IRS changes on ERC: Why don’t all Businesses Qualify for the credit? Learn more !

Payroll Tax Credit:
Receive a credit of up to $2.5M

Startups with less than $5 million in gross receipts can use the R&D tax credit to offset their payroll tax liability.

What is the Payroll Tax Credit?

This version of the R&D Tax Credit was created in 2015 through the Protecting Americans from Tax Hikes (PATH) Act to benefit younger companies with no or little income tax liability. While this credit cannot be claimed retroactively, it allows companies who invest resources in Research and Development (R&D) to qualify for an R&D tax credit. From 2023 onward, you can potentially claim up to $500,000 per year. The Payroll Tax Credit can be claimed for a maximum of 5 years and must be filed timely, allowing startups and small businesses to reduce their payroll taxes.

If your company pays income taxes, you may qualify for the R&D Tax Credit.

What can the Payroll R&D Tax Credit do for your business?

  • account_balance

    Immediate reduction in your payroll tax liability

  • autopay

    Secure credits for future tax liabilities

  • monetization_on

    Increased business valuation

  • credit_score

    Freeing up cash for your business

Everything You Need to Know
About the Payroll Tax Credit

Did you know that your small business could qualify for the Payroll Tax Credit? Discover how this federal incentive can reduce your tax liability, increase your business valuation, and free up cash for your operations.

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Meet our team of Tax and Technical experts who can help you claim up to $250,000 for your current year filing or reduce payroll tax liability!

Matthew Demerle, JD Law

Tax Attorney

Brigid Lenihan, M.Sc. Tax

Senior Tax Manager

Jennifer Bolton, LL.M Taxation, J.D, B.A.

Head of Tax


Everything you need to know about the Payroll Tax Credit

Can’t find the answer you’re looking for? Please contact our team

Can I still qualify if my company is currently pre-revenue? keyboard_arrow_down keyboard_arrow_up

Yes! Pre-revenue companies are still eligible.

Can my business receive credits for work done in previous years? keyboard_arrow_down keyboard_arrow_up

Yes! You can receive credits for past research and development, however, you will need to reach out to our team before claiming your credit to ensure this work qualifies. The Payroll Tax Credit is only relevant to the most recent tax year. Contact us here!

What if I don’t know exactly how many hours my business has spent on Research and Development? keyboard_arrow_down keyboard_arrow_up

Not to worry — we’ll help you calculate the number of hours, or percentage of the time, your team has spent on research and development. Plus, you can connect your payroll software or manually upload W2 forms to share salary information.

How can my company use the credit? Are there any limitations? keyboard_arrow_down keyboard_arrow_up

You can use your R&D tax credit however you’d like — to grow your company, hire new talent, reinvest in innovation, and more!

How does the Payroll R&D Credit differ from the regular R&D Credit? keyboard_arrow_down keyboard_arrow_up

The Payroll R&D Credit was created to enable newer and small businesses to find an immediate return on their R&D activities. The federal government outlined special criteria that enable these businesses to claim this credit and immediately apply them to their payroll tax liability as opposed to their income tax liability, which these newer businesses may not have. The regular R&D credit can only be applied against income tax liability.

When will I see the benefits from claiming this R&D Tax Credit? keyboard_arrow_down keyboard_arrow_up

The Payroll R&D Tax Credit is applied the quarter after you claim and will eliminate your payroll tax liability on an ongoing basis until the credit is exhausted. If you have no immediate tax liability, your credits may be carried forward indefinitely. How the credit is applied may depend on your payroll provider.

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