January 2019

Ideas to Strengthen Your Business in 2019 and Beyond

Posted on January 27, 2019 by Debra Barcuch

New Year’s is traditionally a time to make resolutions for the upcoming months. Once you set your personal goals, it’s time to get serious about your business goals. Here are ten changes you might consider making — and sticking to — to put you on track to prosper in 2019.

1. Compare 2018 financial performance to the budget.

Did you meet the goals you set at the beginning of 2018? If not, why? Analyze variances between budget and actual results, and evaluate what changes you could make to get closer to achieving your goals this year. In some cases, you might need to look at several years’ results to understand what’s happening and how problems can be resolved.

2. Create a three-year capital budget.

What large investments will you need to make to grow your business and maintain its competitive edge? Such investments can be both tangible (for example, purchasing new equipment and launching new product lines) and intangible (for example, training to develop employees’ technical and soft skills).

The depreciation deductions reported on your income statement aren’t just bookkeeping notations. Machines, equipment, furniture, vehicles and other types of capital equipment eventually wear out and become obsolete, so you’ll need to maintain, update and replace these assets on a regular basis.

3. Assess the competition.

Make an honest appraisal of the quality of what your business sells versus what competitors sell. Are you doing everything you can to meet (or exceed) customer expectations? Staying ahead of the competition is critical in a free market economy. Loyalty and inertia will allow you to retain some customers over the short term. But, over the long run, you’ll likely be out of business if you lose your competitive edge.

4. Nurture vendor relationships.

Many companies are so focused on building and maintaining customer relationships that supplier relationships fall by the wayside. At the start of each year, review your contracts with key vendors to find out whether their products and services are fairly priced. Long-term vendor relationships can be helpful if you need to ask for more generous payment terms or a rush emergency shipment. But periodically renegotiating contracts or even switching vendors can help ensure that you’re getting the best possible terms and service.

5. Benchmark employee compensation.

Look at your entire compensation package, including wage and salary rates and benefits. How does it measure up against competitors? In today’s tight labor market, employees might be tempted to leave for greener pastures. So, review compensation studies and job listings — or talk to local recruiters — to gain some objective insight into what’s reasonable in today’s job market.

You might not be able to afford immediately giving workers a large pay raise. But you can react sympathetically if an employee asks for a raise, make gradual increases to improve below-market rates, or find low-cost ways to boost morale and prevent turnover.

6. Review insurance coverage.

Don’t assume that your insurance agent is on top of your property casualty and liability coverage. Property values or risks may change — or you may add new assets or retire old ones — requiring you to increase or decrease your level of coverage. A fire, natural disaster, accident or out-of-the-blue lawsuit that you’re not fully protected against could put your business on a downward spiral. Along similar lines, be sure you have current operational contingency plans to stay open and minimize disruptions in case disaster strikes.

7. Seek independent feedback on marketing efforts.

Companies often spend a lot on marketing. But are your efforts generating tangible results? Set up focus groups or hire outside professionals to evaluate the quality of your company’s website, branding, advertising and social media presence. Then review the findings with an open mind. Address any shortcomings and consider discontinuing ineffective campaigns. It’s easy to fall in love with your creative efforts, but your customers might have different opinions.

8. Conduct a personal time assessment.

Business owners tend to be overachievers. But there comes a time when you need to delegate lower-level tasks to others. Controlling everything 24/7 can wear you down. It also sidetracks you from two critical tasks: 1) proactive, strategic planning, and 2) building a successful management team. Gradually transitioning managerial tasks to subordinates builds their confidence and improves job satisfaction. Employees are loyal to employers who provide opportunities for professional development.

9. Conduct a personal skills assessment.

Do you (or other members of your management team) need to acquire any new skills or knowledge to help run the business more effectively? Highly effective people seek continuous improvement and renewal, both professionally and personally. Complacency is bad news for growing your business.

10. Analyze market trends.

What direction is your industry heading over the next five or ten years? Consider trends in technology, the economy, the regulatory environment and customer demographics. Anticipating and quickly reacting to trends are the keys to a business’s long-term success. Companies don’t operate within a vacuum. Trends can be positive or negative, creating either opportunities or threats. Either way, it’s important to give yourself time to formulate a strategic response to make the best of it.

This may be a daunting list. But as the familiar Chinese proverb states, a journey of a thousand miles begins with a single step.

2018 Tax Payments Fall Short? You May Be Eligible for Penalty Relief

Posted on January 23, 2019 by Debra Barcuch

The IRS announced that it is waiving the estimated tax penalty for many taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year.

The IRS is generally waiving the penalty for any taxpayer who paid at least 85% of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. The usual percentage threshold is 90% to avoid a penalty. (IRS Notice 2019-11)

The move addresses concerns expressed by various parties. A July 2018 Government Accountability Office (GAO) report projected that nearly 30 million taxpayers will owe money when they file their 2018 personal income tax returns due to underwithholding. A wide range of changes from the Tax Cuts and Jobs Act (TCJA) caused many taxpayers to be underwithheld.

A recent letter to the IRS from U.S. Senator Ron Wyden (D-OR) noted that millions of taxpayers would face unexpected tax bills and penalties. He wrote: “It seems unavoidable that millions of taxpayers who are expecting critical tax refunds will instead owe taxes” when they file.

The American Institute of CPAs and the National Conference of CPA Practitioners, in separate letters to the IRS, also asked the tax agency to forgo imposing penalties related to certain underpayments and under-withholding due to the TCJA, which was enacted in December 2017.

