Jan 03, 2022
Have your sales been hit by import competition? If so, the federal Trade Adjustment Assistance for Firms (TAAF) program may be able to help. For Ohio manufacturers, the program is managed by the Great Lakes Trade Adjustment Assistance Center (GLTAAC) who helps qualified manufacturers identify, develop, staff, and pay for critical business improvement projects. GLTAAC clients have received up to $75,000 in matching funds.
While TAAF matching funds are extremely beneficial, GLTAAC clients also value the planning assistance received from their experienced team of manufacturing professionals. The guidance helps to clarify which projects can best support each client’s growth strategy while matching funds help clients fast-track those important efforts – regardless of the project’s size. Here are just a few case studies to demonstrate the value of GLTAAC and how leveraging funding can aid your organization:
- Big impact from a quick and concentrated effort for an instrumentation manufacturer – An Ohio GLTAAC client had recently changed its name and required a rebrand with a new logo. After multiple conversations with key company stakeholders and a marketing consultant, a new logo was developed. The company’s website now features their re-designed logo and the GLTAAC client states, “This TAAF co-funded project was a simple, small – but strategic – marketing effort. Two weeks of intense work and results.”
- TAAF matching funds saved both money and time for Ohio foundry – When their existing ERP system was being phased out, this GLTAAC client knew they would use TAAF matching funds for outside IT expertise to migrate to a new system. However, they also recognized their shortage of a key resource: time. They elected to utilize TAAF co-funding to hire a consultant to serve as the internal project manager for the entire ERP upgrade process. The consultants managed and ran all aspects of the upgrade, which enabled the project to be completd on schedule without disruption. Total cost for both consultants: $91,000 (TAAF paid 50%).
If import competition has hurt your sales, don’t put off learning more about TAAF and GLTAAC. Here’s how to get started.
STEP ONE – Contact GLTAAC Project Manager, Jani Hatchett at firstname.lastname@example.org or 734.998.6227. Jani can quickly outline the TAAF program and help you determine whether your firm would qualify and provide the next steps.
Categories: Manufacturing & Distribution
Nov 15, 2021
Don’t leave ERTC money on the table!
The Employee Retention Tax Credit (ERTC) is a provision established under the CARES Act which has been enhanced by additional legislation and could provide an immense amount of capital to employers. Unfortunately, statistics are showing the credit is being underutilized. The good news is with year-end planning on the horizon, now is the perfect time to leverage the ERTC.
What is the ERTC?
This is a refundable tax credit employers can claim against certain employment taxes, equal to a percentage of qualified wages and health insurance premiums paid after March 12, 2020, and before September 30, 2021.
For 2020, the credit is 50% of qualified payments, up to $10,000 per employee. Simply put, an eligible business has the potential to request refunds of up to $5,000 per employee for the year.
For 2021, the credit increases to 70% of qualified payments, up to $10,000 per employee per quarter. The credit was intended to run through December 31, 2021, but the passing of the recent Infrastructure Bill put an end to it after September 30. Nevertheless, the credit is still fair game for the first three quarters of 2021. With a maximum credit of $7,000 per employee, per quarter, a business eligible for all three quarters of 2021, could receive refunds of $21,000 per employee. Without question, the ERTC can provide much-needed dollars for eligible employers.
How do I know if my business is eligible?
For most businesses, eligibility is determined by meeting one of two tests; with a third test available for quarters 3 and 4 of 2021, which will be outlined later.
- TEST #1 – A measure of decline in gross receipts. If an employer experiences a significant decline in gross receipts for any calendar quarter, as compared to the same calendar quarter in 2019, they will be eligible for the credit in that quarter. For 2020, this is defined as gross receipts that are less than 50% of gross receipts for the same quarter in 2019, and for 2021, this is gross receipts being less than 80% of gross receipts for the same quarter in 2019.
