Listed below are some of the most frequently asked questions our team receives about R&D tax credits.
The R&D Tax Credit is a federal dollar-for-dollar reduction of income (or payroll) tax liabilities for U.S.-based businesses involved in innovation, science, or technology.
Businesses of any size and in a variety of industries qualify for the R&D Tax Credit. The only requirements are that they have projects that satisfy the 4-part test and incur qualified research expenses (wages, contractors, supplies/materials) in a given year.
Qualifiable expenses as they relate to R&D may include: taxable wages; guaranteed payments; U.S. contractors, subcontractors, and vendors; supplies and materials used during prototyping or testing; and computer rental and cloud storage costs.
R&D Tax Credits can be used to offset current or future income tax liabilities. For companies filing amended, prior-year returns in which income tax was paid, the IRS issues a cash refund. For startups with no tax liability, the R&D Tax Credits can be used to offset payroll taxes.
The amount of R&D Tax Credits your company can expect to receive is directly related to A) the amount of qualified research expenses it can claim, and B) the R&D Tax Credit benefits available in the state in which your business operates.
Our R&D Tax Credit experts gather financial documentation, analyze expenses, conduct technical interviews, calculate the R&D Tax Credits, and deliver the completed federal Form 6765 and applicable state R&D tax form(s) to the business owner and CPA.
Yes. For qualified small businesses (QSBs), the current-year federal R&D Tax Credit can be used to offset future payroll taxes owed to the IRS. Thus, startups no longer need to be paying income tax to benefit from the R&D Tax Credit.
No. If the R&D Tax Credits are accurately and properly claimed on a timely-filed tax return, there is no increased chance of audit. However, amending a prior-year tax return to claim R&D Tax Credits does increase your audit chances.
Companies in a range of industries have received significant tax benefits through the R&D Tax Credit. These include, but are not limited to, manufacturing, software, technology, engineering, architecture, food & beverage, aerospace, and pharmaceutical companies.
Activities related to the arts, soft sciences, sales, marketing, general and administrative, training, market research, funded research, or research conducted outside of the U.S. do not qualify for the R&D Tax Credit.
Strike works on a success-based fee structure. Strike does not get paid until our client utilizes the tax credits or receives a cash refund from the IRS and/or state.