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Paradigm Partners Newsletter

July, 2010
Greetings
 
The purpose of our newsletter is to keep you informed and up-to-date on the latest regarding R&D Tax Credits, Cost Segregation, IC-DISC (Exporters' Tax Incentive), WOTC/HUD Zone, Section 179, other tax related issues, Business Development and Personal Development.
 
If you find the Newsletter helpful, you may want to forward it to a friend.  Just click below.
 

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NoticeFiling Deadline for R&D Tax Credit
 
The filing deadline for taxpayers that have extensions for 2009 is quickly approaching. This is particularly important for taxpayers that are taking advantage of the R&D Tax Credit for the first time.
 
One of the great benefits of the credit is that you can go back 3 open tax years. For those who are filing for the credit the first time and going back 3 open tax years, the deadline to use the credit for 2006 is 3 years from the date you filed your 2006 returns.
 
So don't lose your R&D Tax Credits for 2006 if you filed an extension in 2006. Complete your study and amend your 2006 tax returns to include your R&D Tax Credits. Most times, the credits you receive for the first year will pay for the entire 4 year study.
 
Contact Paradigm today, call Karim Solanji at 281-558-7100 X-109 or email him at ksolanji@paradigmlp.com.
FeatureWhy Machine Shops and Job Shops Qualify for the R&D Tax Credit
 by
Mark Lauber and Zee Makhani
 
 
Most machine shop and job shop (build-to-print) owners do not believe they qualify for the R&D (Manufacturers') Tax Credit. In addition, this notion has been reinforced by their CPAs.
 
The average person would think the same because when one thinks of R&D, one thinks of scientists in lab coats performing experiments for large Fortune 500 type companies. Certainly that is not the image conjured up for a machine shop or job shop.
 
So why do they qualify?
 
The answer is simple; the IRS definition of what qualifies as R&D.
 
The IRS definition is simply "the design or development of a new or improved product or process." This can include products that are unique to the machine or job shop not necessarily to the entire industry.
 
In order to design or develop a new or improved product or process, some of the following common activities generally take place: 
  • CNC & equipment programming
  • Prototyping
  • Testing
  • CMM
  • CAD design
  • CAD simulations
  • Welding procedure development
  • Process instruction development
  • PPAP development
  • Integration of new equipment
  • Process development
  • Lean Manufacturing projects
  • Six Sigma projects
  • Design and development of specialty tooling and fixtures
  • Evaluation of alternative materials
  • And many more activities.
 
As a machine shop or job shop owner, you recognize that these activities are performed almost every day by your employees. These are activities that qualify as R&D according to the IRS definition.
 
I'm sure you're asking yourself, "How can I be sure this applies to my business?"
 
Again, the answer is simple. Contact a firm that specializes in the R&D Tax Credit (their staff should include engineers that perform the work). Most firms offer a free conference call to discuss your company's specific activities and tax situation to determine if you qualify and if you can take advantage of the credit. They can even provide an estimate of your credit. Select a firm that is not a CPA, these firms will work in harmony with your own CPA without any conflict.
 
Now you're wondering if it is worth the effort.
 
Some examples may help. One of the fantastic aspects of the tax credit is that you can go back 3 open tax years. So for most shops, the first time you take the credit, you can take the credit for the current year and 3 previous years. These examples are for machine shops and job shops that have taken the credit for the first time and were able to go back 3 years.
 
Example 1
Annual Payroll: $4 MM
Total Credit: $150,000
 
Example 2
Annual Payroll: $2 MM
Total Credit: $120,00
 
Example 3
Annual Payroll: $1.2 MM
Total Credit: $80,000
 
As you can see it can be well worth the effort and you can do this for every year going forward. With credit being so difficult to obtain, this is an opportunity to get a check back from the IRS for taxes you have "overpaid" and to reduce your current tax year liability.
 
So don't delay and contact Paradigm today.
 
Call Karim Solanji at 281-558-7100 X-109 or email him at ksolanji@paradigmlp.com.
 
 
ValantValant & Company's Solid Rules
Can Ensure Success in Life, Business
Editor's Note: Today we present the fourth installment in a special inspirational series from business performance improvement expert Laurence B. Valant, who specializes in growing profits for accounting firms and general business. Larry has been a frequent contributor to our newsletter, and again today, we feature excerpts from his new book, Stop Breaking These Rules! 100 Hard-Hitting Truths for Business Integrity and Performance. If you want more information or would like to order a copy of the wonderful new book, please visit www.valantco.com.
 
52 - Stars get awards. Teams win championships.
 
It was only when Kobe Bryant, the All Star shooting guard for the LA Lakers, discovered that his team won more games when he became a more effective passer and rebounder to complement his great scoring ability did Kobe change his approach to the game to recognize the importance of team. (In fairness to Kobe, it did take a couple of years to provide him with enough competence on the team to make passing a worthwhile investment.) Teamwork put the Lakers in a position to win championships.
 
The great sport dynasties of the Packers and the Celtics, the Steelers and the Pistons, the Bulls and the Yankees, all had star players. But, these teams won championships not because of their stars but because of the effectiveness of the overall team.
 
Likewise there are examples of star businessmen who flourished as part of the team, but when released to steer their own ships, quickly ran aground. Even those enduring stars such as Welch from GE, Goizueta from Coca-Cola, Bossidy of Allied Signal, were successful because they were part of a cohesive, well functioning team that excelled in execution.
 
Want to win a championship?  Make sure the stars are less important than and enjoy being a contributor to the team.
 
53 - Team building takes place when people work together and solve tough problems.
 
Team building does not take place romping through the woods. While outdoor team building exercises are a great place to get exercise and see who among you is the most athletic, little is accomplished in terms of the team building required in day to day business.
 
Team building is much like an annealing process: heat forges strength and bonding.  The pressures of dealing with tough competition, meeting growth plans, and achieving your business plan all create great heat and put demands on teams that test their ability, cohesiveness, and stamina. Meeting such challenges builds teams.
 
Those readers who have been through demanding times as a member of a team and emerged as victorious know exactly what this means. The joy of winning and sharing that victory with your teammates is like nothing else in the world.
 
Team building does not happen because of motivational programs. Team building happens when management provides a set of challenges and delegates responsibility for achievement to a team. The team working together and under competent management delivers the results expected. Those who are part of that team truly get to understand success: what it takes to deliver on time and on budget.
 
Solving tough problems through a team is true team building. Nothing else comes close.
 
54 - One of the best measures of a CEO and a company's executive team is how welcome they are in staff meetings
 
One of the most interesting elements of my consulting work occurs when I sit in a staff meeting in which one of the top managers is participating. Groups which welcome the presence of top management reveal that the executive is respected and that positive contributions by him to the meeting's objectives are the norm.
 
When we see the opposite, which is by far more common, we know that the manager's style, capabilities, and values have created a culture of tension and fear. While there are exceptions, observing one member of top management in the staff meetings they attend will tell you about the company and how well it is managed. And in those companies where top management is welcomed into staff meetings, you can invariably look at the financial statements and expect to see superior performance.
 
Welcomed top management is welcomed not because they are hail fellows well met, but rather because they are respected and valued for their skills and abilities, and their willingness to contribute to their team successes.
I hope you have benefited from our Newsletter.  Do not hesitate to contact me if you have any questions about what you heard or read in this Newsletter. 
 
Sincerely,

Mark Lauber
VP of Marketing
Paradigm Partners
281-558-1700 X-105

www.ParadigmLP.com