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IRS Takes Aim at Valuation Discounts for Family Controlled Entities

Posted by on Sep 26, 2016 | Comments Off on IRS Takes Aim at Valuation Discounts for Family Controlled Entities

IRS Takes Aim at Valuation Discounts for Family Controlled Entities

For years, the transfer of family-owned entities and the use of valuation discounts such as those for lack of control and marketability have been a staple of the estate planning process. These discounts allow value to be transferred from one individual to another with a reduction from the pro-rata value of up to 40% in some cases. Generally, these discounts are the result of strict verbiage in the family controlled entity’s organizational documents. The IRS has been lobbying to have laws implemented that reduce or abolish the usage of these discounts when family members effectively retain control of a company. Although these congressional proposals were never passed into law, there are currently proposed changes to the IRS regulations contained within IRC §2704. Historically, IRC §2704 has presented strict guidelines regarding what attributes can and cannot be considered when valuing an interest in a family-owned entity such as transfer, distribution, voting, and liquidation restrictions. However, in many cases valuation specialists were still able to consider some of the attributes of the interest as stated in the governing documents if they were not overly restrictive or onerous. Under the new proposed regulations, the ability to rely on these attributes to justify an impact on value would significantly change if the family member owners of the entity have the ability to alter these attributes. Essentially, the new regulations require a valuation specialist to ignore certain restrictions that would limit control or marketability and in some cases, require the valuator to make certain assumptions. The major changes under the proposed regulations are as follows: New 3-Year Lookback Period. Transfer within 3 years of a decedent’s date of death may be added back to the estate for purposes of determining control and marketability; Change in the Definition of Control. Control may be defined by either vote or value; Consideration of Family Control. The determination of control will no longer be based on the interest valued if the family still retains control over the entity. It will be assumed that the remaining family could adjust the attributes of a specific interest and therefore the interest’s attributes are to be ignored; Disregarded Restrictions Expansion. Any onerous restrictions beyond what would exist in a private company with unrelated parties will be ignored; and Non-Family Owner Exemptions. The rights of non-family owners can only be considered if they have been an owner for at least 3 years, can liquidate in less than 6 months, and have a substantial interest as of the date of the transfer. These new proposed changes would effectively eliminate discounts for valuations of family-controlled entities. A hearing on these proposed regulations is scheduled for December 1, 2016. Although it is expected that the proposed changes will meet significant push-back, some form of these proposed changes are expected to become effective in early 2017. Most professionals believe at this time that the IRS will allow discounts on gifts prior to the final regulations being issued, however, there is a possibility that the change may be retroactive. Now is the time to advise clients about the significance of these changes and the timing of potential transfers. To learn more about these proposed changes and the potential impact for your clients, please contact one of our business valuation professionals. Robert W. Carter, MS, CPA, CVA, CFE, CEPA,...

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Congratulations to Robert Carter – CPA Practice Advisor 40 Under 40 Award Recipient

Posted by on Sep 23, 2016 | Comments Off on Congratulations to Robert Carter – CPA Practice Advisor 40 Under 40 Award Recipient

Congratulations to Robert Carter – CPA Practice Advisor 40 Under 40 Award Recipient

