This is not another article on how artificial intelligence (AI) and machine learning (ML) are transforming manufacturing. Day after day, your inbox and media feed are probably full of them. As is the case with many trending stories, it’s hard to tell what’s actually happening versus what’s expected to happen. I’m hoping this article provides a little perspective so Small and Medium Businesses (SMBs) in the manufacturing space can stop feeling like they’re the only kids on the block without the latest I-phone.

Don’t get me wrong. The transformative capabilities and potential uses of AI and ML in the manufacturing space can’t be over-stated. AI/ML should absolutely be an ongoing strategic consideration for all manufacturing business leaders.

In January, the World Economic Forum’s article “6 ways to unleash the power of AI in manufacturing”  acknowledged: “The global AI in manufacturing market is valued at $3.2 billion in 2023 and is poised to grow to $20.8 billion by 2028. Yet, despite these possibilities and significant investments, manufacturers are not harnessing the full potential of AI.”

This sentiment was echoed in a recent blog article published by the American Society of Mechanical Engineers. While discussing AI as the industry’s key to future growth and profitability, the article acknowledges, “The uptick in usage has continued to be slow as well as uneven.” (Cecere, Cathy. March 6, 2024. “Manufacturing in 2024 Means Embracing AI.” ASME.org.)

After doing some research, I found this undercurrent of discussion about actual AI/ML use is starting to make its way into the media mainstream. It appears that while the biggest businesses and companies developing AI solutions are making the most progress and largest investments in AI/ML applications, SMBs in manufacturing should not just consider closing shop because they don’t have the knowledge, finances, or ability to make big leaps into the AI/ML arena right now.

It’s hard to tell what percentage of manufacturing companies – especially SMBs – are actually deploying AI/ML solutions today. Survey results from different sources run the gamut, indicating less than 4% of businesses are using AI/ML to produce goods and services to stating more than half of SMBs are playing in the AI/ML arena. One survey shows about 30% of large companies are using AI/ML and another shows less than 20% of global manufacturing companies use AI/ML on the plant floor.

Rather than trying to keep up with the Joneses, it feels like a good time to level set what manufacturing SMBs can actually do with AI/ML today and how to plan for the future. At this point, staying knowledgeable about what’s available, what’s coming, and use cases is vital.

Consider how AI/ML can address pain points in your business. Begin seeing how free AI apps can 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, explore where it makes the most sense.

The U.S. Chamber of Commerce has some information about small business use of AI. The U.S. National Institute of Standards and Technology (NIST) points out that, among other things, the Manufacturing Extension Partnership offers resources to “help you understand what technologies exist and if they are a good fit for your business,” with experts available to help you “establish an adoption strategy, scope the project, align suppliers with vetted resources and manage implementation to ensure your business goals and customer needs are met.” To learn about the NY MEP, click here.

As you’re considering how AI/ML will impact your business in the future, please remember RBT CPAs is  available to meet all of your accounting, tax, audit, and advisory needs. We’ve been proudly serving municipalities, businesses, non-profits, and individuals in the Hudson Valley for over 50 years. Please don’t hesitate to give us a call and 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.

The RBT CPAs Advisory Services team receives a lot of inquiries about internal financial controls, especially as a growing number of our manufacturing clients explore and implement Enterprise Resource Planning (ERP) systems. So, we figured we’d do an article on the topic. Take a look as financial controls can help any business – whether it’s adopting an ERP or not – protect its assets, promote transparency, provide data to make business decisions, and instill stakeholder and investor trust.

Starting with the basics…The Sarbanes-Oxley Act (SOX), enacted in 2002, was a regulatory response to major corporate and accounting scandals. SOX Section 404 mandates publicly traded companies in the U.S. establish, document, test, and maintain internal controls and procedures for financial reporting. Among other things, these companies must produce an annual report where management asserts the effectiveness of internal controls.

Private companies looking to go public must be SOX-compliant before an initial public offering. Although not mandatory, many nonprofits voluntarily adopt SOX provisions as best practices. New York State law requires state agencies and public authorities to maintain a system of internal controls to help safeguard public assets and promote accountability in government.

