Running a manufacturing or distribution business requires an understanding of the unique circumstances and dynamics of the industry. The impact of automation, higher-level technology service needs, shifting world markets, workforce challenges, complex new laws and regulations, and countless other issues demand your attention. Today's business climate has changed dramatically from what it was twenty years ago - or even five years ago. You cannot thrive by just producing an excellent product.
Staying abreast of the newest tax laws and opportunities will help you minimize your tax liability. Here are just a few of the tax credits available:
There are a couple of depreciation incentives that manufacturers should take advantage of. These include:
Product costing helps you define all the expenses including direct materials, direct labor, and overhead for a product. Having accurate costs allows you to determine where to control expenses, set appropriate pricing, and improve profit margins.
Keeping your business running efficiently, with a focus on profitability, will ensure you are making the most of your daily operations. This should include regular operational assessments of your supply chain management, inventory management, product costing, and continuous process improvement plans.
Business professionals need easy access to information to make timely decisions. SVA has what you need, when you need it. Choose a topic below or just contact us directly. Our expertise is ready anytime you need it.
Section 179 enables manufacturers to write off qualifying fixed asset purchases in the year those purchases are made. The Section 179 deduction applies to tangible personal property (such as machinery, equipment, and office furniture) which is purchased for use in a trade or business. Recent legislation increased the scope of Qualified Improvement Property (QIP) to include the following improvements to non-residential property after the date the property was first placed in service: roofs, heating, ventilation, air-conditioning, fire protection, and alarm and security systems.
Bonus Depreciation to 100% became available with the Tax Cuts and Jobs Act (TCJA). Effective for assets acquired and placed in service after September 27, 2017, the provision applies to both new and used property. As such, this provision heightens the importance of cost segregation studies. Costs identified as tangible personal property and land improvements are eligible for immediate expensing whether the property is new construction or acquired property. The 100% expensing is available through 2022, after which it begins phasing out by 20% per year.
BIZ TIP: 5 Depreciation Methods Business Owners Need to Know
Businesses and individuals have specific foreign reporting requirements and, in some cases, U.S. withholding is required on payments made to a foreign entity or person. Significant penalties can apply if you are not aware of these requirements and fail to meet these reporting and withholding obligations. Our professionals can assist you in meeting these obligations and in international tax planning through our network of specialists and international affiliates. Here are a few of the areas we can evaluate for your business:
The Research and Development (R&D) Tax Credit is calculated as a percentage of the expenses related to R&D activities. These activities could include:
SVA can help you through the complex calculations and documentation needed to benefit from this often underused tax credit.
SVA's Supply Chain Management education and consulting services focus on your specific organization, the challenges you face, and the objectives you are working towards. Together, we strategize and instruct in the following areas:
Nexus, also known as sufficient physical presence, determines whether an out-of-state business selling products into a state is liable for collecting sales and use tax on sales into the state. Nexus is required before a taxing jurisdiction can impose its taxes on an entity. Congress enacted Public Law 86-272 which protects companies with only minimal state activities from being taxed. Our professionals can assist you in determining your company's multistate tax situation, take steps to insulate your activities from overzealous states, and minimize your overall state tax liability.
BIZ TIP: What Manufacturers Should Know in the Wake of Wayfair vs. South Dakota
IC-DISC is a powerful tax-savings opportunity for U.S. businesses who export a minimum of $1 million in goods annually. Companies who export less than $1 million may also benefit from this tax-savings opportunity with a review of costs vs. benefits to determine the best options. It is available to manufacturers and distributors and it offers them permanent tax savings primarily resulting from a reduction in the tax rate on qualified dividends.
Through 2025, taxpayers can deduct up to 20% of their QBI from a pass-through entity (sole proprietorship, LLC, partnership, or S corporation). Phaseouts begin when taxable income exceeds $164,900 for single taxpayers or $329,800 for married couples (other limitations also apply).
BIZ TIP: IRS Attempts to Clarify Section 199A Qualified Business Income Deduction in FAQs
Everyone is familiar with sales tax and the role it plays as a consumer. However, understanding the complexities and laws involved with sales and use tax as it applies to business is another story. Reduce the impact of sales tax on not only your business but your customers by proactively planning for the tax consequences of your business-related activities.
The Wisconsin Manufacturing Tax Credit applies to those businesses that own or rent and use real and personal manufacturing or agriculture property in Wisconsin. If the company is a partnership, LLC, or an S corporation, the credit will pass through to its owners. The credit is 7.5% of "eligible qualified production activities income." With a maximum Wisconsin tax rate of 7.65% for individuals, this credit will virtually eliminate the Wisconsin tax on manufacturing and agriculture income.
If you hire individuals from a specified disadvantaged targeted group, you could be eligible for a credit worth 25-40% of their wages. Find more information on the tax credit extension.
This eGuide provides tips for manufacturing companies to save money, increase profitability, and insights into tax savings, credits, and deductions.
This eguide covers different tax credits and deductions available to businesses, as well as what to look for in a tax advisor, choosing a tax-advantaged business entity and more!
CPA, CFE, CGMA