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In This Issue
News & Resources
SAVE THE DATE!

The Metro Manufacturing Alliance Annual Summit has moved this year!

When: Friday, May 13, 2016
Where: The Henry Clay
604 S Third Street
Louisville, KY
KENTUCKY EXPORTERS ONCE AGAIN RECEIVE AID FROM STEP GRANT
    
As in previous years, Kentucky has received a State Trade Export Promotion (STEP) grant from the U.S. Small Business Administration to aid in increasing international trade for the Commonwealth's small businesses. The total amount received by Kentucky for 2015 was $400,000, to be used to assist Kentucky small businesses who are just beginning to conduct international business or are currently involved in the international scene.

Kentucky utilizes the STEP grant to decrease the costs for small businesses wanting to participate in international activities such as trade missions, sales trips and subscription services provided by the U.S. Department of Commerce. In addition, the funds may be used to assist in international marketing campaigns, export trade shows, training workshops and other activities designed to encourage and enhance international trade in the Commonwealth.

For more information contact John Rittichier, CPA at 800-880-7800 ext. 8484 or jrittichier@hsccpa.com.
APPROACHES TO DRIVE VALUE FROM EXISTING DATA WITH BUSINESS ANALYTICS

Data collected by companies can and should be viewed as an asset to the company. There are three data driven approaches to drive greater value for middle-market companies: business planning, profitability analytics, and benchmarking and performance analytics.

The business planning approach focuses on using data to plan direction, priorities, and to test economic logic. Profitability analytics deals with focusing on a company's products, services, customers and regions from a top-down and side-by-side view. Lastly, benchmarking and performance analytics focus on moving forward by knowing where the company has been and making comparisons to competitors. By implementing these three approaches, companies can maintain or improve competitiveness going forward from data generated from within the company.

For additional information, download the full article here or contact Scott Olinger, CPA, CGMA, CPIM at 800-880-7800 ext. 8466 or solinger@hsccpa.com.
AS FUNDING FOR IRS DECREASES, SO TOO DOES TAXPAYER SERVICE
 
A recent report by National Taxpayer Advocate Nina E. Olson to Congress noted a declining level of taxpayer service supplied by the IRS to taxpayers during the 2015 filing season. Funding for the IRS was down about 17 percent since 2010, while increased requirements under new legislation such as the Affordable Care Act were implemented during the 2015 season. The report found that the IRS ran a generally successful filing season under difficult circumstances. However the advocate's findings were that taxpayer service had decreased significantly in key areas during the filing season, notably in the area of telephone assistance.

Some key measurements of this reduction in performance:
  • The IRS answered only 37 percent of taxpayer calls routed to customer service representatives overall, with an average hold time of 23 minutes (compared to 71 percent and 14 minutes in the 2014 season).
  • The IRS answered only 45 percent of calls from practitioners on the Practitioner Priority Service line, with an average hold time of 45 minutes.
  • The IRS answered only 17 percent of calls from taxpayers who had been notified that their tax returns had been blocked on suspicion of identity theft, with an average hold time of 28 minutes.
  • The number of "courtesy disconnects" jumped from 544,000 in 2014 to 8.8 million, an increase of more than 1,500 percent. In a "courtesy disconnect," the IRS basically hangs up on a taxpayer due to its switchboard being overloaded.
Olson wrote that the decline in taxpayer service imposes increased compliance burdens on taxpayers and may lead to erosion in taxpayer trust. Per the advocate, "...there is a real risk that the inability of taxpayers to obtain assistance from the government, and their consequent frustration, will lead to less voluntary compliance and more enforced compliance."

