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December 14, 2016
The “Taxman” cometh in April; but it is wise to be prepared in December. The dreaded April 15th, when all those hard-earned dollars are due to Uncle Sam, is right around the corner. Manufacturing companies and their owners can and should take steps in December to minimize their tax burden in April. As we explore some of these year-end tax planning opportunities, it is important not to let the tax tail wag the dog; businesses should not spend a dollar to save 40 cents in taxes unless that dollar brings economic value to the company.

Before we delve deeper into tax planning opportunities, there are two underlying considerations: 

  • Coordinate business tax planning with individual tax planning: Most small to mid-market businesses are structured as pass-through entities (S-Corps/Partnerships /LLCs). Under these structures, the business does not pay income tax. The taxable income/loss of the business is reported on the owner’s individual tax return and the tax is paid at that level. As a result, it is critical to coordinate tax planning for a business with ownership tax planning.
  • Assess whether your income brackets are likely to change: As a general rule of thumb, businesses should accelerate deductions and defer income when tax brackets remain consistent year to year, or if the current year is in a higher tax bracket. If 2016 was a strong year, it is likely that you will want to accelerate deductions into 2016 and defer income into 2017. Conversely, if 2016 was a down year, the company would take the opposite approach.

Now let’s examine some of the various tax planning opportunities:

  • Timing of payments: Determine when to make related-party payments. Most related-party transactions (owner’s interest related-party rent, ownership bonuses, etc.) are treated on a cash basis. Companies should make these payments depending on if they want to accelerate or defer deductions.
  • Have your fixed asset ledger up to date: Due to Section 179 deductions and Bonus Depreciation, fixed asset additions create a tremendous opportunity to manage taxable income for assets purchased and placed in service before year-end. Although these determinations do not need to be made until after year-end, a company needs to know what impact tax depreciation will have on their taxable income while making other time-sensitive decisions.
  •  Managing your capital gains and losses: Capital gains and losses offset. If a pass-through business has generated any capital gains or losses, there should be coordination with the ownership’s investment advisors to explore opportunities to harvest capital gains or losses in the ownership’s personal investment portfolio.
  • Obsolete inventory: In general, manufacturers cannot take a deduction for obsolete inventory until it is physically disposed. If you have obsolete inventory that you have reserved for, dispose of it before the year-end to get the deduction.
  • Research and Development Tax Credits: The R&D credit provides significant tax savings to a significant number of manufacturers. If your manufacturing company does not take the R&D credit, double check to see if you qualify. If you are already
    taking advantage of the R&D credit, be sure to coordinate with your R&D expert regarding any changes in the laws and in your operations to maximize the credit.
  •  Explore creating an IC-DISC (Interest-Charge, Domestic International Sales Corporation): Manufacturers may be missing this lucrative U.S. tax incentive. Manufacturers that export (directly or indirectly) U.S. made goods may qualify for reduced tax rates on export profits. Because of the complexity involved with this tax strategy, many manufacturers are not taking advantage of this opportunity.
  • Don’t forget the bank: These tax planning strategies, along with others, can’t be considered in a tax planning vacuum. As always, manufacturers need to consider any impact that these decisions would have on their debt covenants with their lenders. Tax planning time is the perfect time to also review your compliance with bank covenants since many financial covenants are measured at year-end. There can be opportunities to coordinate tax planning and covenant compliance decisions. One example is the timing of tax distributions. If a company is planning on a significant tax distributions to ownership in early 2017 to cover 2016 tax liability, and the company could make those distributions in 2016 while still being in compliance with their bank covenants, consideration should be given to accelerating those distributions into 2016.

These are just a few of the various tax opportunities out there. The key to keeping taxes low in April is to make sure your ducks are in a row by December. Be sure to coordinate with your financial and tax advisors to minimize your tax obligations.

By Brian Barsi

BRIAN BARSI, CPA, is a Managing Director at CBIZ MHM and a Shareholder of Mayer Hoffman McCann P.C., an independent CPA firm. Brian has extensive experience serving mid-market clients primarily in the manufacturing and distribution industries, and leads the CBIZ MHM Minneapolis Manufacturing group. He can be reached at 612-376-1237 or bbarsi@cbiz.com.





December 9, 2016

The holiday season is a time of giving. However, before you set plans into motion, it’s important to understand the tax advantages – as well as the possible complications – that are associated with gifting assets to family, charities and institutions.

That’s why we compiled the infographic below from the CBIZ 2016 Individual Tax Planning Supplement that details our top gift and estate tax planning ideas to consider. Please remember that these and other planning strategies need to be executed in the context of balancing who controls the assets and who benefits from the assets.

Note that some of these opportunities – specifically the ability to use valuation discounts in certain situations – are subject to revision by Congress and the IRS, so it’s important to start thinking about your gifting strategies now.

For other tax strategies, contact your CBIZ tax professional, or check out the CBIZ website and the rest of the Individual Tax Planning Supplement as a comprehensive guide to minimize your 2016 tax bill.






November 14, 2016

Learn more about exact ways CBIZ MHM can help companies in the manufacturing industry from Brian Barsi on Today's Business Radio. 

Listen to the full interview.




