Industry 4.0—also known as the Fourth Industrial Revolution or “smart manufacturing”— refers to the digital transformation of the manufacturing field, including the integration of technologies such as artificial intelligence, Internet of Things (IoT), cloud computing and analytics, and machine learning (IBM). While large manufacturers have access to the funding and resources required to embrace Innovation 4.0 fully, small and medium-sized businesses may find it more difficult to adopt the latest technologies due to funding and staffing restraints, among other concerns. However, there are ways that small and medium-sized manufacturers can integrate elements of smart manufacturing without breaking the bank.

Challenges

• Funding and resources: Many of the technologies included under Industry 4.0 require significant initial investment, something that may be unrealistic for smaller manufacturing firms. Current economic uncertainty and rising production costs add to financial concerns for smaller companies.
• Staffing issues: Small and medium-sized businesses often lack the specialized staff needed to operate the new technologies. As a study entitled “Industry 4.0 – opportunities and challenges for SMEs in the North Sea Region” points out, “there is a shortage or lack of proper access to people with the right skills and at the level of systematic engagement with the skills education/ training that could sustain these fast-moving changes.”
• Security concerns: Many companies worry about the cybersecurity risks involved in adopting Industry 4.0 technologies, and the costs and resources required to manage these risks. Smaller companies tend to have limited resources to dedicate to cybersecurity measures.

Solutions

• Start small: Many sources indicate you don’t have to start with a major overhaul that disrupts operations; progress can be made in phases and by doing more with the equipment you already have. Smart manufacturing solutions are scalable and can be added gradually to a company’s tech stack. Platforms can be expanded and developed over time as your company’s budget allows.
• Focus on low-cost technologies first: Consider how AI and machine learning can address pain points in your business. Try using free AI programs to help you with a variety of everyday tasks, from marketing to scheduling, tracking receipts for expense reporting, and more. And, if you can, take advantage of AI enhancements to your current systems, equipment, and operations. The Manufacturing & Technology Enterprise Center (MTEC) in a 2023 article discussed several lower-cost automation options for small manufacturers, including: collaborative robots (more affordable than industrial robots), programmable logic controllers (PLCs), automated conveyor systems, automated guided vehicles (AGVs), automated packing machines, and other technologies.
• Collaborate: Small manufacturing firms can partner with larger, well-established institutions to make smart manufacturing more attainable. An article published by RIT’s Golisano Institute for Sustainability spotlights one small business in Ontario, NY, that uses collaboration as a strategy to support its Industry 4.0 initiatives. The company, OptiPro, partners with government agencies and research universities to access funding and conduct research related to new technologies. Businesses can also gain access to valuable expertise through these partnerships.
• Focus on employee training: To adopt Industry 4.0, you will need to prioritize training your employees on new technologies. Upskilling and reskilling your existing staff is generally the most cost-effective solution to the skills gap problem.
• Implement affordable cybersecurity measures: net discusses several low-cost strategies for improving cybersecurity, including implementing password policies, multi-factor authentication, mandatory cybersecurity training for employees, and utilizing affordable external resources (listed here).

Small and medium-sized manufacturers don’t have to be left behind in the race to Industry 4.0. While you focus on integrating the latest technologies into your business model, you can rely on RBT CPAs for all of your accounting, tax, audit, and advisory needs. Contact us today to learn more.

As a manufacturer in New York State, you may be able to receive tax credits for purchasing new equipment, creating new jobs, utilizing property for manufacturing, investing in research and development, participating in the Excelsior Jobs Program, and more. Tax credits can directly reduce the taxes you owe and, in some cases, produce a refund. In the spirit of tax season, let’s take a look at some of the tax credits available to manufacturers in New York.

