Author: Ryan Maddock

Ryan Maddock is the Managing Partner at Growth Management Group and is a News Contributor & Corporate Consultant on Stimulus Money, Specialized Tax Credits, & Corporate Outsourcing

The Great Shock of April 15th

This tax season I encountered a record number of business owners that were outright shocked to find out how much they owed for 2014 taxes. There are a few common questions I keep hearing.

#1 – How Did I End Up Owing Money?

There are four key areas that contributed this year to so many companies owing:

  1. Surprise Profitability
    The last several years have been decent if you’re lucky but dismal for most. This caused most companies to pull back on quarterly tax prepayments, or often eliminate them altogether.
  2. 2014 Was Better Than Expected
    There is no question that 2014 started an upswing that is continuing to get stronger with each passing quarter (even for those companies have yet to feel the impact of that upswing). Once income began to flow again, many businesses were forced to make capital investments that were years overdue. This means that although 2014 was in fact more profitable, it wasn’t “felt” by many Owners. Not all investments may be written off in the current year. Even if the bank account hasn’t recovered, the P&L sheets have and additionally the IRS considers many to be profitable and out of AMT. Even if the bank accounts don’t reflect the same.
  3. Tax Breaks Disappeared
    Without many major tax breaks that companies have not only come to enjoy, but have come to count on, many are finding themselves with unexpected increases to their tax liabilities.
  4. Tax Rates Increasing
    Tax rates have increased, for example; the recent Personal Limit increase to 40% and Capital Gains increasing from 15% – 25%.

#2 – Why Didn’t My CPA Warn Me?

Many owners are left wondering:

  • Did my CPA let me down?
  • Why didn’t they prepare me for this?

The reality is, your CPA only knows the information you provide to them And for most of us business Owners we don’t do our CPAs any favors. As Owners we know this, and if we are honest we’ll admit that we just don’t take the time necessary to discuss an overall tax strategy with our CPA.

Yesterday I spoke with one CPA that was completely unaware that their Client had purchased an additional building (over $2M in cost), and another CPA that upon delivery of our Cost Segregation report didn’t understand where we got our figures from only to find out the Client spent over $300K in renovations last year that they failed to tell the CPA about.

Most business Owners are guilty of … running their business. As business Owners, we make decisions today that are good for our company and good for our bottom line, with little to no regard of how it affects our tax strategy (and it usually wouldn’t cross our minds to call our CPA in the middle of summer to review something for next April).

#3 – What Can I Do About It?

Step #1 for most business Owners I’ve talked to is:

  • Pound their fist on the desk angrily while complaining about the government
  • When that ceases to provide relief move on to the below Step 2

Step #2 (True Step #1)

For some business Owners, you bit the bullet and made a payment yesterday, for others you either filed extensions or simply filed without making a payment and are going to wait for the dreaded IRS bills to arrive.

In either instance, the good news is that just because tax day has come and gone doesn’t mean your numbers are written in stone. There is over $200B in Federal Tax Incentives allocated to small and mid sized businesses to help offset your liability.

We’ve developed a simple online tool for business owners to check in 30 seconds if you qualify for any Federal Programs.

Click here to find out in 30 Seconds if you qualify for any Federal Tax Incentives.

 

The Perfect Storm Catapults Some Manufacturers While Crippling Others

For those that follow the Podcast or the Blog, I’ve been talking since last summer about a “storm” coming for U.S. Manufacturers. A storm that was going to catapult some, while crippling others. We were right in our prediction, but underestimated just how much this “storm” would affect Manufacturers. Daily I find myself speaking to Manufacturers, all with the same story, and all lacking answers on how to solve it.

Right now the industry is facing the shocking realization of large upcoming tax liabilities, without the capital to pay those liabilities. Even though extensions may be filed and payment arrangements may often be made, this is a slap in the face to business owners. They’ve spent years digging out of a hole, surviving. Just to go back into debt and have this daunting concern hanging over their heads while they should be shifting their focus from survival to growth.

