which U.S. taxpayers hold a beneficial interest. While a number of foreign countries initially opposed FATCA, over time and in coordination with the Organization for Economic Cooperation and Development (OECD), many came together to create their own FATCA-like Common Reporting Standards (CRS). However, because the United States does not currently participate in CRS, the country has become a favorite locale for many foreign investors to move their financial interests and attempt to avoid reporting those interests to their home countries under CRS.

 

Foreign investors seeking political and economic stability have long found the U.S. to be a safe haven to park their money. Using domestic limited liability companies, they are able to make often-anonymous all-cash purchases of multi-million-dollar U.S. real estate properties. This environment of secrecy came to a head in 2016 with the leak of the Panama Papers, which identified the true owners behind more than 214,000 anonymous offshore shell companies. Moreover, the Panama Papers highlighted the increasing use of U.S. entities and structures among money launderers, kleptocrats and other criminals who have contributed to the United States’ growing reputation as one of the world’s leading tax havens utilized by foreign investors to hide wealth obtained both legally and illegally obtained. In response, the U.S. government is taking steps to reinforce existing regulations and implement a number of new initiates intended to put an end to asset concealment domestically and offshore while strengthening financial transparency within the country and beyond its borders.

 

Tracking Buyers of Luxury U.S. Properties

In January 2016, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued an order requiring title insurance companies to intensify their due diligence by collecting information and reporting the identities of the true, beneficial owners behind carefully structured shell companies that make all-cash purchases of luxury real estate in Miami and Manhattan. While Treasury conceded that the use of corporate structures, such as LLCs, to make a property purchase, may, in most cases, be legal, they are often used by “bad actors” to “exploit the system” and “deliberately hide money laundering, tax evasion and other illicit financial activities.”

 

In July, FinCEN expanded the geographic targeting order (GTO) through the end of February 2017 to include transactions occurring in Florida’s Broward and Palm Beach Counties, all five boroughs of New York City, Bexar County in Texas, and San Diego, Los Angeles, San Francisco, San Mateo and Santa Clara Counties in California. It is practical to assume that these GTOs will remain in place throughout 2017 to help regulators uncover hidden assets and dirty money that flows through shell companies, including single-member LLCs.

 

Stricter Scrutiny of Disregarded Entities

In December 2016, the IRS finalized rules intended to expose potential tax evasion through the use of domestic disregarded entities. Under the tax code, certain U.S. businesses with a single owner may elect to be treated for tax purposes as a disregarded entity, which is not separate or distinct from its owner. However, such domestic limited liability companies are treated as separate legal entities for all other purposes. Thus, by using LLCs, foreign individuals and corporations may enter into various transactions, such as purchasing real estate, without having to disclose the actual owner of the investment.

 

To uncover the identity of the true owner of these investments, the new regulations require that foreign-owned disregarded entities will be treated as domestic corporations for purposes of certain information reporting requirements. Specifically, beginning on January 1, 2017, disregarded entities will be required to obtain a separate employer identification number (EIN), maintain appropriate books of financial transactions and file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business for its foreign owner and other foreign related parties with which the entity has a “reportable transaction.” The definition of reportable transactions is extended to include “any sale, assignment, lease, license, loan, advance, contribution, or other transfer of any interest in or a right to use any property or money” between the entity and its owner, “as well as the performance of any services for the benefit of, or on behalf of” another taxpayer.

 

Ongoing Compliance Programs for U.S. Citizens/Residents with Unreported Offshore Assets and Income

To encourage non-compliant taxpayers to come clean and disclose foreign assets without admitting willful intent, and therefore avoid criminal liabilities, the IRS offers two programs for taxpayers to consider.

 

The first is the Offshore Voluntary Disclosure Program (OVDP), under which taxpayers may apply to disclose their offshore assets and accounts in return for protection from criminal prosecution and the ability to become current with outstanding tax liabilities. In addition to paying back taxes on unreported foreign assets and filing FBARs for the past eight years, OVDP participants also pay a penalty of 27.5 percent of the highest aggregate balance in foreign accounts during a single year. However, the offshore penalty will increase to 50 percent if the taxpayer discloses accounts at financial institutions where the IRS has obtained a successfully conviction, settled a criminal investigation in exchange for payment of a fine, entered into a deferred prosecution or other agreement with the Justice Department, or has otherwise been publicly disclosed as being subject to an investigation. The IRS publishes a list of these financial institutions on its website. Since 2009, more than 50,000 taxpayers have come forward under the OVDP, resulting in the U.S. government’s recovery of more than $7 billion in previously unpaid taxes, interest and penalties.