Internal financial controls are processes designed to help prevent fraud, enhance reliability of financial statements, reduce the risk of unexpected financial losses, and ensure compliance with laws and regulations. They include procedures for authorization, record keeping, reconciliations, and auditing. They also contribute to effective management by providing reliable data for decision-making.

Although a business can consider adopting financial controls at any time, they are particularly important as part of ERP implementations. ERP systems eliminate data silos, reducing the risk of errors and fraud while promoting financial integrity and transparency. ERPs enable real-time tracking of financial transactions. So, instead of waiting for end-of-period financial reports, managers can proactively monitor financial processes, promptly detecting and addressing any anomalies. What’s more, by automating routine tasks, ERP systems minimize manual intervention, reducing the risk of errors and freeing up time for more strategic activities. Based on our advisory services teams’ experiences with ERP implementations, the one non-negotiable recommendation we would make is to define internal financial controls as part of the up-front planning process. Trying to develop these controls concurrent with ERP implementation or after the fact can lead to higher implementation costs, longer project timelines, and extended business disruption.

If your business is going to take the time and expense to implement an ERP, defining financial controls upfront is critical to maximizing your return on investment. Even if your business isn’t currently considering an ERP, internal financial controls can provide added protection for your business, while increasing trust among stakeholders, including financial institutions, investors, and lenders.

Interested in learning more? For business advice, accounting, audit, and tax services, RBT CPAs professionals are always available. Give us a call.

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.

Within the last few years, registered apprenticeship programs have become a growing part of national, state, and regional workforce planning strategies, making them a strong option for building a talent pipeline with advanced skills to operate new and emerging technologies.

As industries like agriculture, health care, cybersecurity, manufacturing and more evolve thanks to technology, employers are experiencing a skills gap. These industries need employees with higher skillsets, but not necessarily a four-year college degree. Registered apprenticeship programs are helping to fill the gap.

In December of 2022, the Mid-Hudson Regional Economic Development Council’s Workforce Development Strategy identified Advanced Manufacturing as one of three priority sectors for workforce strategies. The report explains, “Advanced Manufacturing differs from traditional manufacturing in that it incorporates innovative technologies, such as computation, sensing, and networking, into the production process. Types of Advanced Manufacturing include additive manufacturing/3D printing, advanced/composite materials, robotics/automation, laser machining/ welding, and certain types of nanotechnology.”

It adds, “Many traditional manufacturers in the Region have also adopted value added manufacturing processes that require similar skill sets and training as those in Advanced Manufacturing.” As a result, there’s a big demand for machinists, welders, electrical and mechanical technicians, and semiconductor technicians, along with computer science skills.

While apprenticeships to develop these skills were once reserved for large employers due to the time, expenses and resources required, registered apprenticeships are now accessible to small and medium manufacturing employers as well, thanks to associations like the Council of Industry (COI) and its Manufacturing Intermediary Apprenticeship Program (MIAP).

COI Vice President of Operations & Workforce Development Johnnieanne Hansen spoke with us about how it works.  “Let’s say you run a small manufacturing business and you have one or two employees who you would like to upskill so they can successfully operate new and emerging technology, now or somewhere down the line. You would give us a call. We evaluate whether an apprenticeship is a good fit for your needs and, if so, we take care of the compliance end of things – helping you identify schools that meet classroom requirements for registered apprenticeships; completing and submitting the necessary paperwork to register with the NYS DOL; onboarding the new apprentice; and then tracking and documenting progress.”

Without the COI’s support, an employer may find it takes six to nine months to meet all the NYS DOL compliance-related responsibilities to build and register an apprentice program. Because the COI is a DOL-approved sponsor for manufacturing related trades, the timeframe to register an apprentice can take less than a week.

Best of all, the COI provides these services to any manufacturer in the Hudson Valley at no cost. While a COI membership does offer numerous advantages and access to additional resources and information about workforce development and funding opportunities, it is not required. Johnnieanne explains, “We want to remove as many barriers as possible to help employers. Their only investment is their time and their commitment to seeing the apprenticeship program through.”

When it comes to paying related schooling costs as part of an apprenticeship program, all SUNY schools in the Hudson Valley offer up to $5,000 in tuition credits. In addition, New York’s Apprenticeship Expansion Grant program provides awards of up to $15,000/apprentice to help cover program costs. (Applications are accepted on an ongoing basis until August 23, 2024.)

