Over 65 industries are eligible to claim the Research and Development Tax Credit by creating a new or improved product, process or technique.
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.
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.
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.
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.
Systematic approach, modelling, simulation, or trail and error
Application of principles of the hard sciences: engineering, computer science, physics, chemistry, etc.
W2 Employee Wages
Wages for conducting qualified research or directly supervising or supporting qualified research.
Supplies and Raw Materials
Supplies cost that are consumed, used up or destroyed during the R&D process.
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.
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).
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.
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!
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.
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.
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.
Review your R&D Study Report with our Tax and Technical experts for the next year to increase efficiencies for future claims.
All you need to know about R&D Tax Credit
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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!
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.
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.
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.
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.