 

The second option for eligible taxpayers residing in the U.S. or overseas to come into FACTA compliance and disclose unreported foreign income is the Streamlined Domestic Offshore Procedure or the Streamlined Foreign Offshore Procedure. Under both programs, taxpayers may avoid criminal liability and potential penalties by certifying that their failure to report income from a foreign financial asset and to pay applicable taxes was a result of “non-willful conduct”, including “negligence” or “a good-faith misunderstanding of the law”. Those taking advantage of this option will be required to file amended income tax and information returns for the most recent three years and delinquent FBARs for the past six years. In addition, those taxpayers residing in the U.S. will be required to pay a miscellaneous penalty equal to 5 percent of their foreign assets holding; taxpayers living outside the U.S. may not be subject to any penalty.

 

When there is no unreported income relative to the foreign financial accounts, taxpayers should discuss their options with a qualified tax advisor, as filing under the OVDP or Streamlined programs may not be necessary.

 

Conclusion

As the sophistication with which individuals attempt to hide money and evade taxes increases, global authorities continue their efforts to improve financial transparency across borders and implement regulations to expose “bad actors” who try to manipulate the system. Taxpayers should consult with accountants and legal professionals experienced in international tax laws to get ahead of an intensifying regulatory environment and identify the best methods for coming into compliance before the opportunity to do so passes.

 

About the Author: Arthur Dichter, JD, is a director of International Tax Services with Berkowitz Pollack Brant, where we works with multi-national businesses and high-net worth foreign individuals to structure their assets and build wealth in compliance with U.S. and foreign income, estate and gift tax laws. He can be reached at the CPA firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.

 

Tax Considerations for Divorced and Divorcing Couples by Joanie B. Stein, CPA

Posted on January 13, 2017 by Joanie Stein

Couples who separated or began the process of divorce during 2016 should remember that their marital status will affect their individual tax filings in April 2017. Following are some tax tips to keep in mind.

Name Change. Individuals who change their names after a divorce must notify the Social Security Administration (SSA) by completing Form SS-5, Application for a Social Security Card, which can be found online at www.SSA.gov or by calling (800) 772-1213. It is important that the name on an individual’s tax return matches the name on file with the SSA to prevent any delays in the processing of the tax return and potential refund.

 

Alimony Paid. Individuals may deduct alimony paid to a spouse or former spouse under a divorce or separation agreement by entering the spouse’s Social Security Number or Individual Taxpayer ID Number on Form 1040. However, voluntary payments made to a former spouse outside of the divorce or separation agreement are not deductible. The same holds true for and property settlements, which are neither deductible nor taxable as income.

 

Alimony Received.  Alimony is considered taxable income to the recipient. Because these payments are not subject to tax withholding, recipients may need to adjust the amount of taxes they pay throughout the year by either increasing the amount withheld from their wages or making estimated tax payments.

 

Child Support. Payments of child support are neither deductible by the payer nor taxable to the recipient.

 

Spousal IRA. If a divorce decree or maintenance is finalized before the end of the tax year, an individual may only deduct contributions made to their own individual retirement accounts; Contributions to a former spouse’s IRA are not deductible.

 

Filing Status. Married couples who separated but did not yet finalize a divorce during the calendar year have the option to file their 2016 tax returns jointly or as married filing separately. Once the divorce is final and filed with the court, neither party may file jointly for that or any subsequent tax year.

 

Health Care Law Considerations. Under the Affordable Care Act, individuals who purchase health insurance through a Marketplace must report any changes in their personal circumstances (i.e. name change, address change) to the Marketplace to ensure they receive the proper financial assistance to which they are entitled. Similarly, should an individual lose health insurance due to a divorce, he or she must enroll in new coverage during a Special Enrollment Period.  Obamacare requires all individuals to have coverage for every month of the year or risk exposure to an individual shared responsibility payment.