There are also tax benefits. Through 2026, apprenticeship program sponsors and participating employers in New York may be eligible for the Empire State Apprenticeship Tax Credit for each apprentice. In general, the tax credit starts at $2,000/year one and increases by $1,000/year until it reaches $6,000/year five. For disadvantaged youth, the credit starts at $5,000/year one and increases to $7,000/year five. If a mentor counsels an apprentice for an entire year, the credit increases by $500.

For more information about an apprenticeship program, refer to the Registered Apprenticeship in New York State booklet or contact the COI. To help you find time to focus on this, please know RBT CPAs is here to support all of your tax, audit, and advisory needs. Give us a call to learn how we can work together to promote your business success.

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.

Big manufacturers have the money and resources to embrace the many different technologies and capabilities that make up Innovation 4.0, while small and medium businesses may be challenged to simply keep the day-to-day going in an uncertain economic environment, much less take on the task of investing time and resources to build their tech stack. One consideration: it doesn’t have to be an all or nothing proposition.

Technology that makes up Innovation 4.0 (also referred to as Manufacturing 4.0 and smart manufacturing, among other monikers) can help address labor challenges now and in the future. Adopters are finding technologies increase productivity and safety; operate in a more environmentally friendly manner; hasten product development; promote quality; reduce downtime with predictive maintenance; and save time on a variety of other business-related tasks ranging from marketing and invoicing to recruiting and more.

Manufacturing.net reports, “The return on investment of Industry 4.0 can be very high, with a McKinsey report suggesting that the addition of AI and automation technology can lead to 30 to 50 percent reduction in machine downtime; 10 to 30 percent increase in throughput; 15 to 30 percent improvement in productivity, and 85 percent increase in forecasting accuracy…Manufacturing companies that achieve even the lower end of these potential business gains stand to recover their initial expenses very quickly.” (Kumin, Roland. Five Common Myths About Industry 4.0. August 9, 2023. Manufacturing.net.)

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.

According to Mfgtec.org, “Many of us know that automation is a great way to help increase efficiency in your manufacturing processes. However, not everyone can afford state-of-the-art machinery or robotics. When it comes to inexpensive automation machines, there are several options available that can help streamline manufacturing processes without breaking the bank.” (Timoldi, Daniel. Affordable automation options for manufacturers looking to increase productivity. June 28, 2023. MFGtec.org.)

An article in IndustryWeek.com notes, “The beauty with implementing these technologies is that they build on each other, one investment leading into the next… Manufacturers shouldn’t think twice about simply diving in, researching certain technologies and figuring out how to implement within their companies… A step-by-step approach also allows leadership to gain greater understanding of often complex technologies and systems, snowballing into more successful implementations as time goes on (Karp, Ethan. Digital Transformation on a Small Business Budget: It Can Be Done. February 2, 2023. Industryweek.com.)

The Manufacturing.net article referenced earlier points out, “Modular smart manufacturing platforms are highly flexible and scalable. For example, you can start with a solution to enable predictive maintenance first, before adding another module to automate production orders, then another to capture and analyze quality data, and so on. A good Industry 4.0 platform integrates seamlessly with your existing processes and equipment to automatically capture data, build digital twins, and generate valuable insights. It can also be upgraded as business growth allows.” (Kumin, Roland. Five Common Myths About Industry 4.0. August 9, 2023. Manufacturing.net.)

With so many technology solutions available, it can be challenging to determine where to start or how to proceed; however, there are organizations and resources that can help:

• The Manufacturing & Technology Enterprise Center or MTEC, the official representative of the Manufacturing Extension Partnership (MEP) National Network in New York State/Hudson Valley, provides consulting services to small and midsized manufacturers.
• Empire State Development Division of Science Technology and Innovation (NYSTAR).
• Manufacturing USA Institutes, comprised of public and private institutes with a goal to “secure the future of manufacturing in the US through innovation, collaboration and resources.”
• Association for Advancing Automation (A3), North America’s largest automation trade organization, offers articles, beginner guides, and webinars.

