See beyond the numbers

Before You Invest in Miami Real Estate, Invest in These 5 U.S. Tax Tips

The resilient South Florida residential real estate market is back in business.  For the second consecutive year, Miami was named among the top 10 luxury property markets in Christie’s International Real Estate report. What sets Miami apart from the other cities on the list, including Paris, New York and Sydney, is the relative value it offers, making it extremely attractive to investors, especially  foreign buyers looking to invest funds from their home countries. Cash-rich investors from Argentina, Brazil, Venezuela and other Latin American countries are fueling the latest boom, often outlaying 50% or more in cash to finance their investments.Albert Primo of Kaufman Rossin

For a foreign investor, seizing the moment and identifying a property is generally the easy part of the investment process. Choosing the right structure for the acquisition from a legal, tax and risk standpoint, isn’t quite as easy (or enjoyable). And some foreign investors might not realize the potential U.S. tax-related pitfalls that can come with buying a U.S. property.

If you’re a foreigner considering purchasing a property in South Florida, proper planning is required to make sure your investment doesn’t come with any unexpected financial surprises.  As such, here are five simple steps you may want to consider:

1. Find a U.S. tax professional with international tax expertise.

Investing in U.S. property can involve significant financial implications under the Foreign Investment in Real Property Tax Act (FIRPTA) and other U.S. tax laws, so you need a U.S. tax advisor who understands the complexities of the tax code.

As the saying goes “nothing in life is certain but death and taxes.”  This couldn’t be more apropos than when it comes to acquiring U.S. property (i.e., United States Real Property Interest or “USRPI”). In every scenario, there will be some form of U.S. tax ramification, and depending on your situation, U.S. estate taxes may also come into play.  As such, it is vital to meet with a tax professional who can help guide you through the process.

Tip:  It is generally more advantageous and cost-efficient to engage a U.S. tax professional before you acquire the property, rather than after, as restructuring (i.e., transfer of U.S. property) may prove costly and result in U.S. gift or income tax consequences.

2. Ask your accountant and attorney about the most optimal structure under which to acquire the property.

Every transaction is different and every buyer has unique facts and circumstances. So it’s imperative to find the optimal structure that best fits your situation.  For example, a foreign investor acquiring several rental properties may not want to acquire all of the properties under a single entity because that may expose him or her to a greater amount of liability from a legal standpoint. Likewise, foreign investors who value anonymity may choose a structure that shields their identity, while others may value a structure that minimizes any potential U.S. tax liability. In the end, the structure should address the investor’s unique facts and circumstances while fitting his or her needs and goals.

Tip:  Although it’s usually the most common structure utilized, acquiring the property in an individual or joint capacity is generally not the most optimal structure for foreign investors.

3. Apply for an ITIN.

An ITIN is an individual tax identification number.  It’s similar in format and purpose to a Social Security number, but ITINs are strictly for foreign nationals. An ITIN allows a foreign individual to file a U.S. tax return and, when disposing of a U.S. property, may ultimately reduce the amount of U.S. tax withheld at closing.

The process to obtain an ITIN can be cumbersome. Kaufman Rossin is authorized by the IRS to process ITINs on behalf of our clients as a Certified Acceptance Agent. Rather than visit the local IRS office or Tax Assistance Center to certify documents, a foreign applicant can make an appointment at our office to facilitate the application process.
Note:  ITINs expire if not used on a federal income tax return for five consecutive years.

4.  Consider filing an annual tax return to record your property’s activity.

If your USRPI is an investment or rental property, chances are it may generate an annual operating and tax loss. In order to preserve those losses and offset them against any possible gain in the disposition of the property, you must file a U.S. tax return.  A special U.S. tax election must be made to obtain the use of deductions that will generate such losses.

Keep in mind:  If you file as an individual (Form 1040-NR), you will need to disclose the number of days you spent in the U.S. during that specific tax year. Foreigners who exceed the threshold for number of days spent in the U.S. for three consecutive years as per the substantial presence test will generally be considered U.S. residents for tax purposes under the Internal Revenue Code and will be taxed on their worldwide income.

5.  If you sell the property, consider filing a withholding certificate.

Under FIRPTA, a withholding agent is required to withhold 10% of the gross proceeds upon the disposition of U.S. real estate by a foreign seller, irrespective of the gain on the sale. For example, if you are selling an investment property for $500,000, the withholding agent would withhold $50,000 at closing. The amount withheld must be submitted to the IRS within 20 days of closing.