Software Integration

The waiver computation announced by the IRS on January 16 will be integrated into commercially available tax software and reflected in the forthcoming revision of Form 2210, “Underpayment of Estimated Tax by Individuals, Estates, and Trusts,” as well as its instructions.

This relief is designed to help taxpayers who were unable to properly adjust their withholding and estimated tax payments to reflect changes under the TCJA.

“We realize there were many changes that affected people last year, and this penalty waiver will help taxpayers who inadvertently didn’t have enough tax withheld,” said IRS Commissioner Chuck Rettig. “We urge people to check their withholding again this year to make sure they are having the right amount of tax withheld for 2019.”

The updated federal tax withholding tables, released in early 2018, largely reflected the lower tax rates and the increased standard deduction that are part of the new law. In general, that meant taxpayers had less tax withheld in 2018 and saw more in their paychecks.

However, the IRS explained that “withholding tables couldn’t fully factor in other changes, such as the suspension of dependency exemptions and reduced itemized deductions.” As a result, some taxpayers could have paid too little tax during the year, if they didn’t submit a properly-revised W-4 withholding form to their employers or increase their estimated tax payments. The IRS conducted an extensive outreach and education campaign throughout 2018 to encourage taxpayers to do a “Paycheck Checkup” to avoid a situation where they had too much or too little tax withheld when they file their tax returns.

“Although most 2018 tax filers are still expected to get refunds, some taxpayers will unexpectedly owe additional tax when they file their returns,” the IRS stated.

Pay-As-You-Go System

Because the U.S. tax system is pay-as-you-go, taxpayers are required, by law, to pay most of their tax liability during the year — rather than at the end of the year. This can be done by either having tax withheld from paychecks or pension payments, or by making estimated tax payments.

Usually, a penalty applies at tax filing if too little is paid during the year. Normally, the penalty wouldn’t apply for 2018 if tax payments during the year met one of the following tests:

The person’s tax payments were at least 90% of the tax liability for 2018, or
The person’s tax payments were at least 100% of the prior year’s tax liability, in this case from 2017. However, the 100% threshold is increased to 110% if a taxpayer’s adjusted gross income is more than $150,000 ($75,000 if married and filing separately).

For waiver purposes only, the IRS relief lowers the 90% threshold to 85%. This means that a taxpayer won’t owe a penalty if he or she paid at least 85% of his or her total 2018 tax liability. If the taxpayer paid less than 85%, then he or she isn’t eligible for the waiver and the penalty will be calculated as it normally would be, using the 90% threshold.

When it comes to withholding, the IRS wants taxpayers to check their situation again for 2019. This is especially important for anyone who faces an unexpected tax bill when they file a 2018 return this filing season. It’s also an important step for those who made withholding adjustments last year or had a major life change. You want to make sure the correct tax is still being withheld.

Who Could Have a Tax Season Surprise?

Those most at risk of having too little tax withheld from their pay include:

Taxpayers who itemized in the past but now take the increased standard deduction,
Two-wage-earner households,
Employees with non-wage sources of income, and
Taxpayers with complex tax situations.

To help get withholding right in 2019, an updated version of the agency’s online withholding calculator is now available on the IRS website. To access it, go to: https://www.irs.gov/individuals/irs-withholding-calculator.

The IRS previously announced that this year’s tax season starts on January 28. Although the IRS won’t begin processing 2018 returns until that date, your tax advisor can accept and prepare returns before then and answer any questions you have about your situation.

Cybersecurity Becomes Top Priority for Manufacturers

Posted on January 21, 2019 by Debra Barcuch

Security has always been a vital issue for manufacturing firms, but the threat of cyber attacks requires ever more sophisticated preventative measures.

If your firm hasn’t stepped up its game, it’s vulnerable to all sorts of predators. That could leave it open to financial losses, production delays and, in a worst-case scenario, failure.

Threats from Synergies

Technological advances, including the Internet of Things (IoT), continue to dominate the manufacturing sector. To increase the benefits of technology, manufacturers typically unify operations and business processes in some manner. A logical approach is to coordinate Internet technology (IT) functions that control the business with operational manufacturing technology.

The synergies of this approach are obvious, but security risks are increased. With systems being connected through the IoT, new entrance points have opened up to cyber criminals. And this has led to a corresponding rise in the number and severity of cyber attacks.

For instance, an industrial IoT environment may feature sensors at various locations at a manufacturing plant. Although they provide a valuable stream of business and operating data, the sensors are gateways to critical infrastructure and processes. Sophisticated hackers can now enter a system, seize data, cause malfunctions or otherwise use the information for their own purposes.

Countering the Attacks

How can you best protect your firm from cyber attacks at this defining moment in time? Here are four practical suggestions.

1. Employ best practices.

Increasingly, cyber attacks are being conducted on a geopolitical level, involving foreign nationalists and governments that have massive resources at their disposal. This spans many industries and triggers protocols on a national level.

For U.S. manufacturing firms, the groundwork for current best practices was laid in 2013 when the National Institute of Standards and Technology (NIST) was directed to develop the framework for an authoritative source. According to a 2016 study, 70% of the organizations view the NIST Cybersecurity Framework as the most popular best practice for IT. Other countries have followed suit by adopting similar standards or are actively working on their own versions.

These national standards create a methodology for addressing cybersecurity issues. They focus on common sense risk analysis, risk tolerance assessment and risk avoidance. Other industry standards outside of government direction can provide protection. Notably, IEC 62443 is a robust standard for industrial automation technology that can safeguard operations across multiple layers.

Nevertheless, cyber threats change daily, so these standards are constantly being updated. It is essential to keep close track of new protocols and standards signifying best practices.