To free you up to focus on your business and technology strategy, RBT CPAs is here to offer you peace of mind that your accounting, audit, tax, and business advisory needs are covered. We’re a leading accounting firm in the Hudson Valley, dedicated to exceptional customer service and upholding the highest levels of integrity. To learn what we can do for you, give us a call.

RBT CPAs is proud to say all of 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.

For years now, there has been a lot of discussion about the transformative powers 5G will have on manufacturing and the world. There have also been numerous discussions questioning whether its capabilities have been overexaggerated. As we enter year five of the discussion and transformation, it looks like 5G is taking hold, especially in large companies. Some sources even suggest that companies that don’t start planning for 5G will be at a significant competitive disadvantage in the future.

Admittedly, I am a CPA trying to talk future technology, so bear with me. To take this story forward, I took a step back to get my grounding. First, what is 5G? Literally, it stands for the fifth generation of cellular wireless technology. 1G allowed for voice. 2G allowed for digital voice. 3G allowed for data. 4G brought streaming. 4GLTE allows all the things up through 4G, but faster and better than ever before. Enter 5G, which appears to be a game changer that will take the world leaps and bounds ahead of where it is now.

With 5G, communication will be significantly faster (transmitting data 20x faster than 4G). Everything and everyone will be connected — more machines, objects, and devices (handling 100x more traffic) than ever can operate on the network and perform without issue, making it available to more users and more reliable. The delay in data traveling and an action occurring (latency) will be much lower, thanks to higher radio frequencies allowing data to be transported much faster. And, it supports wireless operations, allowing the imagination to run wild on configuring a shop floor. (Source: Stone, Mark. What Will 5G Cost My Business? Verizon.com.)

So, where does everything else – like IoT, edge computing, robots, augmented reality (AR), virtual reality (VR), automated guided vehicles (AGV), sensors, machine vision, and more – fit in? Wi-Fi just can’t handle all of it or maximize what their combined abilities are capable of; 5G can. It’s basically where everything is going to come together and be able to do all of the things we’ve been hearing about for years. What’s more, there will be more data available to help with decision-making.

As an end game, 5G is expected to transform how work gets done and data gets used, driving productivity, competitiveness, quality, cost savings, and profitability. It will impact virtually every aspect of the manufacturing process, from inventory tracking, facility security, warehousing and logistics inside facilities, and quality control to assembly, maintenance, safety, and even employee training.

In a 2021 study, the Manufacturing Institute learned, “Nearly all manufacturers (91%) believe 5G connectivity will be important to the overall future of their business, with three-fifths (61%) indicating it will be extremely important.” In addition, the study found companies expect 5G to deliver significant value to enable new applications, increase automation, enable AR/VR applications, enable use of mobile robots and AGV, redesign factory spaces and machines, allow for remote line of sight into operations, and decentralize decision making.

As reported by Accedian.com, “One of the most profound properties of 5G is the ability to allocate network capacity to private enterprises. This is network slicing. It gives enterprises the means to set up high speed, low latency connections in a self-contained environment.” The Accedian report includes Analysys Mason data indicating that by 2024 76% of manufacturers will adopt private 5G networks to improve network security, performance, and application.

Metrology News reports “By 2030, more than 50% of the major manufacturers will have 5G implemented on their shop floors.” What about the middle market? The high cost, infrastructure, and talent demands that accompany the move to 5G seem to put it out of reach, for now. Still, there are opportunities for more middle market and smaller manufacturers to upgrade infrastructure in preparation for 5G. For example, adopting multi-access edge computing (MEC) that enables ultra-low latency via wireless technology can be launched on LTE networks today and integrated with 5G later. (Source: Yee, Bernard. How Manufacturers Can Prepare for the 5G Revolution. ATT.com.)

Finally, as reported by RSMUS.com, “While today private 5G networks are not widely deployed in the middle market manufacturing space, we see this marketing growing as companies continue to integrate 5G use cases into their business and look toward digital innovation to maintain competitiveness in the market, offset staffing challenges, and deal with increased labor costs.”