 

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 info@bpbcpa.com.

 

6 Ways to Use your Year-End Bonus by Scott Montgomery, CLU, ChFC

Posted on January 12, 2017 by Richard Berkowitz, JD, CPA

Congratulations to the countless American workers who received year-end bonuses from their employers in 2016. Before heading out on a shopping spree, however, individuals should consider the following suggestions for putting those extra dollars to work for them in the future.

  1. Maximize Retirement Savings. Workers with access to an employer’s 401(k) retirement plan should consider maxing out their contributions, if they have not already done so through payroll deferrals. For 2016, the maximum amount individuals can contribute to a 401(k) is $18,000, or $24,000 for individuals and 50 and older. Compound interest on these contributions combined with an employer match could mean a significant cushion for one’s future retirement. In addition, many individuals can qualify to increase their nest egg by funding an Individual Retirement Account (IRA) before the April 15, 2017, tax deadline.
  2. Create an Emergency Fund. The future is uncertain. Rather than being unprepared for a costly medical bill, house repair or loss of a job, individuals should have a stash of cash to cover three to six months of living expenses. These funds should be kept liquid, in a savings account, that is not affected by the equity markets nor subject to any tax or early withdrawal penalties, which is the case with investment and retirement accounts.
  3. Plan for a Child’s Future Education. The cost of a college education continues to rise, adding to the nation’s $1.3 trillion student loan debt problem. With some advance planning, however, Americans can lighten their future education costs by contributing to a 529 college savings plan. These plans can provide an immediate tax deduction on the contributions as well as tax-free withdrawals in the future, as long as the money is used for “qualifying education expenses,” such as tuition, books, room and board. Resident of Florida have the added benefit of participating in the state’s prepaid college program and lock in today’s costs for a child’s future education. For the 2016-2017 enrollment period, which runs through February 28 , 2017, Florida residents can begin paying as little as $47 a month to cover one year of a child’s future tuition.
  4. Make an Excess Premium Contribution to a Permanent Life Insurance Policy. Because a permanent life insurance policy acts just like an investment, overfunding the policy with an additional premium payment can yield positive returns.
  5. Pay off Credit Card Debt. According to personal-finance website WalletHub, the average amount Americans will owe on their credit cards at the end of 2016 is a whopping $8,500. When considering that the average interest rate on credit card balances is 16 percent, it behooves individuals to apply their year-end bonuses to pay down outstanding credit card balances.
  6. Pay Off a Home Equity Line of Credit. A home equity line of credit (HELOC) works like a credit card in that it allows homeowners to borrow money from the bank and make affordable interest-only repayments over a pre-determined period of time (draw period) before making a dent in the principle amount borrowed. During the draw period, however, the interest rates on the HELOC can fluctuate causing wide swings in payments from month to month. Moreover, the lender has the ability to close the line of credit at any time, leaving the homeowner on the hook for the full amount. Paying off a HELOC can provide homeowners with peace of mind and the ability to allocate their savings to more beneficial sources.
  7. Treat Yourself (within Reason). A year-end bonus represents the hard work and long hours a worker put into his or her job during the previous 12 months. Subsequently, it makes sense that an individual should seek instant gratification and reward themselves with a treat, whether it be a vacation, a new car or new shoes. However, individuals should plan and budget properly to ensure they do not leave themselves in a poorer financial position than they were before receiving the bonus.

 

About the Author: Scott Montgomery, CLU, ChFC, is a director with Provenance Wealth Advisors, an independent financial planning services firm affiliated with Berkowitz Pollack Brant Advisors and Accountants, and a registered representative with Raymond James Financial Services. For more information, call (800) 737-8804 or email info@provwealth.com.

 

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

Scott Montgomery is a registered representative of and offers securities through Raymond James Financial Services, Inc., Members FINRA/SIPC.

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

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of PWA and not necessarily those of Raymond James. Financial advisors of Raymond James Financial Services are not qualified to render advice on tax or legal matters.

As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Investors should carefully consider the investment objectives, risks, charges and expenses associated with 529 plans before investing. This and other information about 529 plans is available in the issuer’s official statement and should be read carefully before investing. Investors should consult a tax advisor about any state tax consequences of an investment in a 529 plan.