2. Study the financial aspects.

Virtually every manufacturer recognizes the risks of cyber attacks in the current environment. But firm management needs to assess these problems in terms business owners can truly understand: dollars and cents.

Simply put, it’s time to shift the conversation from the fears of a cyber attack to protecting the bottom line. Data breaches cost manufacturers billions each year worldwide, not to mention the damage to reputations. Also, insurers may limit how much coverage that can be acquired for cyber attack protection. In some parts of the world, insurance premiums are based on responses to questions about how the firm is adhering to cybersecurity best practices.

By its very nature, cybersecurity is expensive. But managers must invest enough to protect overall interests or risk losing the company entirely.

3. Perform risk management.

Once business leaders buy into the premise that better cybersecurity is worth the investment, they can move to protect their interests. This means determining the size of the gap that needs to be closed.

For starters, ascertain the value of manufacturing processes and company assets to the company. This involves a calculation of the size of the security risk. For example, if the plant were forced off-line for a week due to a cyber attack, what would the dollar loss be?

Each firm is different, so you must figure out how to integrate security risk management functions into the infrastructure. These functions can take the form of risk avoidance, mitigation, acceptance or transference. Then you can address the gaps specific to your operation and plant.

Also, remember that people are the first line of defense. Security must be incorporated into everything from personnel screening to employee training. Every employee must take ownership of their own security, adhere to industry standards and follow vendor documentation for system configuration. Finally, develop a corporate culture that emphasizes security.

4. Continue to adjust.

This isn’t a “get it and forget it” proposition. Your cybersecurity plan should be a living, breathing document that is analyzed on a regular basis and updated when necessary. Programming elements, such as threat monitoring and bug patching, must be continuing. Cybersecurity risk management isn’t a single event, it’s a long play.

In the past, you may have said, “If it ain’t broke, don’t fix it.” But that doesn’t work anymore. The safety of your business, and ultimately its future profitability, depends on your plan.

Emphasize the suggestions outlined above and keep up with evolving industry standards. Don’t wait for a catastrophe to strike before you adopt sufficient protective methods. If you need assistance in implementing these objectives, consult your business advisors.

How Bad is the Problem?

The statistics don’t lie. About half of the country’s manufacturers have been hit by a cyber attack.

According to a 2018 report from the UK manufacturers’ organization EEF, 48% of UK manufacturers surveyed have suffered cyber attacks, with half of those victims sustaining financial or other business losses. Managed security services firm NTT Security, in its 2018 Global Threat Intelligence Report, identified manufacturing as the fourth-most targeted industry, trailing only finance, technology, and business and professional services.

As attacks have risen, so have the damages. According to a report from the nonprofit consortium Alliance for Manufacturing Foresight, about 400 manufacturers were attacked every single day in 2016, resulting in more than $3 billion in losses.

The IRS Tells Employers How to Report W-2 Scams

Posted on January 18, 2019 by Debra Barcuch

The IRS is explaining, in a recent release, what employers should do if they become the victim of a W-2 scam.

Background Information

Any employer could become the target of a W-2 scam. In recent years, these scams have become one of the more dangerous e-mail crimes involving tax administration. The e-mails appear to be from an executive or organization leader to a payroll or human resources employee. It may start with a simple, “Hey, you in today?” and then asks for tax and personal information about employees. By the end of the exchange, all of an organization’s Forms W-2 for their employees may be in the hands of cybercriminals. This puts workers at risk for tax-related identity theft.

Because payroll officials believe they are corresponding with a company executive, it may take weeks for someone to realize a data theft has occurred. Generally, the criminals are trying to quickly take advantage of the theft. In some cases, they file fraudulent tax returns within a day or two to steal tax refunds. This scam is such a threat to taxpayers that a special IRS reporting process has been established.

The IRS is advising employers who are the victims of this scheme to report it as follows:

E-mail dataloss@irs.gov to notify the IRS of a W-2 data loss and provide contact information. In the subject line, type “W2 Data Loss” so that the e-mail can be properly routed. Don’t attach any information about employees’ personally identifiable data.
E-mail the Federation of Tax Administrators at StateAlert@taxadmin.org to get information on how to report victim information to the states.
A business/payroll service provider should file a complaint with the FBI’s Internet Crime Complaint Center (IC3.gov). A business/payroll service provider may be asked to file a report with their local law enforcement agency.
Notify employees so they can take steps to protect themselves from identity theft. The Federal Trade Commission’s www.identitytheft.gov provides guidance on general steps employees should take.
Forward the scam e-mail to phishing@irs.gov.

The IRS is also encouraging employers to put steps and protocols in place for the sharing of sensitive employee information such as Forms W-2. One example would be to have two people review any distribution of sensitive W-2 data or wire transfers. Another example would be to require a verbal confirmation before e-mailing W-2 data. Employers also are urged to educate their payroll or human resources departments about these scams.

Coping with Construction-Related Tariffs

Posted on January 16, 2019 by Debra Barcuch

In the current politically charged environment, construction owners must continue to meet financial challenges, including tariffs on products frequently used in their industry. Notably, tariffs have been imposed on aluminum and steel, among other commodities. What’s more, the situation is fluid and constantly evolving. How can you navigate through this minefield? Calmly deal with the tariffs in your typical businesslike manner, guided by your professional advisors.

How Tariffs Work

A tariff is akin to a tax on imported goods. Generally, it is paid directly by the importer, not by the exporting country. When the United States imposes a tariff on goods from a foreign country, it is paid to the U.S. Customs and Border Protection Service at the border by a U.S. broker representing an importer.