There are 4 Significant Changes That Have Caused This “Perfect Storm”:

  1. Surprise Profitability
    The last several years have been decent if you’re lucky but, dismal for most. This caused most companies to pull back on quarterly tax prepayments, or often eliminate them altogether.
  2. 2013 Was Better Than Expected
    There is no question that 2013 started an upswing that is continuing to get stronger with each passing quarter. Manufacturers not only did not anticipate this upswing, they did not really “feel” it either. For years they were forced to cut back to the essentials just to survive. Once income began to flow again, many were forced to make capital investments that were years overdue. This includes; equipment, staff, software, and facility improvements. This means that although 2013 was in fact more profitable, it wasn’t “felt” by many owners. Not everything may be written off in the current year, even if the bank account hasn’t recovered, the P&L sheets have, and the IRS considers many to be profitable and out of AMT, even if the bank accounts don’t reflect the same.
  3. Tax Breaks Disappearing
    Without Bonus Depreciation, (and other major tax breaks that Manufacturers have not only come to enjoy, but have come to count on), many are finding themselves with unexpected increases to their tax liabilities.
  4. Tax Rates Increasing 
    Tax rates are increasing for example; the recent Personal Limit increase to 40% and Capital Gains increasing from 15% – 25%.

So, what happens when companies cut back on paying taxes over the last few years, have a “surprise 2013” that showed up in profit but not necessarily in their bank account and experience tax rate increases, even though tax breaks continue to disappear?

They have a choice, either be crippled or be catapulted. Those that choose to put their head down and re-enter survival mode will surely suffer for it. Those that seek out ways to grow will take over new positions in market share while others scramble to survive.

One key area growing manufacturers are taking a serious look at is what Specialized Tax Incentives are available to offset these increases in Tax Liability. Programs such as the R&D Tax Credit, Cost Segregation, Hiring Incentives, and Property Tax Mitigation. Programs that previously seemed out of reach, all of a sudden are making it to the top of the priority list.

Related Articles:

What the Last 5 Presidencies Have In Common and How It Affects Every Manufacturer In America

Believe it or not, there is at least one thing that the last five Presidential Administrations have unilaterally supported, and we can feel quite certain the next will as well.

There is a little known tax credit that is part of Section 41 of the Internal Revenue Code, allowing manufacturers to reclaim a small portion of their annual payroll simply by performing activities manufacturing companies are already doing as part of daily operations.

This credit may be the only thing both sides of the aisle can actually agree on.   It has bipartisan support in both houses, backing of the Obama Administration, and has been renewed by every single Presidential Administration over the last 32 years.  How can there be such a disconnect between what may be the only thing the last five presidencies have in common?

A lot of the confusion is in the name.  Many manufacturers don’t believe they do “R&D” because they don’t have a traditional R&D department.  The IRS definition of R&D is quite different than yours or mine.    It often includes activities such as:

  • Manufacturing
  • Fabrication
  • Engineering
  • New Product & Process Development
  • Developing New Concepts or Technologies
  • Design – Layout, Schematics, AutoCAD
  • Prototyping or Modeling
  • Testing / Quality Assurance:  ISA 900X, UL, Sigma Six, etc.
  • Integration of new machinery (CNC, SLA, SLE, etc.) into existing processing
  • Software Development or Improvement
  • Automating or Streamlining Internal Processes
  • Developing Tools, Molds, Dies
  • Developing or Applying for Patents

Just to name a few…….

Only the folks in Washington DC could take unilateral support and turn it into unilateral confusion.

Since 2004 Growth Management Group has been educating and assisting Manufacturers and other Commercial Property Owners on their rights to programs buried deep within the tax code.   To date we’ve assisted small and mid sized companies discover over $300M in benefit.   Contact us for a comprehensive review.

$14B Available in Manufacturing Tax Credits

$14B Available in Manufacturing Tax Credits

There is a new bill that would put $14B in tax credits back into the pockets of manufacturers.  What makes this bill unique amongst its predecessors is that manufacturers don’t have to wait around for this one to pass through its bureaucratic channels (or stall out in a constant state of delay and confusion).

Manufacturers can take advantage of this program before it passes.  This is because a largely unknown version of the program already exists called the R&D Tax Credit.  A temporary version is in place through the end of 2013 as part of the American Taxpayer Relief Act of 2012.  So, manufacturers can actually begin receiving funds this year based on previous years activities.