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. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk, and you may incur a profit or loss regardless of strategy selected.

 

Enhanced Reporting Rules for U.S. Taxpayers with Foreign Assets by Angie Adames, CPA

Posted on January 09, 2017 by Angie Adames

The Internal Revenue Service (IRS) has issued final rules for certain “specified domestic entities” to report foreign financial assets with their annual tax returns using Form 8938, Statement of Specified Foreign Financial Assets, beginning with the 2016 tax year. This updated reporting requirement is in addition to the taxpayer’s annual reporting of Foreign Bank and Financial Accounts (FBAR).

 

Specific domestic entities include U.S.-based corporations, partnerships and trusts that are “formed or availed for purposes of holding, directly or indirectly, specified foreign financial assets (SFFAs),” including foreign entities and assets held by foreign financial institutions. This determination must be made on an annual basis, and the filing requirement applies to any “specified individual” who holds interest in SFFAs in which the aggregate value of those exceeds $50,000 on the last day of the taxable year, or $75,000 at any time during the tax year. Different thresholds apply for individuals and married couples filing a joint return living abroad. A “specified individual” incudes anyone who is either a U.S. citizen, a resident alien of the United States for any part of the tax year, a nonresident alien (NRA) who makes an election to be treated as resident alien for purposes of filing a joint income tax return, or an NRA who is a bona fide resident of American Samoa or Puerto Rico.

Corporations and Partnerships

Under the final guidance, a corporation or partnership qualifies as a “specific domestic entity”, subject to reporting requirements, when it meets the following criteria:

  1. it is closely held by a specified individual; and
  2. at least 50 percent of the entity’s gross income is passive income, or at least 50 percent of the assets held by the entity for the taxable year are assets that produce or are held for the production of passive income

The regulations further define “closely held” as those corporations in which at least 80 percent of the total combined voting power of all classes of a corporation’s stock or 80 percent of the total value of a corporation’s stock is owned directly, indirectly or constructively by a specific individual on the last day of the corporation’s taxable year. Similarly, a closely held partnership refers to those in which 80 percent of the capital or profit interest is held, directly, indirectly or constructively be a specified individuals on the last day of the partnership’s taxable year.

Passive income denotes investment income, including dividends, rents and royalties, as defined by the Internal Revenue Code Section 1472. Dealers are exempt from the passive activity criteria, while related entities face special rules for applying the passive income test.

Domestic Trusts

A domestic trust qualifies as a “specific foreign entity” when its current beneficiaries, who are entitled to distributions of trust income or principle during the current tax year, include one or more “specific individuals” or “domestic entities”. In addition, a trust will be considered a “specific foreign entity” when its gross income exceeds the 50 percent passive income threshold, or at least 50 percent of its assets produce or are held for passive income. An exception to these rules applies to trusts that are treated as grantor trusts for U.S. tax purposes as well as domestic trusts in which the trustee meets the following criteria:

  1. He or she has supervisory authority over or fiduciary obligations with respect to the trust’s specified foreign financial assets
  2. He or she timely files annual returns for the trust, and
  3. The trustee is a U.S. bank, a financial institution registered with and regulated by the SEC, or a domestic corporation that’s regularly traded on an established securities market or an affiliate of a domestic corporation that’s so traded.

Making the Determination

An individual will be subject to the reporting rules when he or she has an interest in a specified foreign financial asset in which “any income, gains, losses, deductions, credits, gross proceeds, or distributions would be required to be reported on an annual return,” even when no income, gains, losses, deductions, credits, gross proceeds, or distributions are attributable to those assets during a taxable year.

 

The final regulations relating to specific domestic entities with interests in foreign financial assets is quite complex. Compliance requires taxpayers to seek the counsel of certified public accountants (CPAs) who have experience in such matters. Failing to report financial assets relating to a specified domestic entity will result in a penalty, which may exceed $10,000.

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 info@bpbcpa.com.

 

How a Trump Presidency May Affect the Real Estate Industry by John G. Ebenger, CPA

Posted on January 05, 2017 by John Ebenger

Based on pre-election campaign promises and proposals, the ultimate effect of a Donald Trump administration on the U.S. real estate industry is unknown. To be sure, Trump’s experience as a real estate developer is expected to benefit his industry peers; however, his hard line on immigration and trade raises questions that could diminish this optimism outlook. When planning ahead for the next four years, real estate professionals should consider the pros and cons of the following issues.