1. Investment Tax Credit (ITC) and Employment Incentive Credit (EIC)

Businesses in New York that make investments in machinery, buildings, or equipment are eligible to receive the Investment Tax Credit. The standard rate of credit for C corporations is 5% on the first $350 million invested, and 4% for any amount over $350 million. The credit for S corporations, partnerships, and sole proprietorships is a flat 4% rate. Any unused credit can be carried forward 15 years for C corporations, or 10 years for S corporations, partnerships, and sole proprietorships. A corporation that qualifies as a new business can elect to receive a refund for unused credit rather than carrying it forward. If your investment in qualifying property creates additional jobs, your business may also be eligible for an Employment Incentive Credit (EIC) for the two years succeeding the investment. To qualify for the Employment Incentive Credit, you must (1) qualify for the Investment Tax Credit and (2) increase your average number of employees by at least 101% of the average number of employees during the employment base year (the year immediately preceding the ITC year).

2. Manufacturer’s Real Property Tax Credit

You may be eligible to receive a credit equal to 20% of the real property taxes paid during the tax year on your New York State business property. To qualify, you must use your property principally for manufacturing, processing, assembling, refining, mining, extracting, farming, agriculture, horticulture, floriculture, viticulture, or commercial fishing. For more information about eligibility requirements, see Manufacturer’s Real Property Tax Credit.

3. R&D Tax Credits

Planning to research new technologies or develop a new product? New York manufacturers may be eligible for both federal and state credits for research and development (R&D) activities. The federal R&D Tax Credit offers a dollar-for-dollar reduction in taxable income for qualifying expenses. This credit is available to U.S. businesses for qualifying research activities like software development, testing new technologies, product enhancements, and more. Qualified small businesses can use the R&D credit to offset quarterly payroll taxes up to $500,000. New York State offers a separate R&D tax credit to businesses participating in the Excelsior Jobs Program. The Excelsior Research and Development Tax Credit equals 50% of the business’s federal R&D credit related to R&D expenses in New York State, up to 6% of research expenses based in NYS (8% for a qualified green project or green CHIPS project).

4. Excelsior Jobs Program Tax Credit

If your business participates in the Excelsior Jobs Program, you may be eligible to receive the Excelsior Jobs Program Tax Credit, equal to the sum of five components:

• • Excelsior Jobs Tax Credit (up to 6.85% of wages per net new job; up to 7.5% for green project or green CHIPS project)
  • Excelsior Investment Tax Credit (2% of qualified investments; up to 5% for green project or green CHIPS project)
  • Excelsior Research and Development Tax Credit (50% of federal R&D credit related to R&D expenses in New York State, up to 6% of research expenses based in NYS or 8% for green project or green CHIPS project)
  • Excelsior Real Property Tax Credit (available to businesses located in certain distressed areas or qualified as Regionally Significant Projects)
  • Excelsior Child Care Services Tax Credit (up to 6% of net new childcare services expenditures)

For more information about the tax credits included under the Excelsior Jobs Program, visit Empire State Development.

Have questions?

Understanding the various tax credits available to New York manufacturers can be a confusing process. That’s where we can help. RBT CPAs’ tax and accounting professionals are here to help you understand and claim credits for your business, allowing you to make the most of tax-saving opportunities in our state. Learn more by speaking with one of our experts today.

With escalating trade wars, geopolitical uncertainties and conflicts, the pending Presidential election, and more, U.S. manufacturers continue to navigate choppy waters to chart their supply chain strategy.

Building on President Trump’s 2018 tariff increase on goods from China, in mid-May, President Biden set out to address unfair trade practices and “artificially low-priced exports” from China that are “threatening American businesses and workers.” Under Section 301 of the Trade Act of 1974, tariffs are increasing on $18 billion of imports from China. Tariffs on electric vehicles are increasing from 27.5% to 100%. They are also increasing between 25% and 50% for semiconductors, steel and aluminum, batteries and critical minerals, solar cells, ship-to-shore cranes, medical products, and more.

In mid-June, the G7 (Britain, Canada, France, Germany, Italy, Japan, and the U.S.) pledged to protect their manufacturers against China’s unfair practices and discussed shifting production to countries like Vietnam and Mexico. (India and Bangladesh are also popular options).

For U.S. manufacturers, nearshoring by bringing production to Mexico appears to be an attractive option. In fact, in 2023, Mexico replaced China as the leading exporter to the U.S. thanks to low labor costs, its proximity, and the US/Mexico/Canada free trade pact (USMCA) which removes barriers to buying, selling, and moving parts across the continent.

