Research & Development Tax Credit

Research and Development tax credits seek to reward businesses that are employing U.S. labor to develop or design products and processes. These innovations are a significant contributing factor in driving the economy and the creation of new jobs. So, if you’re performing your technical work in the U.S., the government encourages you to take advantage of this credit. It’s one of the most powerful tax incentives available to taxpayers. Due to several recent legislative changes, this incentive is now available to many smaller businesses that have often overlooked these credits due to misinterpretation. Moreover, recent published case law and solid IRS guidance have made it easier to navigate qualification. If you qualify for the R&D tax credit, you can claim up to 13% of your qualified research expenses. These expenses consist of labor, outside contractors and supplies. While the majority of states allow for a 3-year tax look back period, for which an individual or business can amend returns to claim a refund of taxes paid, some states have a 4-year look back period.  You can also take credits on your 2016 return and offset your tax payments on March 15th or April 15th.  There has never been a better time to take advantage of the R&D tax credit!

Qualifying Industries

  • AGRICULTURE
  • AEROSPACE & DEFENSE
  • ARCHITECTURE
  • AUTOMOTIVE
  • BIOTECHNOLOGY
  • BREWERY/DISTRILLERIES/WINERIES
  • CHEMICALS
  • CNC MACHINING
  • CONTROLS & AUTOMATION
  • ELECTRONICS
  • ENERGY
  • ENGINEERING
  • FABRICATION
  • FOOD SCIENCES
  • FOUNDRIES
  • JOB SHOPS
  • LIFE SCIENCES
  • MEDICAL DEVICE & EQUIPMENT
  • OIL & GAS
  • PLASTIC INJECTION MOLDING
  • SEMICONDUCTOR
  • SHIPBUILDING / MARINE
  • SOFTWARE DEVELOPMENT
  • SYSTEM INTEGRATORS
  • TECHNOLOGY
  • TELECOMMUNICATIONS
  • TOOL & DIE
  • WASTE MANAGEMENT

Qualifications

You must be designing, developing or manufacturing a product, process, technique, invention, formula or computer software.

The actual outcome must be uncertain at the onset of your work. Uncertainty exists when the information available to you does not clearly show you how to proceed. The research starts here!

You must identify more than one approach to achieve the desired outcome – The research stops here!

If you’re performing some of the above activities, contact us to get started.

Our Approach

1

Initial Evaluation

This evaluation represents an initial discussion during which we learn more about your business and determine qualification. The tax situation is carefully reviewed to identify any limitations for the use of the credits.

2

Value Assessment

Following our initial evaluation, we conduct a value assessment meeting during which we share our findings and discuss your potential credit estimate. A full disclosure of our services and fees are presented. A proposal is prepared.

3

Path Ahead

Let’s get started. A conference call is set to develop your study plan. We will discuss with you the precise way we will work together, as well as set a clear goal for the finish. We then request your accounting records, tax returns, and other contemporaneous record keeping. Interviews with owners and key employees will be conducted. If necessary, an onsite inspection of operations will be scheduled.

4

Delivery of Credits

Tax forms and credits are delivered to the CPA for submission to the IRS and state taxing authorities.

5

Delivery of Report

The qualitative and quantitative information is organized into a final report consisting of the following:
• Company background
• Our methodology for determining qualification
• Project reports, details and other substantiations confirming qualified activities
• Credit calculations, project cost summaries and wage allocations – nexus between Qualified Research Expenditures (QREs) and Qualified Research Activities (QRAs)

Legislative History

R&D tax credits present a great opportunity for a dollar-for-dollar reduction in your federal and state income tax liabilities, reduction of your effective tax rate and increased cash flow.

In the 1960’s, U.S. productivity was down for the first time. By the 1970’s, we were losing our competitiveness. In 1981, the credit was introduced as part of the Economic Recovery Tax Act. The intent was to incentivize companies to discover new products, processes, techniques, formulas, inventions and technologies. This became a very transformative period of time especially in the area of information and communications. We could now watch news 24 hours each day, leave a voicemail, and fax a proposal in minutes. The distribution of information was flowing faster than ever. The U.S. was a giant think-tank again and we were flourishing with great innovations. If you were developing, designing or manufacturing these cool, groundbreaking new things, you were rewarded with the R&D tax credits.

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