 

Tax Reform

The one certainty that U.S. taxpayers can count on in the coming years under a Trump presidency and Republican-controlled Congress is tax reform. In his pre-election proposal, Trump promised to simplify the Internal Revenue Code by reducing the existing seven income-tax brackets to only three, with a top rate of 33 percent, rather than the current top rate of 39.6 percent. Other benefits for high-income taxpayers include Trump’s plans to eliminate the Net Investment Income Tax (NIIT), the Alternative Minimum Tax (AMT) and Estate and Gift taxes, as well as proposals to reduce tax rates for pass-through entities and lower the maximum corporate tax rate from 35 percent to 15 percent. However, it is fairly unlikely that all of these tax reduction plans will be implemented without some sort of compromise. Similarly, under Trump’s proposals, real estate professionals should also be prepared for a repeal of a long list of business tax credits and deductions that have benefited them in the past.

 

Investments in Infrastructure

Trump’s plan to invest $1 trillion to upgrade the nation’s infrastructure could provide the economy with a boost in terms of job growth, tax revenue, real estate values and consumer confidence. So far, the capital markets have responded positively to this plan, and the expectation is that it could be a boon for real estate developers and construction companies in the future. Questions remain, however, as to how the government will pay for the infrastructure investment without increasing the deficit. Similarly, Trump’s anti-immigration and anti-trade policies could produce a shortage of skilled laborers and an increase in building supply costs in the future.

 

Deregulation

President-elect Trump has taken aim at existing regulations that he believes are inhibiting the country’s economic growth. For example, plans to unwind Dodd-Frank and deregulate banks have the potential to improve lending prospects for both real estate developers and property buyers. Similarly, Trump has denounced a sea of regulations that have contributed to higher construction costs for real estate professionals, including the Department of Labor’s overtime pay rules as well as land-use and zoning regulations. At the same time, more lenient lending practices combined with rising interest rates could squeeze property values and potentially contribute to another recession in the future. Moreover, caught in Trump’s crosshairs are a number of regulations that currently help builders develop affordable housing and assist low-income families pay for such housing as well as the use of like-kind 1031 exchanges used by commercial real estate professionals.

 

Immigration Reform Trump’s plans to deport undocumented immigrants and close the country’s borders may not only create a real estate industry labor shortage, it also has the potential to lead to a measurable decrease in demand for rental housing.

 

Trade Reform

Trump’s anti-free trade policies, such as renegotiating the North American Free Trade Agreement (NAFTA) and punishing China over claims of currency manipulation, could spark a trade war that has the potential to increase tariffs and severely disrupt American’s supply chain.

 

The one thing that the real estate industry can count on is an uncertain future into 2017 and beyond. While change is almost certain, there is no way to tell at this point how good or bad that will be for the residential and commercial building industries in the long-term.

 

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

Employers Get Obamacare Reporting Extension by Adam Cohen, CPA

Posted on January 03, 2017 by Adam Cohen

The IRS has delayed the due date for businesses to provide their full-time employees with informational statements about the healthcare coverage provided in 2016 under the Affordable Care Act.

The deadline for which applicable large employers with 50 to 99 full-time equivalent employees must furnish workers with informational Forms 1095-B, Health Coverage, and 1095-C, Employer-Provided Health Insurance Offer and Coverage, has been extended for 30 days from January 31, to March 2, 2017. The new date also applies to applicable large employers that are self-insured and other coverage providers and does not allow businesses to request an additional 30-day filing extension. Individuals who do not receive Forms 1095-B and 1095-C before they are ready to file their individual tax returns for 2016, may rely on other documentation to confirm their compliance with the law and determine their eligibility for a premium tax credit.

Despite the extension for informational reporting, the IRS reminds businesses, insurers, and other providers of minimum essential coverage that the deadline for filing with the IRS Forms 1094-B, 1095-B, 1094-C and 1095-C remains unchanged as February 28, 2017, for paper filers or March 31, 2017, if filing electronically. Those who file 250 or more 1095-Bs or 1095-Cs must e-file them with the IRS.

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

 

 

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