With just three months into the 2018 hurricane season, it is not too late for businesses to prepare for the threat of a potential disaster that can interrupt normal businesses operations and cause millions of dollars in damages and lost revenue. In fact, by taking action now, businesses cannot only avoid the avalanche of storm-prep stress that descends on Floridians as soon as high winds threaten our shores, they can also be better prepared to recover and rebuild after a storm passes.
Following are just a few things that businesses should consider as part of a well-thought-out disaster-preparedness and business-continuity plan.
- Develop an emergency plan or review and update last year’s plan based on changes in circumstances, personnel, etc.;
- Review your property insurance and business interruption policy, and understand the terms, policy limitations, exclusions and other loss considerations. Up-front preparations can help you to mitigate losses and more quickly recover lost revenue;
- Update contact information to help you communicate with employees, vendors, customers and any other people your business relies on for maintaining and sustaining normal operations;
- Ensure records of inventory, orders and events are up-to-date;
- Confirm accuracy of historic, current and projected financial data, including balance sheets, profit and loss statements, budgets;
- Document valuables, including taking photographs and video of business assets, such as real estate, equipment, machinery;
- Create and store in a safe place (such as the cloud) electronic copies of important business documentation and inventory of assets; and
- Have data duplication, backup and recovery systems in place to help you access files and restore data as quickly as possible.
The forensic accountants with Berkowitz Pollack Brant have extensive experience helping businesses prepare for, document and defend commercial insurance claims that result from natural or man-made crises.
About the Author: Daniel S. Hughes, CPA/CFF/CGMA, CVA, is a director with Berkowitz Pollack Brant’s Forensics and Business Valuation Services practice, where he helps companies of all sizes assess economic damages, lost profits and the quantification of business interruption insurance claims. He can be reached at the CPA firm’s Miami office at (305) 379-7000 or via e-mail at info@bpbcpa.com.
The frequency and sophistication of cybersecurity attacks continue to intensify leaving businesses, governments and not-for-profits with an ever-present risk of falling victim to data breaches. Cyberattacks not only disrupt normal business operations, they also erode public trust and can lead to irreparable reputational damage, loss of customers and intellectual property, litigation, and significant fines and penalties. Even as businesses race to invest in the latest technologies to improve operational efficiencies and protect critical information assets, many are woefully lacking formal programs to communicate with and reassure stakeholders of the effectiveness of their cybersecurity risk-management activities. To change this, the American Institute of Certified Public Accountants (AICPA) has developed a standard cybersecurity risk-management reporting framework for entities in all industries across the globe to use in the future.
Cybersecurity Risk Management Reporting Framework
The new AICPA Cybersecurity Risk Management Reporting Framework focuses on 19 criteria categories that businesses must address to demonstrate that they are effectively managing cybersecurity threats and have in place suitable policies, processes and controls to protect data and to detect, respond to, mitigate and recover from a security breach. It builds upon the globally accepted internal control framework established by the Committee of Sponsoring Organizations (COSO) and is incorporated into the new system and organization controls (SOC) reporting guidance that helps entities build trust with their constituents, and document their efforts to protect and secure information and technology. Its intent is to help businesses ensure that all of their stakeholders, including senior management, members of the board of directors, business partners and customers, have documentation to help them understand and make informed decisions based on how an organization manages its cybersecurity risks. Investors and analysts may also benefit from receiving this insight into the potential threats to an organization’s operational, reporting and/or compliance objectives, which, subsequently, can affect the business’s value.
SOC cybersecurity exam reports, which must be prepared by certified public accountants (CPAs) to provide independent and unbiased assessments of a risk management program’s effectiveness, include three sections:
- Assertion of Management, which describes an entity’s cybersecurity risk-management program and its inherent limitations;
- Independent Accountant’s Report detailing the entity’s risk-management responsibilities, the responsibilities of the accountant preparing the report, and his or her opinion on the entity’s program;
- Management’s Description of an entity’s cybersecurity risk-management program, including details about how the entity “identifies its information assets, the ways in which it manages the cybersecurity risks that threaten it, and the key security policies and processes implemented and operated to protect the entity’s information assets against those risks.” The report can focus on “a point in time” initially and subsequently cover a longer 12-month “period of time.”
Readiness Review Provide Short-Term Cybersecurity Risk Assessment
SOC reports should reduce entities’ communication and compliance burdens, minimize their risk of vulnerabilities and provide a vehicle for sharing this information with a broad range of stakeholders. Nonetheless, businesses that do not want to invest the time or dollars into a thorough audit or SOC report have a short-term option to evaluate their existing cybersecurity processes and consider steps they may need to take to enhance and bolster those controls.
