R&D Credits

Over the past 25 years, the Federal Research and Development Tax Credit has been an elusive target for many businesses.  While the Federal R&D tax credit is often considered the domain of large companies or high tech companies, middle to smaller tier companies can now access these powerful tax credits. And dozens of states also now offer R&D tax credits.  Of the 16,000 businesses utilizing the Federal R&D tax credit, more than 4,500 companies have assets of less than $1 million.  The industries and activities that benefit and qualify most of the time for the research and development credit include:

• ANY company with tools, dies, jigs, molds, products, certification testing, environmental testing, design work, CAD design, blueprinting, modeling
• ANY company with prototypes, patents, using new materials, adding new equipment, new or improved processes, formulas, new or improved facilities, automating/streamlining
• ANY company doing customization for its customers/clients
• ANY company hiring outside consultants/other companies for ANY of the above activities

THE TAX POINT ADVISORS R&D CREDIT PROCESS BEGINS WITH A FREE CREDIT ESTIMATE & FEASIBILITY ASSESSMENT

Recently issued IRS regulations have made qualifying for the R&D tax credit more appealing to many companies and industries.  The new regulations are taxpayer friendly and reflect a profound change in the position of the IRS and state taxing authorities.  The new regulations:

• dramatically broaden the traditional tax definition of "R&D"
• apply retroactively to prior tax years
• generate refunds of previously paid federal and state income taxes
• provide greater flexibility in certain record-keeping/documentation requirements
• expand the definition of internal-use software

Historically, the majority of companies believed that the R&D tax credit study was not applicable to them due to such beliefs as:

"We have not performed any R&D, it doesn't seem significant and we have no documentation or cost accounting systems to support any qualifying costs."

"My company doesn't perform any R&D.  My competitors have similar products and offerings. The R&D credit is not applicable to my business."

These beliefs can wrongly prevent companies from claiming large tax credits and refunds due to them!

• Utilizing the R&D tax credit can result in "newfound money" for businesses, allowing investment in further research and development or other business growth activities.