4Thought Blog

If your manufacturing company is like many others in the industry, you're having difficulty finding top-notch new hires to expand your workforce as well as to replace employees who are retiring or quitting. At the same time, you'd like to reduce your tax liability for 2022.

Practical solution: Kill two birds with one stone by hiring workers from certain "target" groups. This move can help close the skilled labor gap, and you may qualify for a tax credit — the Work Opportunity Tax Credit (WOTC) — at the same time. What's more, if your company employs certain teenagers during the next few months, it may be in line for a special "summertime" version of the WOTC.

As the midpoint of the year fast approaches, it's a good time for manufacturers to assess their tax status and plan appropriate strategies for reducing their 2022 tax liability.

 Although each situation is unique, here are seven general tax moves that could potentially lighten your manufacturing company's tax load this year.

For decades, owners of small to midsize manufacturing companies have opted for the S corporation form of ownership, rather than being subject to the double taxation of C corporations.

However, in recent years the limited liability company (LLC) has become another popular alternative. Let's compare these two business structures.

It's rare a manufacturer who doesn't want to improve profits and boost cash flow by reducing the carrying cost of inventory.

Here are two cutting-edge ways to help you manage inventory more efficiently.

First-year bonus depreciation typically creates a powerful tax incentive for eligible manufacturers to purchase qualified property needed for business reasons. These tax write-offs can benefit a manufacturer's cash flow, but claiming them isn't always the best decision.

In some cases, there are advantages to following the regular depreciation rules. However, if your manufacturing company wants to take full advantage of the bonus depreciation, this is the year to do so.

Last year was another tumultuous one in the manufacturing sector. The continued impact of the COVID-19 pandemic, unprecedented disruptions to the supply chain and a competitive business environment were all contributing factors, despite a general rebound in the economy.

But manufacturers are facing another major obstacle in 2022 — the ever-growing skills gap in the workforce. A possible solution to this problem is to "upskill" your workforce.

The pandemic and global supply chain disruption have placed an unprecedented burden on manufacturers — and the need for automating manual processes is more pronounced than ever.

One way manufacturing companies can lower costs with technology is to upgrade controls for sales and use taxes. Let's take a look.

The credit for increasing research activities, commonly referred to as the research and development (R&D) credit, is one of the biggest and best tax breaks available to manufacturing companies.

Unlike a deduction, a credit is a dollar-for-dollar reduction of a business's tax liability. Plus, there's no limit on the R&D credit amount for a particular tax year and excess credit can be carried back one year and forward up to 20 years.

Unfortunately, many manufacturers overlook this high-impact credit because they erroneously assume they don't qualify for it. If this is your business, a word of advice: Take a closer look. You may be able to claim a credit worth thousands of dollars.

Manufacturers often own the building, or several buildings, where their goods are produced for public consumption. Normally, it takes almost four decades to fully recover the cost of a commercial property through depreciation deductions.

Fortunately, there's a viable alternative that can help. By commissioning a cost segregation study, a manufacturer may be able to claim much faster write-offs. Furthermore, these tax benefits have been enhanced by the Tax Cuts and Jobs Act.

The manufacturing supply chain is only as strong as its weakest link. But how does a firm know where its weakest link lies? The answer may be found with predictive analytics.

As the name suggests, this branch of advanced analytics uses many techniques to predict where a system can break down, so it can be fixed beforehand.

Many companies have already adopted predictive analytics. And many more are expected to jump on the bandwagon over the next year.