CPA Practice Advisor has announced the recipients of its annual 40 Under 40 Awards, a program designed to recognize and honor young leaders who are helping to positively shape the accounting and tax profession. Robert W. Carter, MS, CPA, CVA, CFE, CEPA, Senior Manager at Hertzbach & Company, P.A. has been recognized as a 40 Under 40 honoree, among the best and brightest talent in the accounting profession. According to the post published in CPA Practice Advisor, the award recipients were chosen based on the criteria that “they are all active in the professional community, as well as in their local communities. Many are also frequently seen at industry trade shows, such as AICPA PS/Tech and state CPA society events, giving seminars or participating in round table discussions on evolving practices and technologies.” Robert Carter joined Hertzbach in 2007 as a financial analyst and now exclusively manages the Business Valuation, Forensic Accounting and Litigation Support Department. Rob regularly contributes articles to several professional and academic publications, including CPA Practice Advisor, and has taught for the National Business Institute as well as the Maryland Chapter of the National Association of Certified Valuators and Analysts. He also teaches at Stevenson University as an adjunct instructor in the Graduate Forensic Studies Program. He specializes in valuation engagements for S-corporation conversions, ESOPs, marital dissolutions, gift and estate tax, buy-sell agreements, and many other business valuation purposes. Mr. Carter has managed several forensic accounting and fraud investigations involving misappropriation of assets/intellectual property and embezzlement claims. He also provides expert witness services for marital dissolutions, stockholder and partnership disputes, personal injury and lost profits claims, as well as other white collar criminal and civil matters. Click here to view Rob’s Q&A with CPA Practice...

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Joel Chazen & City Life Builders Celebrate 1st Construction Training Graduation

Posted by on Sep 8, 2016 | Comments Off on Joel Chazen & City Life Builders Celebrate 1st Construction Training Graduation

Joel Chazen & City Life Builders Celebrate 1st Construction Training Graduation

City Life is the nonprofit arm of City Life Community Builders. The for-profit company has restored hundreds of vacant and boarded city row homes and built new town home developments in these neighborhoods, while working as change agents within these communities to address the many issues. The non-for-profit entity offers programs that provide a source of training, guidance, resources and employment, for individuals as well as new or developing businesses that will lead to careers with family-supporting wages and long-term economic stability. Joel Chazen, Managing Partner at Hertzbach & Company, P.A. is on the Board of Directors at City Life Community Builders in addition to serving as Treasurer. Recently, Joel attended the first Construction Training Graduation Program where six graduates were honored for their completion of the program. During the Construction Training Program, the graduates were able to learn everything from financing and banking, to electricity processes and the basics of building a home from the ground up. When asked about the program, Joel said “Through teaching these construction industry skills, City Life Community Builders is helping to give these young people a way to support themselves and their families. I am honored to be a part of this organization.” Click here to view the graduation event video and click here to learn more about how you can get involved with City Life Community...

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Hertzbach welcomes Coale, Pripstein & Associates, P.A. of Columbia, MD.

Posted by on Aug 26, 2016 | Comments Off on Hertzbach welcomes Coale, Pripstein & Associates, P.A. of Columbia, MD.

Hertzbach welcomes Coale, Pripstein & Associates, P.A. of Columbia, MD.

Effective July 1, 2016, Coale, Pripstein & Associates, P.A. (Coale/Pripstein), a public accounting firm located in Columbia, Maryland has merged their practice into Hertzbach & Company, P.A. (Hertzbach). Coale/Pripstein employees are now working out of Hertzbach’s Owings Mills, MD location, however Hertzbach will also have a satellite office in Columbia, MD. Additionally, Hertzbach has offices in Rockville, MD and Arlington, VA. Coale/Pripstein, founded in 1991, specializes in a wide range of accounting and financial services and holds a unique and diverse client base. Their client base includes the construction industry, attorneys & law practices, restaurants, the automotive industry, the medical industry, nonprofits and the arts & entertainment industry. Joining Hertzbach are partners Eric Pripstein, CPA, and Nancy Buckley, CPA, as well as eight additional full-time staff members – two of them including senior managers Jeannine Jawhar, CPA, MAT and Kevin Kearney, CPA. Edmund “Skip” Coale, III, CPA, a founding partner of Coale/Pripstein, is playing an active role in the transition, however, he will be retiring from public accounting. When asked about why Coale/Pripstein is joining Hertzbach, Eric Pripstein, CPA, said “We had been interviewing local and regional firms for a few years, exploring the opportunity to expand services and enhance capabilities which we believe critical to our clients. After the extensive search and review, we identified Hertzbach as the singular firm in Maryland which shared our philosophy of client service and professionalism. Hertzbach’s approach in mentoring staff and providing an energetic and supportive environment for both staff and clients was critical to our decision.”   Joel Chazen, CPA, Managing Partner at Hertzbach said “Coale/Pripstein has a very talented team of professionals that we are thrilled to welcome into our firm. Eric and Nancy, their skilled staff and their unique client base are something we feel very grateful and enthusiastic to have come across. Coale/Pripstein’s seasoned reputation in Howard County is something that we respect and look forward to utilizing in our firm’s future growth.” If you have any questions regarding this news, please contact Jessica DeMunda, Director of Marketing....