President Trump has aggressively instituted tariffs. After authorizing a 30% tariff on solar panels and a 20% tariff on washing machines, the president imposed a 25% tariff on steel and a 10% tariff on aluminum imported from most countries. On June 1, 2018, these tariffs were extended to Canada, Mexico and the European Union. (Only Australia and Argentina remain exempt). Five days later, the Trump administration announced a 25% tariff for hundreds of categories of goods imported from China.

Questions to Ask

With that in mind, here are the answers to several questions that construction firm owners may have about the recent introduction of tariffs.

Q. How can you best manage construction projects started before the tariffs went into effect?

A. It depends on the contract and the application of state laws. Generally, with contracts executed before the tariffs are effective, the tariffs may be part of the cost of the work for “cost-plus” contracts. However, the tariffs may cause you to exceed the guaranteed maximum price. If a delay is due to a shortage, you may be granted some relief under the contract.

If the contract calls for a lump sum and a fixed price, the contractor generally assumes the risk of subsequent price increases. Any relief would have to be found in other provisions in the contract. Unfortunately, tariffs haven’t been specifically stated in these contracts.

A firm might assert that they may be protected from tariffs because they are “taxes” under certain clauses. However, most legal specialists believe this argument lacks merit in the courts.

A force majeure clause may provide relief, based on the theory that the tariffs cause a delay beyond the contractor’s control. These clauses relieve the parties from fulfilling their contractual obligations when certain circumstances arise that can’t be changed or influenced by either party.

If you’re operating under one of these theories, be careful to observe the requirements for filing claims and providing notice.

Q. How can you best manage construction projects under the current situation involving tariffs?

A. Keep in mind that the imposition of tariffs can change at a moment’s notice, they currently are real and they pose a potential threat to your business.

When you’re presented with tariff-related problems, check the status of court opinions, regulations and orders before developing a strategy to counteract tariffs. Confront the issue head-on in any contracts you are negotiating and aim to include tariffs in the language.

In a best-case scenario, the force majeure clause would clearly cover all tariffs — not just aluminum and steel — and include broad language for other actions by government authorities. Ideally, you would also make sure this language is included in the terms of a cost-plus contract.

Finally, remember that time is a critical factor. Not only should the contract reflect considerations for an increased price, it would preferably give you more time to complete the work.

Q. How can you best plan for construction projects in the future?

A. As contracts and their interpretation fall under state law, it’s essential to incorporate this into negotiations.

Typically, firms and contractors in the construction industry will want to rely on provisions where subcontractors will be granted additional money and time when tariffs are imposed on the general contractor.

Practically speaking, much of this is best left to the attorneys, so make sure you have a reputable practitioner on your side who is experienced in construction matters. With the benefit of foresight, take the time to research the situation and address these issues well before your crews begin working on the job.

Give yourself enough time to negotiate the key terms into the contract for your satisfaction.

Potential Impact of Tariffs

It will still take some time for the recent tariffs to play out, but here are some possible implications:

Higher costs for aluminum and steel could cause construction to slow down and affect infrastructure spending.

According to the Trade Partnership, an economic consulting group, around 30,000 jobs would be lost in the construction industry as a direct result of the tariffs.

Price volatility may ensue, meaning it may be uncertain what you will have to pay for materials if you use existing suppliers.

If you can’t import what you expected from an existing supplier, you may be forced into using a new supplier that could charge more for materials.

Contractors and subcontractors will have to factor higher prices and price risk into their bids. This could cause a spike in bids.

Road Map to Manufacturing 4.0

Posted on January 10, 2019 by Debra Barcuch

The manufacturing industry is at a pivotal point in its history. Recognizing the significance of this juncture, the Manufacturing Leadership (ML) Council recently released its Critical Issues Agenda for 2018/2019, titled The Journey to Manufacturing 4.0.

The result of extensive research, consultation and refinement involving more than 1,000 members, this agenda identifies key issues facing the industry. Manufacturers of all shapes and sizes are advised to take note.

Real Challenges

The modern manufacturing plant, featuring robots doing jobs previously performed by humans and workers on the floor communicating electronically with supervisors in remote locations, may seem like something out of The Jetsons. Yet the challenges are real. Even with cutting-edge technology, manufacturers face pressure to be more innovative, nimble and cost-effective.

In fact, the evolution of advanced digital and analytical technology is forcing manufacturers around the globe to rethink the normal rules of competition, revisit how work is performed, and revise how companies are structured and managed. This fresh approach is what the ML Council calls Manufacturing 4.0 (M4.0).

The Cost of Progress

Make no mistake: Manufacturers will need to pay tolls along the road to Manufacturing 4.0. Firms must invest time, energy and capital to implement advanced technology and best practices.

Cost is likely to be the biggest obstacle for many small- to mid-sized companies. Pilot programs may require you to revisit your budget and raise additional capital. And your firm may need to make tough decisions regarding strategic investments, such as launching new products, purchasing new assets and making strategic acquisitions. You simply don’t have the resources to do everything at once. Your CPA can run financial projections and create decision trees to help you determine which alternatives to pursue today and which to table for future years.

Features

M4.0 goes a step beyond previous iterations of the new technology-driven manufacturing sector. The new regime is characterized by:

Production and supply networks that are increasingly data-driven, automated, modular, agile, sustainable, predictive and rapidly reconfigurable to meet changing demands and competition.
Products that are smart, customized, connected and self-diagnostic, and that provide a rich platform for new revenue streams.
Supply chains that are visible, traceable, risk-resilient, responsive and constantly analyzed in real time.
Enterprises that are cross-functional, collaborative and highly-integrated, often surrounding a single digital thread that stretches from design to deployment.
Leaders and employees who are highly engaged, digitally savvy, customer-centric and ready to meet new challenges and grasp emerging business opportunities.