Like I said at the start of this article, I am a CPA, not a technology person. So, please take this information for what it’s worth (and not as advice). However, as a CPA, the RBT CPAs team and I can help you explore potential tax credits for research and development, as well as other potential tax saving opportunities related to your investments in future technology. Interested? Give us a call because we believe we succeed when we help you succeed.

For the last several months, numerous reports have tried to answer the same question: “Is manufacturing in a recession?” Just when we think we know the answer, something changes.

In January, the National Association of Manufacturers shared the results of its Outlook Survey for the fourth quarter of 2022. Results showed more than 62% of respondents expected the economy to slip into a recession in 2023. The biggest challenges in priority order were workforce, supply chain, and raw material costs. Even in a recession, over 65% of respondents said they would be investing in technology, new equipment and R&D; training and upskilling; hiring new employees; and facilities.

In February, the Conference Board’s U.S. Leading Economic Index® (LEI) fell by .3%, bringing the LEI down 3.6% between August 2022 and February 2023, which represents a larger decline than what was experienced the prior six months. “While the rate of month-over-month declines in the LEI have moderated in recent months, the leading economic index still points to risk of recession in the US economy,” said the Conference Board’s Business Cycle Indicators Senior Manager Jystyna Zabinski-La Monica.

On March 1, Reuters reported, “U.S. manufacturing contracted for a fourth straight month in February, but there were signs that factory activity was starting to stabilize, with a measure of new orders pulling back from more than a 2 ½-year low.”

On March 24, TradingEconomics.com reported “The S&P Global U.S. Manufacturing PMI increased to 49.1 in March of 2023 from 47.3 in February, beating forecasts of 47, preliminary estimates showed.” So, while that still points to a contraction, it’s smaller than what has occurred the prior five months. The report indicates a rise in production, less of a decrease in new orders, and lower price hikes from suppliers and for raw materials. Also “an unprecedented improvement in supplier delivery times” and a significant reduction in lead times allowed “firms to start replenishing stocks and process backlogs of work, which fell solidly.” While employment rose modestly, inflationary concerns along with demand uncertainties drove confidence to the lowest level in three months.

When it comes to New York, the Federal Reserve Bank of New York reports the March 2023 Empire State Manufacturing Survey showed business continuing to decline, with significant drops in new orders and modest decreases in shipments. For the second month in a row, delivery times were down which may point to improved supply availability and stable inventories. Employment and hours worked were down for the second month in a row and “input and selling price increases slowed somewhat.” There’s little expectation for conditions to improve in the next half-year.

However, according to an article in Money on March 1, “…the worst could be over for manufacturing. So-called hard data on factory production was solid in January, while business spending on equipment appeared to have rebounded at the start of the first quarter.”

Still, the upheaval in banking and latest Fed interest hike didn’t occur until after all of these reports and present a whole new set of concerns and challenges. So, the answer to whether manufacturing is in a recession remains elusive, for now.

As you continue to monitor the landscape and forecast how it may impact your organization, please know RBT CPAs is here to provide business advisory, accounting, tax and audit services and support. When you have a trusted business partner to take care of these responsibilities, you’re freed up to put more attention where it needs to be – on your business. To learn what RBT CPAs can do for you and your business, give us a call.

The Interest Charge Domestic International Sales Corporation (IC-DISC) offers eligible manufacturers and distributors that export U.S. products significant Federal income tax savings, which can come in handy given the current economic environment. In fact, an IC-DISC is treated as a federally exempt entity. No federal corporate tax applies. Could it be right for your business?

Who’s eligible?

To qualify for IC-DISC status, a corporation must:

1. Pass the qualified export receipt (QER) test (95% of gross receipts during a tax year are qualified export receipts).
2. Pass the qualified export asset (QEA) test (at the end of a tax year, the adjusted basis of qualified export assets equals at least 95% of the sum of the adjusted basis of all assets).
3. Have one class of stock with a stated value of at least $2,500 each day of the tax year.
4. Maintain separate books and records.
5. Have the same tax year as the principal shareholder with the highest percentage of voting power.
6. File Form 4876-A, “Election to Be Treated as a Disc.”

What is it and what does it offer?

