The Payroll Tax Credit
R&D Tax Credit for Qualifying Small Businesses
Additional source of cash flow for small businesses!
What is the Payroll Tax Credit?
The Payroll Tax Credit is a subset of the R&D Tax Credit that allows qualifying small businesses to reduce the company’s share of their FICA payroll tax liability. The Payroll Tax Credit can provide a source of cash flow at a critical time for startups and small businesses.
This version of the R&D Credit was created in December 2015 through the Protecting Americans from Tax Hikes (PATH) Act to benefit younger companies with no or a very small income tax liability. The Payroll Tax Credit can be claimed for a maximum of 5 years by a Qualified Small Business.
How to Qualify for Payroll Tax Credits?
- To be considered a Qualified Small Business, your company did not have gross receipts for any years preceding the 5 tax year period ending with the credit year
- The gross receipts must be below $5M per year
- Each year qualifying companies can claim a maximum of $250K, or a total of $1.25M across the 5 years
What can this mean for your business?
- Immediate reduction in your payroll tax liability
- Credits banked for future payroll tax liability
- Increased valuation
- Freeing up cash to re-invest