Such a massive transformation doesn’t come without substantial effort. Manufacturers must identify and master various technological, organizational, cultural, workforce and leadership aspects. With that in mind, the agenda is designed to help manufacturers align their thoughts with practices.

Opportunities to Grow

The agenda covers five specific manufacturing areas.

1. Factories. Both large and small manufacturers need to recognize and embrace the potential of new and evolving production models, materials and technology. This will help them create cost-efficient, responsive, flexible, transparent, connected, automated, and sustainable factories, production models and business plans.

The agenda spotlights:

M4.0 guidelines, maturity models and transformation frameworks that can help manufacturers move from current production models (often based on legacy systems) to a future state of digitally-enabled production readiness.
End-to-end digitization and analysis of manufacturing and engineering processes and functions in both centralized and distributed production networks.
Cybersecurity risk management.

Such cybersecurity includes preventive measures and cyberattack response strategies that minimize vulnerabilities of highly networked production platforms.

2. Culture. Manufacturers of all sizes need to transform traditional operations so that their culture becomes collaborative, innovation-driven and cross-functional. This will drive growth, new product and service development, operational efficiency and success.

The agenda recommends:

Cross-functional processes and integrated organizational structures that harness multiple sources of data to drive innovation, facilitate faster and better decisions, reduce time-to-market and enhance competitive agility.
Collaborative innovation cultures and platforms that leverage the ideas and resources of employees, suppliers, external partners, customers, academics and “‘the crowd” to create new products, improve business processes and spawn innovation.
Best-practice approaches in deploying integrated M4.0 technology and platforms, such as digital threads, that enhance collaboration and integration to help deliver new ideas and improvements faster across the enterprise.

3. Technology. Manufacturers must learn how to identify, adopt and scale promising technology. This will result in greater speed and efficiency while opening the door to new business models and improved customer experiences.

The agenda covers:

The impact of artificial intelligence (AI), machine learning and cognitive analytics on the industry’s future.
The latest developments in related transformational technology, including the Internet of Things, 3D printing, modeling and simulation, collaborative robotics, augmented and virtual realities, 5G networks, block chain and other emerging technologies.
Best practice approaches for selecting and deploying new technology in a manufacturing enterprise while implementing standards and architectures that support open systems.

4. Next-generation leadership. It isn’t just the machinery that’s changing. Manufacturers must be more collaborative, innovative and responsive to disruptive change. Leaders will adopt new behaviors, structures, cultures, value systems and strategies. And they’ll consider ways to attract and engage the talent and skills of both the current workforce and the next generation of employees.

The agenda pinpoints:

Effective leadership role models, behaviors and mindsets that define a successful profile for tomorrow’s manufacturing leaders.
Employee transition, development and engagement strategies for an inclusive, diverse, multigenerational, multicultural, multinational workforce that interacts with AI and collaborative robots (“cobots”) and whatever else is developed in the future.
Identifying, attracting, and encouraging talent and skills for the next-generation manufacturing workforce.

Effective next-generation leaders will adopt new working cultures, change value systems and develop better ways to collaborate with educational and community organizations.

5. Sustainability. This new vision provides an opportunity to leverage new analytical insights and more flexible production platforms. It maximizes resources, achieves major efficiency gains, drives revenue growth and minimizes environmental impacts. To successfully engage with others, manufacturers must become more transparent about their environmental and socially responsible practices.

The agenda recommends:

Products designed for easier reuse, remanufacture, refurbishment or recycling.
Production strategies that streamline production processes to increase efficiency and reduce costs and waste.
Holistic, sustainable manufacturing business models supported by collaborative cross-sector partnerships and deeper community engagement that can create a circular manufacturing economy.

Seize the Future

What does all this mean for your company? Manufacturers must embrace the future or risk being left in the dust. As you set your budgets and goals for 2019, review the ML Council’s agenda and consider ways you can leverage emerging technology, innovative business strategies, sustainable practices and other opportunities to grow your business agenda. Visit the ML Council’s website [Insert: http://nammlc.wpengine.com/about-us/#critical].

10 New Year’s Resolutions to Improve Your Personal Financial Position

Posted on January 8, 2019July 22, 2024 by Debra Barcuch

Have you ever kept a New Year’s resolution for the entire year? Every January, millions of Americans make promises to eat less, exercise more and save for the future. But most resolutions are forgotten by spring.

However, there are ten promises that relate to your financial health that you can’t afford to abandon.

1. Make a financial plan. Creating a financial plan forces you to set goals and identifies a path to reach them. Your plan should combine general objectives — like your preferred retirement age and lifestyle. In turn, these general objectives will help you create a ballpark estimate for how much you’ll need to save each year, and whether your current savings are on track to achieve those goals.

2. Seek input from a financial professional. A competent, ethical financial advisor can help you flesh out and achieve your plan. If you don’t already have a financial advisor, look for someone with strategic and tactical advice on saving, investing, budgeting and managing financial risks. Even if you consider yourself savvy about money, prove it by sharing your detailed financial plan with a pro. He or she can give it a reality check and point out potential changes under today’s tax laws.

3. Review financial plans annually. Expected rates of return and annual contributions aren’t guaranteed, especially under volatile market conditions. Life circumstances also might change, such as having a new child or grandchild, getting laid off from a job or receiving an unexpected raise. If you veer off course, tactical adjustments might be needed to reach your goals.