A withholding certificate may eliminate or significantly reduce the amount held at closing to the extent the ultimate U.S. income tax liability from the gain of the sale is less than the amount withheld, and you need an ITIN to obtain this certificate. Many foreigners are hesitant to send their money directly to the IRS, so the filing of a withholding certificate is an option to address this concern.

Tip:  If the sale of the USRPI is toward the end of the calendar year, a foreigner may consider foregoing the filing of a withholding certificate as the funds withheld at closing and sent to the IRS can be retrieved upon filing a U.S. tax return at the beginning of the following year. 

If you’re a foreigner who is considering purchasing a U.S. property, contact me or another member of Kaufman Rossin’s international tax team. We can help you navigate the complexities of FIRPTA and ITINs and advise you on structuring the deal in a way that will align with your financial goals.

To learn more, download our free whitepaper for foreigners buying U.S real estate.

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Albert Primo is a tax associate principal in Kaufman Rossin’s Miami office. Kaufman Rossin is one of the top CPA firms in the U.S. Albert can be reached at aprimo@kaufmanrossin.com.

 

 

See beyond the numbers

How Can You Protect Patient Data from Growing Cyber Threats?

It seems like every day there is news that another major corporation was hacked and confidential information was stolen from its systems.

Medtronic Inc., one of the world’s largest medical device makers, recently announced that its system was hacked in Tyler Quinn of Kaufman Rossinan attack that is believed to have originated in Asia. Although the company reported that no medical records were stolen in that attack, it also reported a separate cyber incident in which Medtronic’s diabetes business unit lost an undisclosed number of patient records.

Health data breaches on the rise

The number of known healthcare-related breaches is increasing every year. More than 29 million patient records have been compromised in HIPAA data breaches since the U.S. Department of Health and Human Services started tracking reported breaches on its website in 2009.

“The healthcare industry, by far, will be the most susceptible to publicly disclosed and widely scrutinized data breaches in 2014,” according to Experian’s 2014 Data Breach Industry Forecast.

Cybercriminals are increasingly targeting the valuable personal information stored by healthcare organizations. Healthcare organizations experienced more cyber attacks than any other industry in 2013, according to The Identity Theft Resource Center, a nonprofit organization that tracks data theft. This is partly because healthcare organizations have been storing more and more information in electronic format since the Health Information Technology for Economic and Clinical Health (HITECH) Act was enacted in 2009. The HITECH Act has been transforming the healthcare industry by increasing the use of technology to drive improvements in quality, safety and efficiency.

Additionally, healthcare organizations such as hospitals, physician practices and other providers are relying more on third-party business associates, and much of the data exchange takes place in the cloud.  Many business associates have weaker information security systems than the healthcare organization that they interact with. Gaining access to a business associate’s IT systems can open a back door for hackers that may make the healthcare organization vulnerable.  These vulnerabilities can lead to theft of patients’ medical and financial information.

What is the risk for healthcare organizations?

The costs involved in responding to a data breach can be significant, and the damage to reputation may be even greater.  Beyond that, healthcare organizations and their business associates may incur significant penalties for not complying with the regulations of the Health Insurance Portability and Accountability Act (HIPAA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act.

New York-Presbyterian Hospital and Columbia University Medical Center made headlines in May when they agreed to pay a combined $4.8 million fine –the largest to date – to settle alleged HIPAA violations. This fine, which resulted from a 2010 data breach in which the electronic protected health information of 6,800 patients was exposed on Google, underscores the need for healthcare organizations to be vigilant in safeguarding patient data if they want to avoid harsh penalties.

How can you minimize your risk of a data breach?

So how can healthcare organizations protect themselves and their patients from cyber threats? The following steps will help you get started.

  • Assess your risk. Complying with HIPAA requirements is the first step. This includes performing a robust information technology risk assessmentto understand your organization’s vulnerabilities and potential threats. Analyzing your risk can be a helpful starting point, providing a roadmap for improving data security.
  • Stay informed. Organizations need to stay informed of the latest trends in cybersecurity. This includes improving the monitoring of data access and network traffic to identify unusual data usage patterns.
  • Hold vendors accountable. You should also develop and implement strict vendor management programs. Many organizations have lengthy business associate agreements but fail to adequately hold vendors accountable for the security of patient information. Outsourcing services does not mean you outsource the risk.
  • Train employees. One other area that has always been important, but is often not done well by organizations, is training employees on their role in network and data security. The best technology in the world is worthless if your people are not properly trained. Training should include teaching employees how to recognize certain risks, including phishing attacks, and how to respond if anything unusual is detected.