5 Reasons Manufacturers are not taking advantage of the current version of this credit:

  • They don’t understand the IRS definition of R&D (see article:  R&D I don’t think we do that!)
  • They believe their companies are too small
  • They believe the benefit won’t outweigh the work
  • They believe they have to change the way they operate in order to qualify
  • They believe that the credit is not being renewed

Not only will this credit most likely be renewed, but congress has continually made it easier to qualify and expanded the eligibility to include not only the Fortune 1000 but also small to mid sized firms who can utilize the credit to significantly affect their bottom line.

When working with manufacturers we ask two questions to determine qualification:

  1. Are you expecting to be profitable this year, or were you profitable in any of the last 4 years?
  2. Is your annual payroll for any of these years in excess of $1 million?

Since 2004 Growth Management Group has been educating and assisting Manufacturers and other Commercial Property Owners on their rights to programs buried deep within the tax code.  To date, we’ve assisted small and mid sized companies discover over $300M in benefit.  Contact us for a comprehensive review.

 

 

5 Steps From Exhausted to Excited

I spent much of last year waking everyday only to be more tired than the day before. I would anticipate every weekend, hoping it would be the recharge I desperately needed. I tried being active; I tried being inactive. I tried long weekends filled with activities, and long weekends parked on the couch in my theater room. I tried healthy eating and when that didn’t boost my energy, I tried comfort eating. Next, I sat down and made a mental list of things I had done in the past that “got me back on track”. I then resorted to the extreme of repeating previous vacations that I had found refreshing (all the way down to the same resort, and same restaurants). When you’ve been a CEO for 15 years you develop a bag of tricks to get you out of the valleys. But this time was different; every trick in my bag was failing me.

I began to wonder if that was that.  Maybe I just couldn’t get out of the hole. Were my best days behind me? The encouragement I kept getting was that I was doing all the right things and it was just going to take time. So, all I could do was get up every day and grind away at every problem I saw. Some days were awful, some decent, but none left me feeling fulfilled, they were no longer great.

Then one day the sun started to shine (literally…spring came). But it wasn’t just that, I found myself more rested, more excited, dealing with fewer problems, and I found myself happier. Being the analytical person I am I couldn’t just let that be, I needed to know why! What had changed? The problem with trying so many things is I didn’t have a clue what finally worked, or if it was a combination of things. I would love to blame this on analytics but, I think it’s more like self preservation; wanting to know how to get back to myself quicker next time.

Here are the top five things that allowed me to move from exhaustion back to excitement:

1.  Focus
We were all designed for something, and we have to ask ourselves, “What are those few things that only I can do?”  “What are the few things that I am truly one of the best in the country at?”  And now for the painful question…“How much time do you actually spend on that?”  For most of us the answer is probably less than 10% of our time. Once you determine the answers to these three questions, get rid of almost everything else! Seriously, delegate it, let go of it, or just stop doing it. What makes you great will never make your organization great until you are focusing the majority of your available time and energy on it.

2.  Balance
This may seem contrary to the first point, but only doing what we enjoy is unhealthy. Let’s use baseball as an example; if you are amazing as a first baseman then stick to it, hone that skill! That doesn’t mean leaving out all the things you may find lacking in enjoyment. We all see the play on ESPN that makes the highlight reel, but no one talks about the hours of training every day, the routine, diet, coaching, heat treatments, and ice baths that play out behind the scenes. Do you think ball players find that part enjoyable? Remember, there are numerous hours of hard work involved to make up 15 seconds of ESPN fame.

American culture is to avoid the things we dislike. We were not meant to avoid pain, in fact embracing the things we dislike or find painful make the things we do enjoy that much more satisfying. Imagine waking up every day in paradise, after a while every sunset is just a sunset; every wave is just a wave; and the relaxing sound of the ocean…fades away.

3.  Over-commitment
Top performers almost always struggle with this. We thrive on challenge, we enjoy being at the top of our game, and we dislike sitting in the back row whether it be at a networking event, the office, or even at church. This leads to over commitment. Not because we don’t know how to say no, but because we lack the ability to be a spectator. We see everything as what could be, and what we could contribute to it. For years I tried to figure out how to shut my brain off and just enjoy “participating”. Then I realized the real key is accepting the fact that I’m not a spectator and never will be. So, I have to limit the things I put myself in front of. I have to admit to myself, if I even attend a coaching group I will end up leading it. I have to enter every activity understanding that fact before I even choose to participate. I have to ask myself, “Am I willing to dedicate a significant portion of my time to this?” If the answer is no, I don’t get involved.