4. Try to be fiscally responsible. It may be tempting to spend your 2018 bonus or tax refund on an extravagant purchase, like a new luxury SUV or multi-carat diamond necklace. But it’s important to differentiate needs from wants. Hold on tight to your wallet and consult your financial plan before making a costly impulse buy.

5. Allocate investments based on age and risk tolerance. Asset allocation refers to the proportion of different categories of investments — stocks, bonds and cash-equivalents — in an investment portfolio. After deciding on the right asset allocation for your situation, align your investments accordingly. Thereafter, to maintain that balance, consider the need to adjust periodically for additions to your portfolio and changes in the assets’ market values.

6. Monitor investment fees and commissions … and don’t overpay. Studies of mutual fund investments generally don’t show a consistent relationship between operating costs and return on investment. Unless higher fees result in a higher return, why would you agree to pay more for investment management services, brokerage commissions and mutual fund “loads” (sales charges) when you buy or sell securities? By minimizing these fees, you’ll maximize the value of your portfolio. A few extra dollars here and there add up over time.

7. Become financially literate. Personal finance may be a tedious topic for some people. But a little knowledge can help you avoid mistakes and recognize opportunities. Financial literacy also provides the peace of mind that you’re not just relying on gut instinct. Want to learn more? Stick to books and publications from reputable sources that describe trends and principles of personal finance. Avoid doomsday advice or too-good-to-be-true trends.

With long-term investments, slow, steady and responsible usually wins the race. Financial literacy takes ongoing effort to stay atop new types of investments, market trends and changes in the tax law.

8. Purchase adequate insurance. Wise people expect the unexpected. Who expects to die young or become paralyzed in a car accident? While going through life with a sense of foreboding would be tragic, rose-colored glasses aren’t the only alternative. Find a happy medium and insure yourself accordingly.

9. Pay attention to taxes. Tax evasion is criminal. But minimizing your taxes by legal means is smart. Although federal and state tax issues shouldn’t drive every decision, they’re an important variable to factor into the equation.

Remember, the Tax Cuts and Jobs Act (TCJA) brought sweeping changes to the tax law that generally are effective from 2018 to 2025 for individual taxpayers. It’s important to discuss the changes with your financial advisor to determine whether your current plans need to be adjusted.

10. Carpe diem. It’s smart to have a financial plan and be fiscally responsible. But don’t set your savings goals so high that you’re unable to enjoy life today. Budget some discretionary (fun) money to spend on friends, family, travel, pets and anything else you love.

There are two kinds of New Year’s resolutions: Those you keep and those you quickly abandon. So, the ultimate resolution should be: I will keep all of my New Year’s resolutions in 2019. Best of luck in the year ahead.

Are You Risking the Trust Fund Penalty for Unpaid Payroll Taxes?

Posted on January 8, 2019 by Debra Barcuch

The trust fund penalty is one of the more onerous tax provisions on the books. In short, a company owner or officer, or another “responsible person,” may be held personally liable for any unpaid payroll taxes. Because the assessment is for 100% of the tax due, this provision is sometimes called the “100% penalty.”

The IRS is allowed to pursue more than one person for this tax obligation. In a recent Third Circuit Court of Appeals case, USA v. Darren Commander, the court imposed the trust fund penalty against a corporate co-owner even though it was the other owner who was responsible for payroll. The U.S. Supreme Court has declined to review the appeals court’s decision, so the decision stands.

Who’s Responsible

Can You Settle with the IRS?

As with other types of tax debt, taxpayers who owe the trust fund penalty have options. For instance, if you can’t pay the full amount owed, you may apply for a payment plan or installment agreement. Alternatively, you can try to settle the debt for less than you owe through the “offer-in-compromise” program or a partial payment installment agreement.

The most important thing is to contact the IRS and set up an arrangement before the agency tries to garnish your wages or seize your assets. You can’t discharge those penalties in bankruptcy.

The trust fund penalty may be assessed against any person who:

Is responsible for collecting or paying withheld income and employment taxes or for paying collected excise taxes, and
Willfully fails to collect or pay those taxes.

Typically, this liability is imposed on a company owner or president, but it potentially could extend down the ranks to a mid-level manager or bookkeeper.

Notably, a responsible person for these purposes is any person — or group of people — who has the duty to perform and the power to direct the collecting, accounting and paying of trust fund taxes. Accordingly, the IRS says this could be:

An officer or employee of a corporation,
A member or employee of a partnership,
A corporate director or shareholder,
A board of trustees member of a not-for-profit organization,
Someone with authority and control over funds to direct their disbursement,
Another corporation or third-party payer,
Payroll Service Providers (PSP) or responsible parties within a PSP,
Professional Employer Organizations (PEO) or responsible parties within a PEO, or
Responsible parties within the common law employer (PSP/PEO client).

The IRS broadly interprets “willful failure.” The failure doesn’t have to be intentional. For example, the trust fund penalty may be applied in situations where someone knew, or should have known, about the taxes that should have been paid, but weren’t. In other words, the penalty may be imposed on someone regardless of their intentions.

Summary Judgment

In Darren Commander, a trial court granted summary judgment against a 50% owner of a woodwork fabrication and installation business.

He and his co-owner (who died during the court proceedings) formed the woodworking company in New Jersey in 2003. They were the sole officers and owners. All decisions and actions, as well as most significant financial transactions, could only be made with the consent of both parties. However, the other co-owner was responsible for hiring field employees, assigning employees to each job, ensuring work was completed in the field, recording hours worked and distributing paychecks to employees.