In 1971, Congress created the Domestic International Sales Corporation (DISC) to promote export sales. According to the New York State Society of CPAs (NYSSCPA), “A U.S. exporter was allowed to allocate a portion of its export profits to a domestic subsidiary (i.e., a DISC) to reduce its U.S. taxes.” Over the years, there have been several changes, with one occurring in 1984 that resulted in DISC owners paying interest on the deferred tax of undistributed earnings (a.k.a. an interest-charge); thus, the IC-DISC was born. The NYSSCPA further explains, “The IC-DISC is actually a corporate tax remedy – one that provides U.S. exporters and manufacturers large tax incentives in order to mitigate potentially significant tax burdens.”

How is an IC-DISC structured?

Typically, a flow-through entity (i.e., an LLC, partnership, or S-Corporation) holds the ownership interest in the IC-DISC (which is a C-Corporation). The IC-DISC can be structured as a buy/sell (taking title to the goods it sells outside the U.S.) or as a commission where it is treated as a commission agent selling products outside the U.S..

Why would you want to consider it?

By setting up a separate corporation and complying with related rules and restrictions, there’s a 15.8% direct tax benefit. If your company is a commission IC-DISC, the export company pays a commission (which is a deduction at the ordinary tax rate) to the IC-DISC based on foreign sales of products manufactured or produced in the U.S. (which is tax-free income). What’s more, an IC-DISC shareholder will get to treat any distributions, as well as any taxable income from export receipts exceeding $10 million, as taxable dividend income at the qualified dividend tax rate. If the IC-DISC doesn’t pay dividends to shareholders, an interest charge applies to the deferred tax.

Interested in learning more? For general information, visit IRS.gov. If you want to find out how an IC-DISC may benefit you and your organization, give RBT CPAs a call. We can help you determine whether your organization qualifies for IC-DISC and, if so, what the potential benefits could be. Give us a call to learn more.

The world is changing faster than ever. Is your business continuity plan keeping pace?

Between the COVID pandemic and ensuing shutdowns, supply chain debacles, the labor shortage, gas price hikes, increased cyber threats, the war in Ukraine, catastrophic weather events, and now, uncertainties surrounding the economic environment, the last three years have proven time and time again that continuity planning should be a regular, ongoing part of running a business.

A business continuity plan proactively anticipates internal (i.e., you suddenly become incapacitated) and external (i.e., a global pandemic) events that can disrupt your business and defines how you’ll prevent, mitigate, respond, and recover. At the end of the day, a plan can help you maintain operations, minimize impact on your business and others that depend on you for their business; protect staff, finances and brand; and return to normal as quickly as possible.

Take a ransomware attack as an example, since it can shut down operations an average of 20 days. Your plan would detail what you’re doing to prevent an attack; how to minimize the impact should an attack occur; how to keep operations going despite an attack; and what you would need to do to get business operations back to normal ASAP.

Developing the plan should be a team effort among key people in your organization. That way, everyone knows the protocols to follow and can react with speed and clarity should the need arise.

According to InvenioIT – an industry leader in business continuity, data protection and IT security, your plan should identify objectives and include important contact information; risk assessments; business impact; prevention; response plan; systems planning; backup locations and assets; communication plan; testing protocols; and gaps and recommended fixes. (Refer to InvenioIT for details.)

As noted by Everbridge.com – a critical event management platform company, manufacturers should make sure their plan includes backup vendors, machinery and facilities; alternative workflows, routes, and scheduling; response to IT outages and disruptions; and how you’ll communicate with key stakeholders.

The U.S. Department of Homeland Security along with FEMA developed a free, downloadable business continuity planning suite. It includes training resources, a plan template, and test scenarios.

Perhaps one of the most challenging parts of continuity planning is figuring out how to prioritize what your plan should focus on first.

RiskMethods.net provides some ideas to help get the ball rolling: “In manufacturing, consider events that can cause significant unplanned downtime in operations like severe weather; hazardous materials issues; supply chain disruptions; and equipment failure. If you’re a manufacturing company, any business processes that make you unable to continue producing an important share of your product portfolio should be labeled as critical business processes.”