- TEST #2 – A full or partial suspension of operations. If an employer was subject to any full or partial suspension of operations because of government orders related to COVID-19 they could be eligible. These orders could be Federal, State, county, and/or municipality. Even if your business was deemed essential and was not directly affected by such orders, there still could be avenues to be eligible for the credit.
- TEST #3 – Under a third test, if a business can meet the definition of a recovery startup business, they can claim the credits for the 3rd and 4th quarters of 2021 only (not exceeding $50,000 per quarter). A recovery startup business is any employer that began a trade or business after February 15, 2020, and has average annual gross receipts of less than $1,000,000.
What are some important details to keep in mind?
- First, gross receipts are determined based on the method used for the employer’s tax return. Meaning, if your business uses the cash method for tax purposes, then gross receipts for Test #1 should be calculated using the cash method, even if your financial statements use the accrual method. This could be beneficial for businesses, especially during times when the pandemic was hitting the hardest and collections slowed.
- Another important item to keep in mind is that, for this credit, employers are considered either small or large. For 2020, a small employer is one that, based on 2019 counts, averaged 100 or fewer full-time employees. For 2021, this number increases to an average of 500 or fewer full-time employees, still based on 2019 counts. If a business is above these amounts, they are considered large. Small employer status is more advantageous because it allows qualified wages to include all wages paid. If a business is considered a large employer, qualified wages are limited to wages paid to an employee only for the time that employee was not providing services. For example, if your business is a large employer and operations were partially suspended, but all your employees continued working during that time, your business may not be able to claim any credits on the wages paid during that suspension period. For this purpose, a full-time employee is an employee that, in 2019, averaged at least 30 hours per week or 130 hours per month. As an example, an employer in 2019 who had 5 employees that worked 25 hours per week and 5 employees that worked 30 hours a week, would only be considered to have 5 full-time employees. Early on, a common misconception was that full-time employees were equal to full-time equivalents, which may have caused some businesses to think they were large employers, when in fact that may not be the case.
- Finally, there are several different paths a business could take to qualify for the ERTC based on a full or partial suspension of operations due to governmental orders. As previously mentioned, even if your business was not directly affected by the orders, there still could be ways to qualify for the credit. We encourage you not to overlook this test as it could be very beneficial to revisit.
What are my next steps?
With year-end planning season looming, your William Vaughan Company advisor will surely be discussing this topic with you in the coming weeks. If you are not currently a client, but this topic has piqued your interest and you would like us to look at how this credit might benefit your business, please do not hesitate to reach out to us. As mentioned, the credit has been generally underutilized, so we would love to help your business realize the greatest benefits it can.
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Mike Hanf, CPA, CGMA
Categories: Tax Planning
Apr 28, 2021
While the Research and Development (R&D) Tax Credit has been around for some time, it remains one of the best opportunities for manufacturing and distribution companies to minimize their tax liability and leverage an immediate source of cash. The credit was designed to provide a tax incentive for U.S. companies to increase spending on research and development in the U.S.
How to qualify
What constitutes as R&D is much broader than manufacturers realize. Applying to not only the development of products, but also activities and operations, such as new manufacturing processes, environmental improvements, software development, and quality enhancements. The R&D credit is available to any business that incurs expenses while attempting to develop new or improved products or processes while on U.S. soil. A four-part test has been established to help manufacturers determine if they qualify:
- An activity that creates a new or improved business component of function, performance, reliability, or quality;
- Technological in nature and related to physical or biological science, engineering, or computer science;
- Intended to discover information to eliminate uncertainty in capability, method, or design;
- An activity that includes a process of experimentation, or evaluating one or more alternatives to achieve a result. This might include modeling, simulation, or systematic trial-and-error.