From 2007 through 2009, the company failed to pay income and employment taxes for its employees even though workers were being paid. The IRS imposed trust fund penalties totaling $1.6 million against the defendant in 2010.

The trial court granted summary judgment to the government. It concluded that there is no factual dispute that the defendant was a responsible person who willfully failed to pay the company’s taxes. In support of this decision, the court noted that:

The defendant was a 50% owner and one of two officers of the company.
His approval was required for all company decisions and actions and many significant financial transactions, and
He had check-signing authority and power to pay the company’s bills and sign paychecks.

The defendant argued that his co-owner was solely responsible for paying the taxes. But the court found this to be irrelevant because the defendant was, in fact, a responsible person. The court concluded that the defendant had actual knowledge, or should have known, that the taxes weren’t being paid and that he acted willfully within the meaning of the trust fund penalty provision.

The appeals court rejected the defendant’s arguments and upheld the trial court’s grant of summary judgment for the government. Critical to the court’s decision: Liability for the trust fund penalty can be extended to more than one person.

The appeals court also dismissed the defendant’s claim that he had originally misspoken in saying that he was aware of the tax deficiencies during the tax years in question and actually learned of it “later.” The court determined that the defendant didn’t produce any evidence to substantiate this assertion. Finally, it disagreed with the defendant’s complaint that he wasn’t granted sufficient opportunity to prove his arguments.

The defendant appealed the Third Circuit’s decision to the U.S. Supreme Court. The Court has declined to review the case.

Letter of the Law

If the IRS determines in a payroll tax dispute that you’re a responsible person, it will issue a letter stating that it plans to assess the trust fund penalty against you. You then have 60 days (75 days if the letter is sent to an address outside the U.S.) from the date of the letter to appeal. This communication will explain your appeal rights. If you don’t respond to the letter, the IRS will assess the penalty against you and send you a Notice and Demand for Payment.

Once the trust fund penalty is assessed, the IRS can take collection action against your personal assets. For example, it may file a federal tax lien or take levy or seizure action.

You should, of course, do everything in your power to avoid the trust fund penalty. Prioritize the IRS over any other creditors you might have. And if you can’t meet your payroll tax obligations, arrange to meet with the IRS to investigate your options (see right-hand box). Also contact your professional advisors for guidance.

10 High-Tech Construction Trends for 2019

Posted on January 4, 2019 by Debra Barcuch

Technology made significant inroads in the construction industry in 2018. Don’t expect that trend to change or abate in the upcoming year. In fact, as competition grows stiffer, more companies are likely to embrace the latest technological advances.

Practically speaking, it’s better to be a leader than a follower. Keeping that in mind, here are 10 high-tech construction trends to watch for in 2019.

1. Virtual Reality

Virtual reality (VR) isn’t just for video gamers and science geeks anymore. It has practical applications in the real world — notably, the construction field. In the not-so-distant past, VR was the exclusive domain of a handful of firms operating on the cutting edge. However, it’s becoming more mainstream as potential buyers crave and sometimes demand this option.

Besides the “wow factor,” VR can improve safety and efficiency, while helping to deliver a high-quality product. And by walking clients through a full experience at inception, users can present solutions for distinctive designs or unusual conditions. Expect to see increased use of VR in construction during the planning and design stages for major projects.

2. Augmented Reality

With augmented reality (AR), a close cousin of VR, users can “walk” through 3D and 4D models without moving their feet. Doing so enables them to collect valuable information about the environment in real time.

New applications on the market, including an iOS app called MeasureKit, allow users to aim their smartphone or iPad at an object or building component and interact with it through the screen. More products are expected to debut or gain traction. For example, Autodesk’s BIM 360 Glue software enables subcontractors to point a device at a component and obtain information from the 3D models laid against the image framed in the device.

3. Robotics

Construction industry leaders are constantly looking for ways to improve efficiency, streamline procedures and promote greater safety. Not surprisingly, use of robotics is on the upswing. A robot effectively can scan a building, plan for its demolition and remove it with minimal human interaction. Other comparable functions should be implemented this year.

4. Wearable Technology

New wearable devices continue to make their mark in the construction industry. Products range from smart glasses that add data to smart clothing such as heated jackets and cooling vests, to sensors in helmets, belts and shoes that sense fatigue or extreme stress.

These innovations may provide several benefits, including:

Efficiency. Wearable devices can track movements and determine where resources are being best used or wasted.

Safety. Technology-based gear reduces workplace hazards, such as excessive heat and cold, and minimizes the impact of injuries that do occur by providing earlier warnings of danger.

Productivity. When workers have greater protection and feel safer, they’re more likely to be productive.

5. Smart Machinery

Not only is worker clothing becoming smarter, but machinery is doing much more than breaking rocks or cutting wood. Today’s smart machinery is designed to collect data from job sites and analyze it for various purposes, including quality, tracking and safety.

Products such as drones can be use by crews to assemble photos, videos and other visual data so changes may be made or safety violations avoided. The built-in software can tag items by location, too. This enables supervisors to quickly identify and react to visual data on a specific job site. It also creates marketing opportunities based on the provided visuals, which can be added to a company website or brochures.

6. Prefabrication

Prefab is hardly new, but technology is refining this approach to construction and making it more accessible to a greater number of project owners and contractors.

For instance, ManufactOn is an Internet-based platform that allows project participants to view the prefab process remotely or on-the-move. This means that anyone involved in the job can see the manufacturing process, get status updates and receive delivery notice of the assets in question. Similarly, Autodesk’s BIM 360 Docs makes it possible to view information in a single workflow spanning the entire prefabrication process.