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Pennsylvania Subjects Digital Goods to Sales/Use Tax and Establishes a Tax Amnesty Program

Posted by on Aug 24, 2016 | Comments Off on Pennsylvania Subjects Digital Goods to Sales/Use Tax and Establishes a Tax Amnesty Program

Pennsylvania Subjects Digital Goods to Sales/Use Tax and Establishes a Tax Amnesty Program

On July 13, 2016, Pennsylvania Governor Tom Wolf (D) signed into law H.B. 1198, 2015-2016 Reg. Sess. (Pa. 2016), which broadens the sales and use tax base to include digital goods (whether digitally or electronically delivered, streamed, or accessed), and includes provisions that require the Department of Revenue to revise the tax due upon review of an amended corporate tax return. In addition, H.B. 1198 makes various changes to the Bank and Trust Company Shares Tax, establishes a 60 day tax amnesty program, and amends and creates several tax credits and incentives. Sales/Use Tax on Digital Goods Effective as of August 1, 2016, H.B. 1198 broadens the sales and use tax base to include digital goods whether digitally or electronically delivered, streamed, or accessed. Specifically, H.B. 1198 defines tangible personal property to include video, photographs, books, music, games, canned software, applications (or “apps”), satellite radio service, and any other taxable tangible personal property digitally or electronically delivered, streamed, or accessed. These items, including updates, support, and maintenance, are subject to tax whether purchased by subscription, singly, or in any other manner. Previously, the Department had administratively taxed canned software accessed electronically. Taxpayers should consider updating their sales and use tax systems to collect the appropriate tax on sales of digital goods beginning August 1, 2016. In addition, taxpayers should assess whether use tax is due on a purchase of a digital good where no sales tax has been paid. Tax Amnesty Program H.B. 1198 requires the governor to establish a 60 day tax amnesty program for a period ending no later than June 30, 2017. In addition, H.B. 1198 requires the Department to develop and publish guidelines for the program within 60 days of July 13, 2016. The amnesty program applies to any tax administered by the Department and to liabilities delinquent as of December 31, 2015, including a liability related to an unfiled return. H.B. 1198 imposes a 5-percent non-participation penalty. The amnesty program entitles a participating taxpayer to waiver of all penalties and 50 percent of interest and a limited look back period for any unknown liabilities due prior to January 1, 2011. However, the amnesty program requires the taxpayer to file all original and amended returns for all required years, and bars a participating taxpayer from participating in a future amnesty program. The amnesty program provides an opportunity for a taxpayer with a delinquent liability to qualify for 100-percent penalty waiver and 50-percent interest waiver. However, Pennsylvania, like most states, has a Voluntary Disclosure Agreement (or “VDA”) program for taxpayers with liabilities unknown to the state that voluntarily come forward and report and pay tax. Under the VDA program, a taxpayer typically only receives penalty waiver, and the state applies look back periods as follows: (i) corporate taxpayers – 5 years, plus the current year; and (ii) non-corporate taxpayers – 3 years, plus the current year. Taxpayers considering voluntarily reporting unknown liabilities should assess whether amnesty or a VDA is more advantageous. We welcome the opportunity to discuss these law changes with you. Please contact your Hertzbach Tax Advisor at...