However, there’s a problem. According to a report from the Alliance for American Manufacturing, “Countries like Vietnam and Mexico have become routes for Chinese manufacturers to flood the American market with the products they have difficulty sending here directly.” In some cases, China is setting up operations in other countries to bypass the U.S. tariffs. In others, it’s shipping supplies to local manufacturers that ship it out under their name.

Perhaps that’s why onshoring (also referred to as reshoring) remains the preferred supply chain strategy among U.S. manufacturers. Fictiv’s 9^th annual State of Manufacturing report indicated, “For the third year in a row, improving manufacturing and supply chain visibility (54%) is the top priority for leaders, followed by increasing supply chain resilience and agility (48%).” The report indicates manufacturing leaders are considering global tensions as they go about long-term planning and are continuing to adopt onshoring as their lead supply chain strategy.

Finding supply chains offering stability, flexibility, shorter lead times, sustainability, lower costs, and ultimately a competitive advantage is no easy task, especially given the current environment. If you’re looking for more information or assistance, the Manufacturing Extension Partnership’s (MEP’s) National Network offers services to help improve supply chain performance and manage disruptions. This may include supply chain mapping and risk assessment; supplier scouting; process improvement and supplier development; and procurement and supply chain management strategy.

While you focus on your supply chain and other priorities, you can count on RBT CPAs to focus on your accounting, advisory, audit, and tax needs. Give us a call or send an email and let us know what you need. We would appreciate having the opportunity to show you how we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Now that another tax season is wrapped up and the impact on your business is top of mind, consider taking some time to evaluate whether your tax strategy is supporting your business goals or whether you should consider making adjustments. (Even if you filed an extension for your 2023 tax returns, it’s still a good idea to check in on your tax strategy to maximize what you can do in 2024.)

First, conduct a thorough review of your 2023 tax returns. Were you happy with the outcome? Did you pay more in taxes than you expected? Did you take maximum advantage of tax deductions and credits? What changes would better help support your business plans for 2024 and over the long term?

Next, consider your business growth strategy. Is your business expanding? Do you plan to invest in new assets or hire more employees? Are there tax opportunities to support your goals?

Also, take a closer look at your estimated tax payments. If your business income is fluctuating, you may need to adjust payments accordingly. Remember that estimated tax payments are not set in stone. They can and should be adjusted based on changes in income, expenses, or changes in tax law.

Finally, be proactive so you can maximize opportunities to reduce tax liabilities. Some things to consider:

• Is it time to upgrade or expand your facility and take advantage of beneficial tax treatment for energy-efficient renovations? Security and HVAC systems, fire protection systems, and structural improvements to non-residential buildings may qualify for a Section 179 deduction.
• Do you need new (or used) equipment? Most small and medium-sized businesses qualify for Section 179 deductions for the cost of office furniture and equipment; computers and software; certain vehicles; machinery and equipment and other property used for business. Just be sure to put any eligible purchases into service before December 31, 2024, to be eligible for the 60% bonus deduction (which drops to 40% in 2025; 20% in 2026; and expires thereafter).
• Are you stepping up research activities and maximizing related payroll tax credits you may be eligible for?
• Are you staffing up? Hiring targeted workers can earn tax credits for your business.
• Should you offer a qualified retirement plan, a Section 125 plan for health and dependent care expenses, or educational assistance (which can also be used to pay off student loans through 2025)? Not only will these benefits support recruitment and retention, but your business can get a tax deduction for contributions.
• Do you have an accountable plan for employees’ business expenses? Should you? You get to deduct the expenses and you and your employees don’t have to pay withholding or FICA taxes (as reimbursement is not treated as income).

While April 15th signifies the end of tax season, it should also mark the beginning of proactive tax planning for the remainder of the year. To ensure your business is taking full advantage of all tax benefits and staying compliant with changing tax rules, RBT CPAs is here to help.

Make the most of the rest of 2024 when it comes to your tax strategy, credits, incentives, and deductions. Schedule a tax review and planning session with one of our tax or advisory professionals, click here. That way you can find out how we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

One of the more challenging tax concepts business owners should understand, plan for, and address as part of their overall tax strategy is called nexus.