4. Prioritize
Start your day the right way. Many of us jump right into our email box and find ourselves hours later still trudging away; exhausted and having not completed anything of true importance. That’s because email is the art of fulfilling other peoples’ requests. You have to start your day the right way. List your work, AND THEN work your list. Only after doing this can you take control over your day. Once you have a list you can look through your email for additional tasks (which is all emails really are these days).

PRODUCTIVITY TIP: Now that you have a prioritized list, the old adage of “do what’s most important first” isn’t always the best approach. When looking at your tasks determine which ones will leave you energized, and which ones will leave you exhausted? Arrange your tasks by doing energizing tasks first, and then build from that momentum to tackle more draining tasks. Be honest with yourself, there are some tasks that once completed you are just “mentally done” for the day. I always schedule those meetings/tasks for the very end of the day so that I have the energetic momentum of the entire day behind me backing me up (and so I can go home afterwards, as I know I am going to be “done”).

5. Routine
It takes 21 days to develop a habit and only 2 – 3 to get out of one. You need to have control over your day, something you can rely on. Our minds have to be kick started. We are forced to make hundreds if not thousands of decisions on a daily basis. By having a routine you are telling your brain to fire up and pointing it in the right direction. Having and sticking to a routine naturally leads to a more organized day. Once you have established a routine, it becomes automatic; you will start performing tasks without realizing it. So, you get done what needs to be done even while your mind is occupied with other things.

 

Stop Surviving and Start Growing

CEO’s are about the thrill of the deal, achieving something no other person has, the adventure, the vision!  Terms like survival, and cost cutting are something they’re willing to tolerate, but only as a means to the next opportunity to dream again. Even though the business landscape hasn’t changed much in the past few years, the attitude of the CEO has.  We are tired of surviving, and ready to grow again!  Even more, we refuse to live in survival mode.

So, what’s next?  The answer is simple:  GROW.  It seems like such an obvious solution, why didn’t we think of it years ago?

I think it’s because we weren’t hungry enough!  Cutting costs was easier than returning to the practices that once grew our empires in the first place.  But now the fun is gone, work has become exactly that…WORK!  So, the decision has been made; the dreaming has started again and this is where we go from here.

4 Ways to Stop Cutting & Start Growing:

1st:  Start dreaming again.  Get away, go for a drive, sit down with a notepad or whatever it is you once did to dream.  Don’t be afraid, don’t get caught up in the “what if” and “how will we pay for that” roadblocks.  Let’s be honest, you never counted cost the first time you wrote a vision, why start now?  One tip:  dream bigger this time.  You’re older, farther down your path, with more capacity.

2nd:  Make the commitment.  Not just to yourself, make it known.  Tell your staff, family, colleagues and friends.  Accountability is a mighty force and letting others know your plan not only gets others helping push the boulder up the mountain, but it makes giving up more difficult.  Once your name is on the line and your direct reports are coming back with status updates, your team is involved; it becomes real.

3rd:  Get back to the basics.  I know it was fun for a while when we didn’t have to work to get new clients, when the only thing needed for growth was an open sign, but now it’s time to get back to the basics.  Ask yourself, “What was it that made me successful in the first place?”  “What crazy forms of gorilla marketing did I implement?”  “What associations was I apart of?”  And, the painful one…“How many cold calls was I or my staff making?”  It’s important that we realize while the world around us has changed into a social hotspot, traditional marketing and relationship building are still the most effective ways to gain long-term clients and partnerships.

4th:  Every decision should point towards growth.  I’ve watched many CEO’s over the last five years point every decision towards survival, not towards growth.  If I asked what they would do if a few hundred thousand dollars dropped in their lap, most would talk about growing their business and expansion, but that isn’t what happens when those opportunities arrive.  In the last 10 years we’ve gotten companies around $300M in Specialized Tax Incentives, and I have watched time after time a company receive this money and immediately start plugging holes; going into survival mode. They are dedicating hundreds of thousands of dollars towards keeping the status quo.  The answer is so simple; if we are committed to growth, we have to turn every decision towards that plan.  Recently I’ve seen a shift in mindset.  No longer are CEO’s willing to survive just keeping afloat.  They’ve dropped the bucket, stopped bailing water, and decided the real solution is to build a bigger boat.