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Beat the summer heat and shop Maryland Tax-Free Week

Posted by on Aug 15, 2016 | Comments Off on Beat the summer heat and shop Maryland Tax-Free Week

Beat the summer heat and shop Maryland Tax-Free Week

Just in time for back to school shopping, Maryland apparel retailers are beginning a week of tax-free sales. The second Sunday of August to the following Saturday is designated as Shop Maryland Tax-Free Week each year. That means qualifying apparel and footwear $100 or less, per item, are exempt from the state sales tax. Accessory items are not included. The Shop Maryland Tax-Free Week for 2016 is Sunday, August 14 – Saturday, August 20. Full List of Tax-Exempt Items For more information visit here. Questions? Contact your Hertzbach Tax Advisor at 410-363-3200 or 800-899-3633. We look forward to speaking with...

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Mark Edward elected to the Board of Governors of the GWSCPA

Posted by on Aug 3, 2016 | Comments Off on Mark Edward elected to the Board of Governors of the GWSCPA

Mark Edward elected to the Board of Governors of the GWSCPA

Mark P.S. Edward, CPA, CGMA, FCA, Partner at Hertzbach & Company, P.A., has been elected to the Board of Governors of the Greater Washington Society of CPAs. Mark Edward has been an instrumental leader during Hertzbach’s expansion into the Greater Washington, D.C., area, and his involvement with the local professional community has been a very valuable resource to the firm and its clients. Joining the GWSCPA as a Board Director will further increase Hertzbach’s presence in the community. With over 30 years of professional experience as a Certified Public Accountant and Chartered Accountant, Mark has made nonprofits his main area of expertise. He joined Hertzbach in 2011 as a partner in the Nonprofit Services Group, established the firm’s Rockville, MD office and now also leads the Complete Financial Outsourcing Group. He currently serves as Board Director, Treasurer and immediate past Chair of Whitman-Walker Health (Featured photo above is Mark Edward and  DC Congresswoman Eleanor Holmes Norton at the opening of the Whitman-Walker Health center in 2015), Board Director of the American Alliance of Museums, and Advisory Board Chair of the Museum of Science Fiction. He has also served on the boards of the Maryland Association of Certified Public Accountants, the Maryland Chamber of Commerce, and the National Aquarium in Baltimore. Additionally, he is the past President of the Corporate Volunteer Council of Montgomery County, past Vice President of Budget and Finance of the Greater Bethesda-Chevy Chase Chamber of Commerce, a past Board Director of the British American Business Association and a Leadership Montgomery graduate, (2007). The Greater Washington Society of CPAs was founded in 1923 and serves more than 3,000 member CPA and non-CPA financial professionals in the District of Columbia, Maryland, and Virginia. When asked about his role as a Board Governor, Mark Edward said: “For many years I have benefited from the educational resources and peer to peer networking opportunities of the GWSCPA. I am honored and excited to serve our profession and the general public in this new role with the society.”   We invite you to visit www.hertzbach.com/partners/cv-mark-p-s-edward/ to learn more about Mark Edward and our...

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IRS Extends Deadline for WOTC Filings (Again)

Posted by on Aug 1, 2016 | Comments Off on IRS Extends Deadline for WOTC Filings (Again)

IRS Extends Deadline for WOTC Filings (Again)