November 10, 2016
CBIZ Food Drive 2016
CBIZ MHM Minneapolis was proud to kick off the 2016 Food Drive at Second Harvest Heartland. The goal is to eradicate hunger in our local communities through collection of nonperishable food items, monetary donations, and volunteer time. Second Harvest Heartland is one of the nation’s largest, most efficient and most innovative food banks. We helped pack 8,192 pounds of potatoes and cereal that will be distributed to local families in need to help close the missing meal gap.



November 10, 2016

The IRS recently issued proposed regulations eliminating important valuation discounts commonly used in gift and estate tax planning. If finalized as currently proposed, these changes could increase an individual’s gift and estate tax liabilities by more than 60 percent.  Click here to read the full article.




November 10, 2016
Oct 30, 2016 
By Robert Karon

7 Tips on Achieving Zero-Tax Estate Planning Through Charitable Giving

Philanthropy has its advantages

How charitable should I be? What will my legacy be? What values can I teach my children and grandchildren? What do I have passion for? These are some of the questions clients start asking themselves in the autumn of their lives.

Estate planning is an intimate yet challenging process. Deciding who to entrust and bequeath your legacy to is among the largest decisions our clients will face in their lives. 

Many times clients feel that they've given enough to their children, or that even if they wanted to donate to charity, they don't know the intricacies involved. Regardless of the end result, clients always want to eliminate taxes from the picture and spend their savings as they choose, not as the government does. 


Robert Karon is a managing director at CBIZ MHM.

Click here to read the full article.





July 16, 2015

Twin Cities Business Magazine is now accepting nominations for the 2015 Small Business Success Stories Awards. Nominees should have a compelling story such as: a turnaround, rapid early growth, an unusual product innovation, notable longevity, the overcoming of an unusual challenge, or growth in a declining industry.

Click here to submit a company and to see the full eligibility requirements.

To view a list of the 2014 Small Business Success Stories finalists and honorees, click here.






July 1, 2015
Now halfway through the year, one of Minnesota’s most popular tax credit programs holds over one-third of its $16 million pot still available. In past years, the Angel Tax Credit’s pot has emptied months before the end of the year. And last year, the pot was emptied by early March. The struggle to empty the pot can be tied to lawmakers imposing restrictions on those who can reap the benefits. 

This year, lawmakers set aside $7.5 million for businesses owned by women or minorities, or businesses based in greater Minnesota. They also stopped early-investors from accessing the credits, which allowed them to regain a portion of their buy-in to a given company. 

Out of the $6.1 million remaining credits in the pot, $4.4 million are from the pool reserved for the underserved groups. These qualifying businesses have until Sept. 30 to act on this benefit before it funnels back into the general fund. The general fund contains a remaining $1.7 million and businesses who qualify will have until the end of the year to benefit from it. Funds left over at the end of the year will not rollover into 2016. 

To find out if you qualify for the Angel Tax Credit, please refer to the Minnesota DEED website

If you have questions about how this credit can affect your business, please reach out to one of our tax professionals at 612.339.7811.






June 24, 2015

The role of the CFO is continuously changing. Their focus is no longer on just the numbers, but also on the strategic operations within a company. As discussed at the June 17 Twin Cities Business Magazine CFO Forum, the CFO needs to build a strategic partnership with the CEO and its leadership. 

CFO Forum panelists: Jim Macaulay, CFO of The Marvin Companies, John Way, CFO of Proto Labs, Inc. and Kelly Larson, CFO of Summit Brewing discussed the various challenges that they face at their companies. Some of the challenges discussed were: managing strong revenue growth, answering to shareholders and attracting and retaining talent while building an engaged workforce. 

Because of these challenges, CFOs of today need to keep abreast of the ever changing environment, and although difficult, having business partners like CBIZ can ease the burden. 

CBIZ can provide you insights and resources on many areas that can affect the growth and stability of your company. For a collection of thought leadership insights and resources, click here.

If you would like a visual recap of the event, you can click here for images of the night. 

 




June 17, 2015

Your closely held business is likely your largest asset. In most cases, there are many stakeholders relying on the business and what it produces. With succession planning, the wrong decision, or even the right decision implemented the wrong way could be catastrophic. 

Long before you think about transition, you should be thinking about what the effects of the transition would be on the business. Some questions to ask are: 

  • How does the sale of the business coincide with your continued involvement with it?
  • What is the appropriate time frame?
  • Is the talent in the business today?
  • What is the business worth now or what can it be worth later?
  • What benefits could transition bring to the business?
  • How reliant is the business on you today?
  • Do you want the business to stay in the family?
  • How would continued family ownership affect other management and stakeholders? 

There are also many questions that you need to think about personally before a transaction: 

  • What am I considering this?
  • Gather Transaction Team - CPA, attorney, banker, other financial and insurance advisers.
  • What is my financial need?
  • Does transition solve problems or create them?
  • What will I do once the business is transferred?
  • What are some of my other personal and financial goals?

The answers to each of the questions above will greatly affect the process and steps that you will take in your succession planning. Make sure to consult with all of your advisers before you start making decisions that could impact your future and the future of your business. 

If you have questions and would like to connect with someone on this topic, please reach out to David Levi, Senior Managing Director, at 612.376.1208 or dlevi@cbiz.com




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