Keller Williams Commercial Partnership to Bring Millions in Tax Incentives to Commercial Clients

October 4, 2012 – Keller Williams Commercial, the second largest real estate franchise operation within the U.S., has partnered with Growth Management Group, LLC (GMG), a national cost recovery firm, to provide commercial clients the opportunity to gain hundreds of millions of dollars through specialized tax incentives.

Based on the synergy between both organizations, this partnership will provide clients with every opportunity to make the best investment when purchasing commercial property by reducing taxable income, improving cash flow and ROI.

This partnership will substantiate KW’s commitment to excellence which was confirmed with the 2012 J.D. Power & Associates “How Buyer/Seller Satisfaction Study”, ranking them highest in customer satisfaction.

To date GMG has discovered almost $300 million dollars in refunds and/or incentives for it’s clients.  GMG’s  position as a nationally recognized full service Training, Development and Cost Savings Consulting Firm with a vision to stimulate economies aligns with the same commitment to excellence that KW has established.

For more information about Growth Management Group, LLC, contact:  Kendra Pelch, kpelch@gmgconsulting.net (888) 705.5557, www.gmgsavings.com.

For more information about Keller Williams Commercial Real Estate, contact:  http://www.kwcommercial.com

 

References: http://www.kw.com/kw/pressrelease.html?pressReleaseId=381

 

Flint Journal: Company Helping Find Stimulus Money, Tax Breaks for Local Businesses

FLINT, Michigan — A Flint company that helps local businesses qualify for government stimulus money is doing so well that it plans to hire about 100 employees in the next year.

Growth Management Group managing partner Ryan Maddock said the company, at G-3490 Miller Road, directs businesses to stimulus act provisions that have secured an average of $200,000 for establishments in Genesee County.

Rowe Professional Services Company is one company that has benefitted. Rowe Controller Douglas Kline said his company claimed tax breaks on its building, at 540 S. Saginaw St., provided through a cost segregation plan that “takes this big monster of a building and breaks it down into components.”

Depreciation on the building has been calculated and the company receives lower tax bills for years to come, Kline said. He could not provide specific figures on tax breaks for the $23 million project, calling the breaks “beneficial.”

Growth Management Group also found tax breaks during a research and development study for Rowe. Kline said tax law changes in 2009 allowed the company to refile its tax returns for 2006, 2007, 2008 and 2009, and it will do so for the 2010 tax year for some “very significant tax credits” on federal income tax returns.

The management group has worked “hand-in-hand” with Rowe’s accounting firm, and Kline said the business has been “really pleased with the results.”

Maddock said several of the breaks come through three main stimulus plans, including the Hiring Incentives to Restore Employment Act, which allows an employer to take a tax credit of up to $1,000 per worker hired between Feb. 3, 2010, and Jan. 1, 2011. The act also offers up to $250,000 for small businesses to write off equipment investments.

The Small Business Jobs Act has allowed more than 1 million companies to receive stimulus money, the biggest stimulus expansion since 1981, said Maddock, who pointed out that a stimulus act of some kind has been done every year in Michigan and nationwide since the early 1980s.

The SBJA, providing eight tax cuts and $30 billion in small-business lending, applies only to businesses that have $50 million or less in annual sales. Companies can apply for funds retroactively back to 2007.

A commercial property owner’s benefit is open to anyone who purchases a commercial property for $650,000 or up, or has done at least $250,000 in renovations within the past 20 years.

Lawrence Moon Funeral homes, with locations in Saginaw, Flint and Pontiac, has received such money. One of the misconceptions people have about the money, Maddock said, is that the benefits come “with a lot of strings attached.”

Business is going so well for Growth Management Group that it will move to the former Diplomat Pharmacy headquarters at the corner of Corunna and Elms roads in the next 45 days, Maddock said.

He said he hopes to add more than 100 Flint-area employees at the new location in the next 12 months, with positions in sales, customer service, law and engineering. Pay will range by position and experience.

Growth Management Group does charge for its services, between 10 and 33 percent of the benefit garnered. And while the funding is referred to as stimulus, Maddock said the laws are giving back to those who have invested in the community.

“This is a reward for work that you’ve already done,” Maddock said. “You are honestly getting some of your own money back.”

The above article was reposted from The Flint Journal.
Original Article By:  Roberto Acosta