In simplest terms, nexus defines when you must register to do business and pay sales and use taxes in a particular state (and, in some cases, local jurisdictions). However, there’s nothing simple about it.

In general, if you have a sufficient physical presence in a state – like an office, store, or warehouse – nexus applies. If you have employees working out of another state – even remote workers, agents, or an affiliate – nexus is triggered. And if your business’ economic activity in a state – online or offline – meet certain thresholds, nexus comes into play. These are the easiest triggers to understand – there are others.

What’s more, with the growth of online marketplaces and remote sales, legislation regarding nexus has evolved. As a result, going beyond merely having a physical presence, businesses are required to pay sales and use taxes when they have a significant connection to a state. Each state (and in certain cases, jurisdictions like counties or municipalities) set their own thresholds for triggering “economic nexus.” Thresholds are usually based on revenue, sales volume, and/or number of transactions.

For example, Connecticut adopted its economic nexus threshold in 2018 and updated it in 2019. Today, its threshold is $100,000 in gross sales (including online sales) and 200 or more transactions in the 12 months preceding December 30.

On the other hand, Mississippi adopted its economic nexus threshold in 2023. The threshold is $100,000 in taxable sales within the 12-month period ending on the last day of the most recently completed calendar quarter.

To complicate matters, state thresholds can be adjusted and change. So even if your business didn’t trigger economic nexus a year ago in a certain state that may not be the case today.

The consequences of not complying with nexus requirements can be severe. States can impose penalties, interest, and even civil or criminal charges for non-compliance. Moreover, states can audit businesses and demand payment for uncollected sales tax retroactively for multiple years covered under a statute of limitations. The unexpected financial impact could devastate a business.

To simplify a complex topic, we’ve focused largely on nexus as it relates to sales taxes. However, it’s important to know that when nexus exists it can expand a company’s tax obligations to include state payroll taxes, excise taxes, and franchise taxes (a levy for doing business in a state), as well as additional permit and filing requirements. That’s another discussion for another article.

For now, focus on protecting yourself and your business from the legal and financial ramifications of non-compliance with nexus by consulting with a professional, experienced tax advisor – like the ones you will find at RBT CPAs. Please don’t hesitate to give us a call and learn firsthand why businesses across the Hudson Valley and New York have entrusted us with their accounting, tax, audit, and business advisory needs for over 50 years. RBT and your business can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Have you been thinking about purchasing new or used equipment to enhance your manufacturing capabilities? How about upgrading technology and software or updating your facility and equipment? With end of year approaching, you have limited time left to consider whether to purchase, lease, or finance certain assets to take advantage of Section 179 tax benefits. It’s also a good time to consider how Section 179 may play into your business and tax strategy for 2024.

Section 179 uses first-year expensing. That means you can deduct the expense for an eligible asset immediately, rather than depreciating it over time. It serves as an incentive for a business owner to invest in the business and enhance its capabilities and services with the purchase and installation of capital equipment.

One big caveat: You must put the asset you purchase into service the year that you plan on taking the deduction. With just weeks left in 2023, it will be important to account for this in your planning.

Most small and mid-sized business owners qualify for Section 179 deductions. Qualifying purchases can include office furniture and equipment; computers and software; certain vehicles (some with annual deduction limits); machines and manufacturing equipment; and other property used for business. Security systems, HVAC systems, roofs, fire protection systems, and other structural improvements to non-residential buildings may also qualify for a Section 179 deduction.

Equipment can be new or used (as long as you weren’t the prior owner). It can be purchased outright, financed, or leased. So, let’s say you want to purchase qualifying equipment for $1 million and you have $250,000 for the down payment and finance the remaining $750,000. As long as the equipment is put into service this year, you can deduct the full $1 million this year.

Through 2026, there’s an added bonus. For expenses not eligible for the Section 179 deduction, there’s a bonus depreciation allowance in year one. For 2023, bonus depreciation is 80% — remember, that’s in addition to regular depreciation. The bonus depreciation decreases for the next three years (60% for 2024, 40% for 2025, 20% for 2026). Starting in 2027, this additional benefit will no longer be available. Because of this phase-out, businesses benefit the most by making capital purchases sooner rather than later.