7. Predictive Analysis

Risk is a necessary evil for construction businesses. And how you identify and manage risk can make or break your company.

To help predict and address potential threats, new products can analyze data from subcontractors, suppliers, designers and even your crew. This provides a means for identifying project elements that need immediate attention as well as long-term strategic and industry issues. Over time, you can continue to receive updated analyses that allow you to more proactively address specific risks.

8. 3D Printing

3D printing was initially thought to primarily benefit architects and designers. They could create disposable models and reprint them often while perfecting a design. But 3D printing has also found a home in the construction industry.

This innovation has already been used in full-sized construction projects — even in the building of bridges. Now construction companies are beginning to use 3D printing to create the components of full-sized homes. The possibilities seem endless.

9. Green Building

Green (or “sustainable”) building refers to practices and procedures that are environmentally sensitive and that use resources efficiently. It encompasses the entire life cycle of a building, from design and construction through operation and maintenance to renovation and, finally, if necessary, demolition.

Although green building is increasingly taking new forms, the main shared objective is still to protect the environment. This may be accomplished through elements such as:

Lessening use of energy, water and other resources,
Preventing pollution and chemical spills that can harm public health,
Improving productivity to run quicker, more efficient projects,
Reducing waste and general deterioration, and
Increasing a building’s sustainability over the long term.

10. Connectivity

Delays caused by lack of communication or miscommunication between a job site and home office — or between a trailer and design office — can be frustrating and costly. This is especially true when you’re working on a razor-thin profit margin.

Fortunately, the technology for connecting remote sites is speeding up all the time. Mobile devices and the latest apps enable you to access the latest drawings and documents more quickly while handling Requests for Information (RFIs) and other issues. Miscommunications can be greatly reduced using videotelephony, web-based meetings and instant messaging. You can also prevent the need for rework and, if a change order does arise, document the circumstances more thoroughly so you’ll get it approved more easily.

Exciting Year

In summary, 2019 promises to be an exciting year for technological innovation and improvement in construction. Take steps now to put your construction company at the forefront.

Revenue Recognition: New Rules Go Live for Private Companies

Posted on January 1, 2019 by Debra Barcuch

Private companies that follow U.S. Generally Accepted Accounting Principles (GAAP) must implement new revenue recognition rules in fiscal years that start after December 15, 2018. Are your accounting systems and personnel ready for this fundamental shift in financial reporting? The effects will likely be more far-reaching than expected, based on feedback from public companies that implemented the changes in 2018.

What Will Change

Accounting Standards Update (ASU) No. 2014-09, Revenue From Contracts With Customers, ushered in a fundamental change to how companies report one of the most important indicators of their financial performance. Public companies adopted the standard for fiscal years starting after December 15, 2017. Private companies were given a one-year reprieve.

Under prior rules, GAAP provided complex, detailed and disparate revenue recognition requirements, causing different industries to use different accounting for economically similar transactions. The updated standard replaces most of the industry-specific revenue guidance developed prior to 2014 with a single, principles-based model by which most companies must report the top line in their income statements.

The objective of the new guidance is to remove inconsistencies and weaknesses in existing revenue requirements. It also improves comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets.

The updated standard doesn’t change the underlying economics of a business transaction or when a customer pays for a good or service. Rather, the new rules can change the timing of when a business is able to record the receipts from a customer. Depending on the line of business, this could mean earlier or later recognition of revenues compared to current practices.

How to Recognize Revenue from Contracts

Recognizing revenue under the new guidance requires these steps:

Identify the contract and the company’s performance obligations (or promises) under the contract.
Determine the transaction price (including the effects of any variable payment or significant financing components).
Allocate the transaction price to the performance obligations in the contract.
Recognize revenue when (or as) performance obligations are satisfied.

ASU 2014-09 is expected to have a major effect on companies that enter into long-term contracts with customers. Examples include construction firms, software and wireless providers, and media companies.

Though some entities won’t notice a significant change on their income statements, virtually everyone will be affected by the standard’s expanded disclosure requirements. The new guidance calls for more disclosures about the nature, amount, timing and uncertainty of revenue that’s recognized.

Why Revenue Recognition Is a Priority

Unfortunately, some private companies still aren’t up-to-speed with the new rules. Too often, smaller companies underestimate the amount of work involved with implementing the standard — or mistakenly presume that the changes apply to only public companies and large private entities.

Even if the changes will have a minimal impact on your company’s bottom line, it’s critical to evaluate controls and policies for estimating revenue before year end. One solid reason to onboard the changes as soon as possible is to forewarn your lenders about changes to the timing of revenue recognition that could affect the company’s loan covenants. In turn, such proactive measures may help persuade lenders to waive loan covenant violations and ensure that access to credit isn’t disrupted.

Human Resources Implications

The standard could also have spillover effects on the human resources department. To the extent that sales commissions and bonuses are based on revenue, the updated standard could affect the timing of when the performance-based compensation payments are made.

For example, if revenue recognition is delayed by the standard, managers and salespeople who must wait longer to receive part of their compensation won’t be happy. Conversely, if revenue recognition is accelerated by the standard, commissions and bonuses tied to revenue recognition must be paid sooner, possibly causing small employers to incur cash flow shortages.

Ready, Set, Implement

Don’t underestimate the scope of change under ASU 2014-09. If your company hasn’t yet started implementing the new revenue recognition guidance, contact your accounting professional as soon as possible to ensure a smooth transition and anticipate any adverse side effects.

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