 

For the full article, click here or contact Aaron Wilzbacher, CPA at 800-880-7800 ext. 1322 or awilzbacher@hsccpa.com.
GENERATING VALUE FROM PERSONAL GOODWILL
  
When personal goodwill is present in a merger or acquisition, an excellent opportunity exists for taxpayers to lower their tax rates on the gain resulting from such a transaction. Personal goodwill is defined as property with a value dependent solely on the personal characteristics of a business owner. This includes personal relationships, ability, personality, or even reputation which is the property of the business owner. Therefore, if C corporations or S corporations within the built-in gain recognition period can establish the existence of personal goodwill as part of the sale of the business, they can potentially avoid double taxation on the part of the transaction relating to goodwill. Personal goodwill can also allow taxpayers receiving stock in exchange for "sweat equity" to avoid ordinary income treatment. Establishing the existence of personal goodwill transferred in exchange for the stock allows the taxpayer to avoid equity-based compensation treatment for the receipt of stock.

To benefit from the personal goodwill strategy, the first hurdle is proving personal goodwill exists independent of any corporate goodwill. This generally requires a shareholder to possess one or more personal characteristics essential to the success of the business. The second hurdle is that the individual must possess the right to sell the goodwill. The personal goodwill must be the shareholder's asset, and this asset cannot have been previously transferred to the corporation. This means that a shareholder cannot have entered into a covenant not to compete or similar binding agreement to give the corporation the right to the shareholder's services. Finally, the existence of personal goodwill should be verified by formalities and documentation in order to bolster the support for its use. Personal goodwill should be valued by a third-party appraiser, be clearly identifiable in the purchase price agreements, and be agreed to by the acquiring party.

For more information, please contact Scott Olinger, CPA, CGMA, CPIM at 800-880-7800 ext.8466 or solinger@hsccpa.com.
IRS PROVIDES A SIGNIFICANT BREAK FOR SMALL BUSINESSES
 
Taxpayers without an Applicable Financial Statement are now granted a de minimis safe harbor expensing election of $2,500, up from $500.

Effective for tax years beginning on or after January 1, 2014, the IRS has issued significant final regulations relating to tangible assets, materials and supplies, and related repairs and maintenance items. As part of these Tangible Asset Regulations ("TARS"), a de minimis safe harbor was implemented to allow taxpayers to expense units of property that are below certain thresholds that would otherwise be subject to capitalization.

With Notice 2015-82, the IRS provides an increase in the de minimis safe harbor limit to $2,500 for taxpayers without an AFS.

The notice states the effective date for the change to be taxable years beginning on or after January 1, 2016. However, the IRS also states in the Notice that it will not raise the de minimis safe harbor issue upon an audit for taxable years beginning before January 1, 2016 if the taxpayer otherwise satisfies the necessary requirements.

So what does this mean for the 2015 tax year? As long as a taxpayer has implemented accounting procedures for book purposes that provide for a de minimis policy for purchases of tangible property, and these procedures were in place and followed as of the beginning of the year, the taxpayer can use the increased expensing limitation.

To view the entire article, click here or contact John Rittichier, CPA at 800-880-7800 ext. 8484 or jrittichier@hsccpa.com.
ABOUT OUR MANUFACTURING & WHOLESALE DISTRIBUTION INDUSTRY TEAM   
Is today's business environment presenting unique opportunities and issues for your manufacturing operation? How are you addressing the push from your customers for continuous quality improvement? Are you having difficulty finding and retaining quality employees? Add to these issues declining profit margins and strained resources due to rapid growth and you have major challenges facing you day in and day out.

At Harding, Shymanski & Company, P.S.C. we have a dedicated team ready to assist you with those unique challenges and issues facing your industry.

Harding, Shymanski & Company, P.S.C.
800.880.7800
SEE WHAT OUR CLIENTS ARE SAYING... 

Atlas During my first visit with Scott, I knew he was our guy. He exemplified the standards of integrity, responsiveness, and professionalism that we had established. And in very real and measurable terms, the value that Scott and his team have brought to our company have far exceeded the cost - literally by multiples.  They have truly become business partners with Atlas Machine.
 
Rich Gimmel, President
Atlas Machine & Supply, Inc.