Section 179 numbers to know for 2023:

• Maximum 179 deduction: $1,160,000
• Phaseout threshold begins at $2,890,000 and ends at $4,050,000. (So, if you buy eligible assets that cost more than $2,890,000, your maximum 179 deduction is reduced dollar for dollar by amounts over $2,890,000. Purchases above $4,050,000 are not eligible for a 179 deduction, but bonus depreciation can still apply.)
• Bonus depreciation: 80%

If you need help determining whether to act quick to take advantage of Section 179 this year or whether to make it part of your tax strategy for 2024, your RBT CPA client manager can help – reach out to him/her today. Please remember RBT CPAs is here to help with your accounting, tax, audit, or business advisory needs. Interested in learning more? Give us a call today.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

In the blink of an eye we’re in the last quarter of 2023. Don’t blink again or you’ll miss the time remaining in the year to make decisions that can impact your tax liability. Instead, take a few minutes to consider deductions and tax credits you may be eligible for. Even better, call your RBT CPAs contact to talk through your options and plans. For now, here are highlights of some opportunities to consider…

Will you be eligible for a Qualified Business Income (QBI) deduction?

Eligible small businesses include includes sole proprietorships, partnership, S corporations, Limited liability companies. For 2023, total taxable income must be under $182,100 for single taxpayers and $364,200 for married taxpayers filing jointly. Businesses with taxable income exceeding those limits may qualify for a partial deduction if taxable income is under $232,100 for single taxpayers and $464,200 for married taxpayers and other tests are met.

For tax years beginning on or before December 31, 2025, the QBI (a.k.a. Section 199A) deduction allows eligible small business owners and self-employed individuals a tax deduction of 20% of their QBI plus 20% of qualified real estate investment trust dividends and qualified publicly traded partnership income. That’s in addition to the standard deduction.

Do you need new equipment?

Internal Revenue Code Section 179 gives you incentive to consider it. If you buy or lease (with qualified financing) appreciable business equipment, you can deduct the full purchase price (or lease amount) from your gross income. Equipment can include office machinery, furniture, vehicles, computers, and more. The item must be new to your business, used for business purposes, and put in service the year that you take the deduction. The most you can deduct under Section 179 for 2023 is $1,160,000. There’s also an 80% first year bonus depreciation for 2023, so you can reduce your tax liability even more.

Have you increased research and development?

You can take a credit to reduce your income tax liability and, under the Inflation Reduction Act, apply up to a $500,000 credit towards payroll taxes for Social Security and FICA. At the same time, it’s important to know that all Section 174 expenses, including R&E for software development, must be amortized over a five-year period (15 years for research conducted outside the U.S.). Before this change, R&E expenses could be immediately deducted from taxable income. So, your tax liability will likely change and may increase significantly.

Have you invested in solar power or energy-saving facility upgrades?

Receive a tax credit for up to $5/square foot for energy efficiency improvements – including but not limited to interior lighting, business envelop, HVAC or hot water systems – that reduce energy and power costs. In addition, if you switch over to low-cost solar power, you may be eligible for a tax credit equal to 30% of the cost of switching.

Should you adopt a new retirement plan?

If eligible, you can claim a tax credit of up to $5,000 for three years for the costs to start, administer, and educate employees about a SEP, Simple IRA, or other qualified plan. What’s more, as noted on the IRS website, “You can claim the credit for each of the first 3 years of the plan and may choose to start claiming the credit in the tax year before the tax year in which the plan becomes effective.”

Deciding whether to take action to reduce tax liabilities and how isn’t simply black and white. It does depend on your short- and long-term business goals, and other variables. That’s why it’s best to speak with your RBT CPAs client manager. He/she can help you understand your options and the implications of any move you make, so you’re in the best position to maximize opportunities that may be available to you in 2023. For more information, give us a call today.

RBT CPAs is proud to say all our work is prepared in the U.S.A. – we never offshore. As a result, you get peace of mind that your operation’s financial and confidential information is handled by full-time, local staff who have met our high standards for quality, ethics, and professionalism.