A “readiness review” is more of a cursory check-up of the security, availability and confidentiality of an entity’s existing information and technology based on more than 230 “points of focus” identified by the AICPA to measure the effectiveness of an organization’s internal controls. The informal evaluation aims to detect potential weaknesses and recognize opportunities to enhance security by employing a broad range of best practices when designing, implementing and initiating an effective cybersecurity risk-management program that meets their unique needs, objectives and business structure.
No longer can the responsibility to protect confidential business data be relegated solely to an information technology expert or a single team. Cybersecurity must be an enterprise-wide priority involving every level of an organization, including senior management, members of the board of directors and even individual employees who regularly connect to the network and have access to an organization’s knowledge base. While it is nearly impossible to eliminate the threat of a cyberattack, businesses can be proactive and take steps to minimize their risk of falling victim to these security breaches and putting their brands and reputations in danger. Time is of the essence.
The professionals with Berkowitz Pollack Brant’s Business Consulting Group have deep experience working with businesses to address the rising challenges of cybersecurity risks and help them to instill confidence and security among their vendors, customers and business partners. The firm holds certification on completion of cybersecurity training and is registered with the AICPA to provide service businesses with SOC audits and reports that help improve transparency and build trust among service organization’s current and prospective customers.
About the Author: Steve Nouss, CPA, CGMA, is a director with Berkowitz Pollack Brant’s Consulting Services practice, where he provides profit-enhancing CFO services, operational reviews, enterprise risk management, internal audit and anti-fraud services for businesses of all sizes. In addition, Nouss is a System and Organization Controls (SOC) specialist who holds AICPA certification in cybersecurity. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via email at info@bpbcpa.com.
The Tax Cuts and Jobs Act created a new tax credit for businesses that voluntarily offer their employees up to 12 weeks of paid family and medical leave in tax years 2018 and 2019. Here are all of the details that employers need to know about claiming the credit.
How can Businesses Qualify for the Tax Credit?
Employers must voluntarily provide qualifying full-time employees with a minimum of two weeks of paid family and medical leave per year with a benefit of at least 50 percent of the worker’s normal wages, pursuant to a written policy. For part-time workers, employers must also provide a proportionate amount of paid leave based on the number of hours those employees work.
Who is a Qualifying Employee?
Businesses must have employed a worker for at least one year and paid him or her a certain amount in compensations. For 2018, businesses seeking to claim the credit must have paid the worker less than $72,000 in 2017.
How Much is the Credit Worth?
Employers that provide workers with the minimal leave benefit of 50 percent of normal compensation may claim a tax credit of 12.5 percent of that benefit amount. This credit can increase up to a maximum of 25 percent based upon a percentage of the normal compensation the employer pays to the employee above 50 percent.
The employer must reduce its deduction for wages or salaries paid or incurred by the amount determined as a credit. Any wages taken into account in determining any other general business credit may not be used toward this credit.
What Circumstances Qualify for Paid Family and Medical Leave?
A business may qualify for the tax credit when it has an employee who takes a leave of absence for any of the following reasons:
- To care to his or her newborn child,
- To care to his or her newly adopted child or a for a foster child placed under the employee’s care,
- To care to his or her child, spouse or parent who has a serious health condition,
- To care for a child, spouse, parents or next of kin who serves in the military
- He or she has a serious health condition that prevents him or her from performing his or her job,
- A qualifying event occurs in which his or her child, spouse or parent is on or called for covered active duty in the Armed Forces.
About the Author: Adam Cohen, CPA, is an associate director of Tax Services with 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, Fla., office at (954) 712-7000 or via e-mail at info@bpbcpa.com.
Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.
Many affluent families have complex financial lives and responsibilities. Along with the opportunities that can come with wealth are a myriad of challenges that families must plan for under the guidance of experienced family office professionals who can simplify financial management, pay bills, manage charitable giving, oversee succession planning and collaborate with other trusted advisors on administration and management of family wealth.
Accounting is a crucial component to family office success. It demonstrates how money flows between family members, their businesses and investments, and provides a basis for year-end tax planning. However, affluent families should neither underestimate the level of insight that regular bookkeeping can provide, nor should they ignore the countless opportunities they may have to modernize and improve these processes.
The once painstaking process of maintaining accurate financial records on a desktop computer located in a physical office building is today much simpler and easier to maintain, thanks to cloud accounting software, like QuickBooks Online. Cloud-based solutions can automate many accounting processes and reduce the need to hire staff with accounting skills to manage them. Moreover, in today’s 24/7, on-demand society, families can access and manage important financial data at any time and at any place with the click of a button on a mobile device.
