What are US Research & Experimentation (R&D) Tax Credits?
The US Research & Experimentation Tax Credit or R&D Tax Credit is a general business tax credit under Internal Revenue Code section 41 for companies that incur research and development (R&D) costs in the United States. The US R&D tax credit has been around since 1981.
However, it has never been permanent – it would periodically expire and be renewed by Congress. Companies wishing to include this in their long-term budgeting plans couldn’t count on the credit being around for certain. Additionally, many companies couldn’t benefit from the credit since they didn’t owe federal income tax or were subject to the alternative minimum tax (AMT).
In 2015, the Congress made the R&D tax credit permanent and also made key changes so that more companies can benefit from the credit.
What Can You Recover?
Net return on qualifying spend – 14% for Startup Method, 15% for ASC method
How Can I use My Tax Credits?
Reduce Federal or State Taxes owning – carry 1 year back, apply in current year, or carry 20 years forward
Recover Current Year Payroll Tax or carry forward to apply against future payroll tax*
Apply Against Alternative Minimum Tax (AMT)*
*Use of Tax Credit against Payroll Tax and AMT began on January 1, 2016. It cannot be applied before this date.
Are You Eligible?
Small Businesses – non-publically traded corporations, LLC’s, or S-Corps with an average gross receipts (revenues) for the preceding three taxable year not exceeding $50 million
Industry Examples – Software Development & ICT, Hardware Development, Agriculture, Bio Technology, Manufacturing
Here are a few questions that we use to determine whether your project is eligible:
- Are you involved in engineering, design, data collection, testing or other developmental work?
- Have you designed or developed new software?
- Have you changed a process to reduce costs or to improve your manufacturing?
- Have you created a new product, made improvements or added new features to an existing product, or built a prototype?
- Have you incurred costs related to a process, project or prototype that is incomplete because of unresolved technical problems?
If you answered ‘yes’ to any of the questions above, contact us for a complimentary assessment. We’ll go through your project in more detail and provide an estimate of your potential return, no obligation required.
Boast Capital Can Handle Your US R&D Claims For You
Given our technical background and US Research & Experimentation Tax Credit experience, we are able to translate your work into a format understood by the IRS and are able to prepare the claim with minimal time commitment from your end. You are not required to do any technical writing.
We stay engaged throughout the year to identify R&D eligible work on an ongoing basis, so we’re not looking back at the year-end. This also enables us to provide information on other technology grants and financing opportunities that may apply.
Finally, in the event of an R&D review by the IRS, we defend you in the process and help ensure your claim is successful.
Every client engagement is given the same attention; whether you want to engage us to handle your entire claim on a contingency basis, you want us to review and provide feedback on a claim you’ve prepared internally, or you want to engage us on a fixed-cost or hourly basis.
We measure our success by the degree to which we maximize our clients’ R&D claims. Every claim goes through a proven 7-step methodology to ensure we bring the maximum possible value to your claims.
Step 1: Operations Assessment and Training
Every client engagement begins with a kick-off meeting where all key personnel are trained on the US R&D program and its requirements. Our experienced professionals then perform a detailed assessment of your organization and the work undertaken over the time period in scope to identify eligibility. We interview key personnel to gather technical and financial details related to any eligible work performed. We also provide information on any other technology related grants and financing opportunities that may apply.
Step 2: Strategy Development
We analyze all of the information collected from our assessment and devise a claim strategy to maximize your tax credits. A documentation system is recommended to ensure that you keep records of any work performed so as to strengthen your claim.
Step 3: Claim Building
We prepare all the necessary technical and financial documentation required for your claim.
Step 4: Quality Assurance
Every claim goes through a rigorous quality assurance process where another consultant reviews the claim from the government’s perspective to ensure all requirements and necessary details are in place.
Step 5: Client Approval
We review your claim with you for final approval prior to submission, and provide both electronic and printed copies for your records.
Step 6: Claim Submission
We work with your accountant to prepare the necessary tax schedules and file your claim.
Step 7: Status Review to Final Assessment
We maintain constant communication with the government on your behalf to identify the status of your claim. Should there be a IRS review, we will work with you throughout the process to defend your claim.