ContinuityCentral.com’s article, “Myth Busters: A Business Continuity Statistical Mystery Solved?” (Geary Sikich, Feb. 19, 2020) includes a list of questions that can help you prioritize – here are my favorites:

• “What are the three to five scenarios that could put our company out of business?
• Do we have a set of early warning indicators for emerging threats to the business?
• Are we developing accurate assessments of the issues facing our organization (direct, indirect)?
• What opportunities have we missed over the past three years due to inaction rather than lack of knowledge?”

You may also want to check out Accenture’s research report on operating through volatility, which includes a five-pillar framework for understanding immediate and potential future risks:

• “The people that power the organization
• The overarching strategy of the organization and how it differentiates the company
• The systems that underpin operations, both internally and with customers
• The supply chain and operational network that allow the company to fulfill customer needs.
• The partner and customer ecosystem and its alignment to business goals.”

Since so many factors impacting business can change on a dime, be sure to review and update your continuity plan at least every six months.

While you’re focused on protecting your business, let RBT CPAs focus on protecting you by providing professional, ethical and top-notch accounting, auditing and tax services. We’ve been serving businesses in the Hudson Valley and beyond for over 50 years and believe we succeed when we help you succeed. To learn more about what RBT CPAs can do for you, give us a call today.

If your organization is struggling to find talent – a common position given the Great Resignation of 2020/2021 and a continuously tight labor pool, you may want to tap into groups that have traditionally faced significant barriers to employment. While helping you address staffing challenges and boost workforce diversity, it may also result in valuable federal tax credits through 2025 – a worthwhile proposition given the escalating benefit and payroll spending you may be experiencing as you compete for talent.

The Work Opportunity Tax Credit (WOTC) has been around in various forms for decades. The Federal government updated it during the COVID pandemic to encourage employers to keep targeted workers on payroll and to encourage hiring them to rebuild staff following the worst of the pandemic. The WOTC was set to expire in 2020 but has been extended until December 31, 2025. It is jointly administered by the Internal Revenue Service (IRS) and the Department of Labor (DOL).

Targeted groups covered under the WOTC for taxable businesses include qualified IV-A recipients; qualified veterans (including disabled veterans); ex-felons; designated community residents; vocational rehabilitation referrals; summer youth employees; Supplemental Nutrition Assistance Program (SNAP) recipients; Supplemental Security Income recipients; long-term family assistance recipients; and qualified long-term unemployment recipients.  For tax-exempt organizations, qualified veterans are the only group eligible. Employees related to the employer or certain owners of the employer are not eligible. (For definitions of eligible targeted groups, click here.)

On or before the day a job offer is made, you and the applicant must complete Form 8850, along with ETA Form 9061 or ETA Form 9062. Within 28 days of hiring an employee, you must submit the forms to the state workforce agency to verify the employee is a first-time qualifying member of a targeted group. You’ll receive confirmation on whether the employee meets eligibility criteria. Then, you can file for a tax credit ranging from $2,400 to $9,600 for each targeted worker through 2025.

Taxable employers claim the tax credit as a general business credit against income taxes on Form 3800. The credit cannot exceed business income tax liability.

• Qualified tax-exempt organizations claim the credit against payroll taxes using Form 5884-C. The credit cannot exceed Social Security taxes owed.

(For auditing purposes, all forms should be retained for a period of four years.)

There is no limit on the number of employees you can claim credits on, but there are limits on the value of credits. At a for-profit employer, a WOTC credit equals 40% of the first $6,000 of a targeted employee’s qualified first year wages for 400+ hours of service, for a maximum credit of $2,400. If an employee completed less than 400 hours of service but at least 120 hours, the credit is up to 25% of the first-year eligible wages or $1,500. A different maximum credit calculation may apply for qualified veterans and summer youth employees. Note! Certain wages – like federally funded on-the-job training – do not qualify for the WOTC credit.

At a not-for-profit employer, a WOTC for a qualified veteran equals 25% of qualifying first-year wages for 400 hours of service or 16% for at least 120 hours of service but less than 400.

To learn more, visit the DOL website, which has a fact sheet, reference guide, and more information on definitions of targeted groups. The IRS website has complete details, FAQs, links to forms, and more. The NYS Department of Labor website has additional information and resources.

If you have any questions or need assistance on this or any accounting, bookkeeping, tax, or audit requirements, RBT CPAs are here to help. Give us a call.