Cloud-based accounting systems are the future, and the future is here. By combining the benefits of these services with the expertise of qualified accountants, affluent families can gain peace of mind and financial and administrative freedom.
Improve Organization and Productivity
Accounting software eliminates the need to spend time searching through files and pages of data to find important information, such as when a specific payment was received, a bill was paid or an asset was purchased. These solutions organize information in an intuitive and systematic manner that makes it easy for users and the family office team to find what they are looking for within seconds.
Access Real-Time Financial Data
Cloud-based accounting software connects seamlessly to a family’s bank and credit-card accounts and automatically imports data to synchronize in real-time with recorded transactions. This eliminates the need for manual entry of bank deposits, payments, purchases and withdrawals, and helps to improve recording accuracy by automatically populating financial transactions in the general ledger. Additionally, these platforms are constantly evolving and adding new features that they automatically update to end users’ desktops, laptops and mobile devices.
Improve Process Efficiency
Accounting platforms can easily integrate and share data with other cloud-based business-management applications, such as Bill.com, which manages account payables and receivables; Tallie for automating employee expense reports; Tsheets for tracking employee time and automating payroll processes for household employees. With these and other add-on applications, family offices can synchronize relevant data back to their cloud-accounting software to create powerful and efficient solutions for managing all of the core systems that make up their general ledger. Users may also employ trend analysis and analytic-reporting features to gain further insight into their family’s financial picture, and they may deploy this information immediately to share with key stakeholders, including investment advisors, legal counsel, and interested family members.
Store and Access Backup Data Safely
No one is immune from computer failures or natural disasters, including hurricanes, which can wipe out data stored in file cabinets, on desktops and even on backup systems. However, with cloud-based solutions, families have the security of knowing their data is stored and easily accessible on the internet rather than on a computer’s hard drive, which is susceptible to damage. Affluent families need only an internet connection to access general ledgers, financial statements, vendor invoices and bill payment history required to sustain operations and substantiate any insurance claims for accidental loss of data.
Even with all of the conveniences that cloud-based accounting solutions provide, affluent families should still meet with their accountants on a regular basis and not just at tax time. By combining technological solutions with face-to-face professional counsel, families can ensure their finances are on track and that they are flexible enough to manage challenges and take immediate advantage of opportunities that can lead to future growth.
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 high-net-worth families, entrepreneurs and owners of privately held businesses. He can be reached at the CPA firm’s Fort Lauderdale, Fla., office at 954-712-7000 or via email at info@bpbcpa.com.
The recent tax act that reforms the U.S. Tax Code beginning in 2018 changes the rules for how the IRS treats expenses taxpayers incur for lobbying local government bodies, local government officials and Indian Tribal Governments. Under the new law, taxpayers may no longer deduct these costs for influencing local legislation, regardless of whether taxpayers incur them directly or through an outside consulting firm.
Historically, the tax laws disallowed taxpayers from deducting expenses paid or incurred in connection with influencing legislation at the federal and state levels. An exception to this rule existed for taxpayers who incurred these “ordinary and necessary” business or trade expenses in connection with influencing legislation at the local level. More specifically, the law allowed a deduction for expenses that were:
- in direct connection with appearances before, submission of statements to, or sending communications to the committees or individual members of such council or body with respect to legislation or proposed legislation of direct interest to the taxpayer, or
- in direct connection with communication of information between the taxpayer and an organization of which the taxpayer is a member with respect to any such legislation or proposed legislation which is of direct interest to the taxpayer and such organization, and
- that portion of the dues paid or incurred with respect to any organization of which the taxpayer is a member which is attributable to the expenses of the activities described in (1) or (2) carried on by such organization.
The new law repeals this deduction for local lobbying expenses.
While lobbying at the federal and state levels has been relatively easy to discern, this is not always true at the local level, where there are a large number of local government bodies and officials as well as an array of different types of activities, transactions and interactions that may or may not qualify as lobbying. As a result, it is imperative that business taxpayers begin to analyze and assess the expenditures they pay in 2018 to influence local governments, including, but not limited to, promoting or opposing zoning and other local law and regulation changes where the taxpayer has a direct interest, and communications with local government officials with respect to such activities. Careful attention should be paid to review the activities, arrangements and related agreements to determine whether lobbying expenditures are deductible under the new law.
The advisors and accountants with Berkowitz Pollack Brant work closely with businesses in the real estate, healthcare and hospitality industry to comply with complex tax laws while minimizing tax liabilities.
About the Author: Thomas L. Smitha, JD, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant, where he provides accounting and consulting services, as well as tax planning and tax structuring counsel to private and publicly held companies. He can be reached at the CPA firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.