Employers who wish to increase workforce diversity and benefit disadvantaged workers can get a significant tax credit for their efforts. The work opportunity tax credit (WOTC) is a credit that is available to businesses that hire members of “targeted groups,” generally employees with economic or physical disadvantages. The following are targeted groups: Unemployed veterans, recipients of various government assistance programs (TANF, SSI, and SNAP), residents of designated areas who meet certain age criteria, disabled individuals, and ex-felons. The amount of the credit is based on a percentage of wages paid, with the maximum allowable credit ranging from $1,200 per employee for summer youth employees residing in designated areas to $9,600 for certain qualified veterans. Although the signing of the PATH Act in December 2015 resolved many uncertainties regarding 2015 tax filings, it also left some unanswered questions. One of those questions concerned the WOTC, which had actually expired at the end of 2014 before Congress retroactively extended it through December 31, 2019. A significant prerequisite for taxpayers wishing to claim the credit is the filing of Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit. This form is generally due no later than 28 days after the eligible employee begins work. When the PATH Act retroactively extended the credit to the beginning of 2015, a question arose as to how employers should file the necessary forms for employees who had already been hired before the credit was extended. In March, the IRS announced that employers would be granted an extension of time to file the Form 8850. Recently, the IRS announced an additional extension of time: For employees beginning work between January 1, 2015 and August 31, 2016, the filing deadline is moved to September 28, 2016. In addition to extending the credit, the PATH Act added “long-term unemployment recipients” as a new targeted group. If an employee was hired from this group between January 1, 2016 and August 31, 2016, the filing deadline is also September 28, 2016. Additional information on the credit is provided by the IRS at https://www.irs.gov/businesses/small-businesses-self-employed/work-opportunity-tax-credit-1. Employers who are interested in learning more about this opportunity should contact their Hertzbach Tax Advisor at 410-363-3200 or 800-899-3633. We look forward to speaking with...

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David A. Sack, CPA of Hertzbach & Company, P.A. joins the Towson University Accounting Advisory Board

Posted by on Jul 19, 2016 | Comments Off on David A. Sack, CPA of Hertzbach & Company, P.A. joins the Towson University Accounting Advisory Board

David A. Sack, CPA of Hertzbach & Company, P.A. joins the Towson University Accounting Advisory Board

Hertzbach & Company, P.A. is proud to announce that David A. Sack, CPA, Senior Accountant, was selected to serve on the Towson University Accounting Advisory Board. David joined the firm in 2011 after graduating from Towson University with a B.S. in Accounting. As a Towson alum, David has always been actively involved with Hertzbach’s employee recruitment program. Now as a member of the board, Mr. Sack will contribute to Towson’s Department of Accounting by serving in the Chair’s advisory group. Mr. Sack was originally asked by Deborah Norris, CPA, Director at Hertzbach, to represent her at a board meeting when she was not able to attend. “I’ve had the pleasure of working with David and watching him grow professionally for the last 4 years. I am confident that he will bring a fresh perspective to the Towson Accounting Advisory Board while assisting us in better meeting the needs of accounting students,” said Deborah Norris. David took advantage of this opportunity to network with people both in and out of his profession. He is also using this opportunity as a way to keep in touch with his alma mater. When asked about his role as a board member, David said: “The board, as a whole, aims to accomplish multiple goals. However the main goal is to ensure that the accounting program is staying current with the needs of the marketplace while also remaining competitive with the other universities. I feel that I have a new perspective to offer the board. When we discuss what programs and classes best prepare students for their careers, I hope that my fairly recent experience as a college student will make a difference.  My involvement with Hertzbach’s staff recruiting and training programs enables me to see strengths and weaknesses of the Towson Accounting Program. Thus allowing me to share this valuable, hands-on information with the...

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Cyber security in the construction industry: How secure is your data?

Posted by on Jun 22, 2016 | Comments Off on Cyber security in the construction industry: How secure is your data?

Cyber security in the construction industry: How secure is your data?

In this month’s issue of  Building Congress & Exchange‘s newsletter, The Exchange, Hertzbach & Company, P.A. was featured in a discussion about cyber security in the construction industry. Michael Jackson, Director of Information Technology for HIT Solutions (a division of Hertzbach) shared information on threats beyond traditional spam and phishing attacks. For example, “social-engineering hacks” happen when hackers closely research their targets and pose as the victim’s boss or business associate while convincing them to hand over personnel records or network pass codes. The article states that “for a small construction company, lax cyber security can leave you vulnerable to ransom threats, disruption of computer service, compromised financial records, lost trust with clients and even lost contracts.” To read the full article, click HERE to view this months issue of The Exchange. If you have any questions for HIT Solutions regarding cyber security, we encourage you to contact Michael Jackson at...

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