Cyber threats may be scary, but you don’t have to go it alone. A qualified IT security consultant can help you monitor the latest threats and stay abreast of best practices for protecting information and preventing a healthcare data breach.

To learn more about protecting your healthcare organization from cyber attacks and other security risks, contact me or another member of Kaufman Rossin’s risk advisory services team.

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Tyler Quinn, CPA, CISA, is an assurance and advisory services manager at Kaufman Rossin, one of the top accounting firms in the U.S. Tyler can be reached at tquinn@kaufmanrossin.com.

 

 

 

 

 

 

See beyond the numbers

Kaufman Rossin in the Community: Mothers Against Drunk Driving

Richard Salinas talks about his community involvement.

Which organization are you involved in and what is its objective?

I am involved with Mothers Against Drunk Driving (MADD). MADD’s mission is to stop drunk driving, prevent underage drinking and offer support to victims of drunk-driving accidents.

Mothers Against Drunk Driving

Mothers Against Drunk Driving

How are you involved in this organization?

I attend events in both the Ft. Lauderdale and Miami area, including 5Ks, candlelight ceremonies and fund raisers. I also put teams together for the aforementioned events in order to raise funds for the continued efforts of the organization.

Why are you passionate about this organization?

On July 14, 2012, my wife’s 22-year-old sister, Decire Febus, and Decire’s 24-year-old fiancé, Bobby Hunsucker, were killed by a drunk driver. It is safe to say that my wife and her family have never been the same again. MADD events have given her a forum to be around other victims whom she can relate to, and the organization has helped to facilitate the healing process for my wife and family.

MADD also provides victim services, including providing information about victims’ rights, supportive literature and a 24/7 help line. I have personally witnessed the impact MADD has on victims and families.

How has Kaufman, Rossin contributed to your success with this organization?

Kaufman Rossin offers a flexible schedule, enabling me to take some time out of my schedule to volunteer.

What is your advice for others who are thinking about getting involved in the community?

Prior to my involvement with MADD, I wasn’t very involved in the community because I struggled to find a cause I was passionate about. My advice to others looking to get involved is this: find something that you care about and that you want to invest your time and effort into. If it’s something you are not passionate about, then it will not be sustainable long-term. However, when you find the group or cause that you do care about, the challenge becomes holding back your time, rather than giving it up. The feeling of helping others and making a difference in the community makes your time commitment worth it.

Richard Salinas, CPA, is a senior consultant in Kaufman Rossin’s Business Advisory Services practice.  Richard can be reached at rsalinas@kaufmanrossin.com.

See beyond the numbers

Compliance Officers Discuss BSA/AML Challenges at Banking Roundtable

As the threat of fraud, money laundering and terrorist financing continue to rise, financial services industry regulators are working hard to combat these evolving and complex threats.  Kaufman Rossin recently surveyed Florida bankers about how they are managing BSA/AML compliance in the current environment, and we invited several South Florida BSA/AML Compliance Officers to attend a roundtable discussion moderated by Tom Hudson, vice president of news and special correspondent for WLRN. What makes this survey unique is its focus on Florida, and particularly South Florida, which has banking issues unlike other regions of the country.

Banks are investing more resources in key areas such as hiring, training and information systems. One-third of survey respondents said they plan on adding staff to their bank’s BSA/AML/OFAC compliance department over the next 12 months, and 42% of banks who responded plan to increase overall spending related to AML compliance.

Compliance officers who attended the June 25th roundtable echoed the survey findings and also shared other BSA/AML concerns.  Attendees represented a wide range of financial institutions, including community banks and international banks. Some of the topics discussed included:

  • Talent acquisition and retention – Finding well-rounded BSA/AML compliance professionals in South Florida is getting tougher as banks continue to expand the size and comprehensiveness of their BSA/AML departments.
  • Staff training – Front-line personnel can be the first line of defense for banks, but they need proper training to be most effective at identifying potentially suspicious activity.  Account managers, loan officers and other sales personnel can play an integral role in the Know Your Customer process, and assist banks in recognizing potential AML risks. An ongoing training program may include regulatory requirements and information about the bank’s internal AML policies, procedures and processes and, to the extent possible, should be tailored to job-specific duties. For example, front-line personnel may learn what to look for (common red flags) and best practices for communicating with customers about sensitive issues.
  • Technology – Our survey showed that banks plan to make their largest AML compliance investments over the next 12 months in enhancements to their transaction monitoring systems. However, the large investment that usually accompanies AML systems can be a challenge for smaller banks.   Demonstrating ROI by reducing risk and leveraging BSA/AML compliance technology for business purposes is key to getting buy-in from bank leadership, said roundtable participants.
  • Data integrity – Like many companies in the age of big data, banks are struggling with data collection and analysis. Sometimes the issue is not that the data is inaccurate, but rather, that it is incomplete.  The survey results revealed that more banks are focusing on the integrity of their databases and information systems.

Managing AML compliance programs to address evolving and complex threats is a major challenge for financial institutions. If you have questions or need assistance with your bank’s BSA/AML compliance requirements, please contact us.

Download the 2014 Florida AML Compliance Survey Summary Report for Banks.

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Ivan Garces, CPA, CFE, CAMS, CFF, is a risk advisory services principal in Kaufman Rossin’s Miami office. Kaufman Rossin is one of the top accounting firms in the U.S. Ivan can be reached at igarces@kaufmanrossin.com.

Jason Chorlins, CPA, CFE, CAMS, CITP, is a risk advisory services manager in Kaufman Rossin’s Miami office.   Jason can be reached at jchorlins@kaufmanrossin.com.

See beyond the numbers

QuickBooks Tip: Transitioning to New QuickBooks Online

Have you noticed a change in your QuickBooks Online layout? According to users, the new look has been a rough adjustment. Menu options have seemingly vanished into thin air.  Tried and true numbers have been replaced by colorful graphs.  One user on the QuickBooks help forum summed it up best: “I am seriously considering switching to paper, quill pen and inkwell.” Meredith Tucker, CPA, of Kaufman, Rossin

Before you abandon your QuickBooks program completely, try these five tips for coping with the transition to the new QuickBooks Online:

Keyboard shortcuts – not just for desktop users.  Using keyboard shortcuts in the online version of QuickBooks can save you time and effort during the layout transition. The following are some of the most common shortcuts:

  • When entering the date, you can use “T” to represent today’s date, +/- signs to go backwards and forwards a day, “W” and “K” for the first and last day of the WeeK, “M” and “H” for the first and last day of the MontH, and “Y” and “R” for the first and last day of the YeaR.
  • In number fields, you can use your numeric keypad to do quick math in a cell.
  • To launch popular activities such as invoices and bill payments, you can now use Ctrl + Alt + a shortcut key. For example, “Ctrl+Alt+I” will create an invoice and “Ctrl+Alt+W” gives you the option to write a check. To see a full list of shortcut options, click “Ctrl+Alt.”
  1. Save bookmarks in your web browser.  One of the biggest benefits in the new QuickBooks Online is subtle. QuickBooks Online updated all web URLs to be static depending on the feature in use. Previously, all web addresses appeared to be the same regardless of the feature or page you were using. Take advantage of this change and create a set of bookmarks for your top 10 customized reports.  Create another set for your common transactions like bank reconciliations and invoices.  It’s much easier to customize your experience by bookmarking your most frequently used pages.
  2. Quickly open new windows. While holding down the “Ctrl” button, click on most options in the new QuickBooks Online, and your selection will immediately open in a new window.
  3. Filter your search.  Finally you can search by more than one parameter. For example, you could quickly find out how many cash receipts were over $40,000 in 2013.
  4. Use it on the go. One of the best benefits of the new layout is that QuickBooks Online is now optimized for your tablet. You can check your A/R aging on the go, or send a statement to a client from the airport.
  5. Work faster behind the scenes. Though users can’t see it, Intuit has made many changes under the hood of the new QuickBooks Online that allow for much quicker processing speeds every time you hit “Enter” or navigate backwards or forwards from a page.  This means an enriched user experience with better load times that allow you to get in and out faster.

QuickBooks Online’s new layout is still being rolled out to customers, and Intuit is working on improving the overall functionality based on customer feedback. In the meantime, these tips are designed to help you cope with the changes and learn about the best that the new format has to offer.

If you want to learn more about how you can better use QuickBooks for your business needs, contact me or another member of Kaufman Rossin’s QuickBooks ProAdvisors team.