How to claim the credit
Since the credit may be claimed for both current and prior tax years, manufacturers should document their R&D activities to ensure they are positioned to claim the credit in both situations. You will be required to factually provide the number of qualified research expenses (QREs) paid with documentation such as payroll records, general ledge expense detail, project lists, and notes, etc. Qualified research expenses are defined as:
- Wages paid to people directly working on, supervising, or directly supporting the development process
- Supplies used or consumed during the development process
- Contract research expenses paid to a third party for performing qualified research activities on behalf of the company
- The cost of cloud service providers or leasing computers used in research activities
It is important to note that research doesn’t have to lead to a successful product or process for the expenses to count. Even if the project or research failed, you can still claim the credit.
Additional tax benefits
- Alternative Minimum Tax – Eligible small businesses with an average of $50 million or less in gross receipts over the past three years may claim the federal R&D tax credit against their alternative minimum tax liability beginning in 2016.
- Payroll Tax – Eligible startups can use the credit to offset payroll withholding taxes. Startups using the provision must have gross receipts of less than $5 million and no gross receipts prior to the five taxable years ending in the then-current tax year. The credit towards payroll withholding taxes is limited to $250,000 in one year, but companies can carry forward excess credits to apply to future payroll withholding taxes.
How we can help
For more information about R&D credits or reducing your company’s risk of facing penalties, contact our Manufacturing & Distribution Practice Leader below.
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Robert Bradshaw, CPA
Manufacturing & Distribution Practice Leader
email@example.com | 419.891.1040
Apr 20, 2021
Further details on the Restaurant Revitalization Fund (RRF) were released by the SBA late last week. Details regarding application requirements, eligibility, and a program guide were all included in this announcement. A sample application for the RRF can be found here.
Over the next two weeks and before the application launch, the SBA is initiating a 7-day pilot period for the RRF application portal. Selections for the pilot period will be made at random and the participants will be from existing borrowers of PPP funds in priority groups. The funds requested from these early participants will not be made available until the application portal is open to the general public. Also, the SBA is working on an application program interface to allow for the application to be embedded in POS systems such as Toast, Aloha, Clover, and Square. This interface will allow operators to be able to submit applications directly within the POS system.
The SBA is expected to announce the official application launch date soon. Once the application is open to the general public, the first 21 days will be reserve for the priority groups including businesses owned by women, veterans, and socially and economically disadvantaged individuals. Furthermore, there will be funds set aside for various revenue groupings. Currently, there is $5 billion set aside for applicants with 2019 gross receipts of less than $500,000. There is also $500 million set aside in grant money for applicants that had gross receipts less than $50,000. The fund also has set aside $4 billion for applicants that had 2019 gross receipts ranging from $500,000 and $1.5 million.
The National Restaurant Association recently published a Q&A which can be found here to help clarify several questions surrounding the RRF program. Some highlights and further information of additional points of clarification can be found below.
There is a discussion that the RRF covered period will potentially be extended for an additional 14 months, which would allow applicants to have until March 2023 to spend the grant money.
An entity that has permanently closed or has filed for bankruptcy protection (without an approved plan of reorganization) will not be eligible for the RRF grant. Furthermore, the eligibility requirements include demonstrating at least one-third of an entity’s revenue comes from the sale of food or beverages being consumed on-site.
The following documents should be prepared for those entities entitled to RRF grants:
- An application form and the IRS Form 4506-T.
- Applicants in operation before January 1, 2019, must supply gross receipts for both 2019 and 2020
- Applicants in operation through part of 2019 must supply gross receipts for both 2019 and 2020
- Applicants that began operations on or between January 1, 2020, and March 10, 2021, and applicants that have not yet opened as of March 11, 2021, but have incurred eligible expenses, must supply documentation of both gross receipts and eligible expenses for the length of time in operation.
- Gross receipts and eligible expense documentation:
– Business tax returns (IRS Form 1120 or IRS 1120-S)
– IRS Forms 1040 Schedule C; IRS Forms 1040 Schedule F
– IRS Form 1065 (including K-1s)
– Bank statements
– Financial statements such as income statements or profit and loss statements
– Point of sale report(s), including IRS Form 1099-K
We will continue to monitor and provide updates on the RRF grant program as they are made available.
