R&D Tax Credit:
Enabling Innovation

Over 65 industries are eligible to claim the Research and Development Tax Credit by creating a new or improved product, process or technique.

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    What is R&D Tax Credit?

    Established in 1981, the Research & Development Tax Credit is a federal incentive that allows companies to reduce income tax liability in the current tax year, and receive a cash refund for taxes paid in the last three years.

    Many states have implemented their own version of the R&D Tax Credit, and qualifying businesses can claim both! In 2015, when the Protecting Americans From Tax Hikes (PATH) Act was put into place, the R&D Tax Credit became permanent, which revised qualifications that greatly expanded the eligibility for businesses to qualify. With these changes, qualifying small businesses may claim the Payroll Tax Credit to offset some of their payroll tax liability.

    The majority of businesses are unaware that their daily operations could qualify to a dollar-for-dollar Tax Credit, irrespective of industry or company size. An activity that meets the 4-part test is a qualifying research activity and can potentially qualify for claiming R&D Tax Credit.

    How could this credit impact your business?

    • Trending_Down
      Immediate reduction in your income or payroll taxes
    • Attach_Money
      Increased business valuation
    • Payments
      Freeing up cash for your business
    • Lock
      Secure credits for future tax liabilities

    Everything You Need to Know
    About the R&D Tax Credit

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

    The Four Part Test

    • New, or Improved, business component

      What does your company offer? A product, process, software, formula, or invention. How has your company changed the game? Permitted preposes: Improve performance, efficiency, functionality, quality, durability, security.

    • Elimination of Uncertainty

      The activity must be intended to discover information to eliminate uncertainty concerning the capability or method for developing or improving a product or process, or the appropriateness of the product design.   Even unsuccessful attempts shed light on what can and cannot be achieved, so don’t discount failed R&D projects.

    • Processes of Experimentation, Where at Least one Alternative is Evaluated

      Systematic approach, modelling, simulation, or trail and error

    • Technical in Nature

      Application of principles of the hard sciences: engineering, computer science, physics, chemistry, etc.

    Cost Categories

    Supplies and Raw Materials
    Supplies cost that are consumed, used up or destroyed during the R&D process.

    Cloud Computing Costs
    The use of cloud computing resources  such as Microsoft Azure, AWS, or Google cloud in R&D activities (development and pre-release testing).

    W2 Employee Wages
    Wages for conducting qualified research or directly supervising or supporting qualified research.

    Contact Research Expenses
    Payments to contractors would be reported on form 1099. They need to be located in the US and have been preforming work physically in the US when the R&D occurred. Companies can also hire third parties to perform research activities.  Ownership of any credit would depend on how the contract is structured.

    See if you qualify and estimate your potential benefit with our R&D tax credit calculator.





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          Leyton’s Steps for Success

            Getting Started

            Meet with a member of our team to receive an overview of the R&D Tax Credit and review your eligibility. Our team will collect the financial documentation needed from you.

            Initial Assessment

            Our team will use this information & data to estimate what credit you are eligible for and establish an optimal claim timeline. If no credit is identified, there will be no cost for you!

            Comprehensive R&D Study

            Our technical consultants will determine the list of qualified R&D projects according the 4-part test while our tax consultants will work with you to ensure that the Qualified Research Expenditures (QREs) are accurate.

            Report Writing & Finalization

            Leyton’s team of Tax and Technical experts will work together to complete the calculations and provide your deliverables, including a detailed technical report and supporting documentation.

            Receive your Benefits

            After filing the proper documentation with the IRS, the R&D Tax Credit will reduce your income tax liability in the current tax year and refund for the previous 3 years. Any remaining credit can be carried forward up to 20 years.

            R&D Study Review

            Review your R&D Study Report with our Tax and Technical experts for the next year to increase efficiencies for future claims.

          R&D Tax Scenario Software

          This company has developed software for individual organizations focused on serving community needs. They have responded to a growing need for faster, safer, and more secure ways of data sharing & collaboration.
          • Wages $3,637,792
          • Contract Research Expenses $33,602
          • Supplies $0
          • Cloud Service Providers $99,579
          • Total R&D Spent $3,770,973

          R&D Tax Scenario Engineering

          This company aims to accelerate the success of solar in leading utility-scale energy production by maximizing solar plant value with defensible and actionable reference solar data.
          • Wages $3,136,947
          • Contract Research Expenses $0
          • Supplies $576,520
          • Cloud Service Providers $0
          • Total R&D Spent $3,713,467


          All you need to know about R&D Tax Credit

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

          How do I know if I qualify? keyboard_arrow_down keyboard_arrow_up

          A quick call with our expert will determine if you qualify. If you have developed anything new or improved, something based on the hard sciences (engineering, computer science, chemistry, biology, physics, etc.) then it’s worth having a chat!

          How long will it take to get my claim? keyboard_arrow_down keyboard_arrow_up

          We are always working to make our process as efficient as possible. Once you provide all necessary financial and technical documents to our team, on average, our R&D studies last about 1-2 months, depending on the size and complexity of the study.

          Does it increase my chance of an audit? keyboard_arrow_down keyboard_arrow_up

          Claiming the R&D Tax Credit does not increase your chances of an audit. However, any time you amend your tax returns, the chance of an audit slightly increases. What’s important is that you have an experienced team that provides audit defense to back you up.

          Why is the technical report important? keyboard_arrow_down keyboard_arrow_up

          This report details the Research & Development activities being conducted and the expenses associated with all activities. The core of the R&D Tax Credit is being able to tie financial expenses with technical research activity. This nexus is what builds the credit and allows companies to claim the benefit on their tax return. Without this nexus, the credit is null. This is where Leyton’s technical report comes in.  

          Contact us to schedule an initial consultation

          Our in-house team of highly experienced scientists, engineers, tax consultants and attorneys would love to answer all your questions and help you make the most out of your R&D efforts.

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