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Kristin Metzger, CPA
Restaurant Practice Leader
firstname.lastname@example.org | 419.891.1040
Apr 01, 2021
The Restaurant Revitalization Fund (RRF) which provides federal grants to the hardest hit sector of the economy during COVID-19 is about to become a reality. President Biden is expected to sign a $1.9 trillion relief package, the American Rescue Plan today. As part of this plan $28.6 billion has been allocated to small and mid-sized restaurants for The Restaurant Revitalization Fund.
What is this new program?
The Restaurant Revitalization Fund allows eligible businesses to receive grants equal to their pandemic-related revenue loss, with a maximum of $10 million per business entity, or $5 million per physical location. How much you receive depends on the revenue your business lost due to the pandemic and if it received a PPP loan.
Businesses that were established before January 1, 2019, can calculate their grant amount by subtracting your 2020 gross receipts from your 2019 gross receipts. Businesses that were established during 2019 can receive a grant equal to the difference between:
- Average monthly 2019 gross receipts, multiplied by 12
- Average monthly 2020 gross receipts, multiplied by 12
Businesses that were established on or after January 1, 2020, can receive a grant equal to eligible payroll expenses, minus gross receipts from that year.
Who is eligible?
Eligible businesses include any location where patrons gather for the purposes of being served food and beverages: restaurants, bars, caterers, lounges, inns, taverns, saloons, brew pups, taprooms, tasting rooms, food trucks, food carts, or food stands.
Who is not eligible?
- Restaurant chains that, together with affiliated businesses, own or operate more than 20 locations as of March 13, 2020
- Restaurants that have a pending application for or have received a grant for shuttered venue operations
- Publicly-traded companies, or
- State or local government-operated businesses.
What can the grant funds be used for?
- Payroll costs
- Rent payments (excluding pre-payments)
- Principal and interest payments on a mortgage (excluding pre-payments)
- Maintenance expenses including construction to accommodate outdoor seating and walls, floods, deck surfaces, furniture and fixtures, and equipment
- Supplies (including PPE)
- Food and beverage expenses
- Covered supplier costs
- Operational expenses
- Paid sick leave
- Any other expenses that the SBA deems essential to maintaining the eligible business
How and when can you apply for the grant?
Much like the Paycheck Protection Program, the Restaurant Revitalization Fund grants will be distributed by the Small Business Administration. Applications will be available on their website in the coming days. During the first 21 days of the fund launching, the SBA will give priority to restaurants owned and operated by veterans, women, or socially and economically disadvantaged individuals. If after 60 days, the funds have been exhausted, the SBA will have the discretion to administer grants to eligible businesses without regard to annual gross receipts.
During a Senate Small Business Committee hearing, senior SBA official Patrick Kelley confirmed the U.S. Small Business Administration (SBA) is targeting early April to launch a phased rollout of the $28.6 billion Restaurant Revitalization Fund (RRF). In addition, state restaurant associations have been meeting with Congressional leaders to learn more about details regarding applications, etc.
Key updates resulting from these meetings include:
- SBA will likely start posting relevant qualifications, instructions, and other information for restaurant operators over the next 7-10 days and give guidance on supporting documents needed to apply
- SBA will open applications in April
- SBA is currently planning the whole process will take place over the next 30-45 days
- SBA also confirmed applicants for the Fund program will not need to register for a DUNS number or on SAM.gov.
- The process is slow on account that the SBA has to build a technology platform from scratch with the capability of dealing with the crush of applications and likely automating the process so it’s as efficient as possible. Once it’s up and running, the grants will function like direct payments to the applicants. The SBA is also in talks with third-party POS vendors to discuss accessing relevant sales data needed for application processing
We will continue to provide updates as the SBA releases additional guidance. Please check back periodically as we will post updates here.
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Kristin Metzger, CPA
Restaurant Practice Leader
email@example.com | 419.891.1040