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Frequently Asked Questions

Listed below are some of the most frequently asked questions our team receives about R&D tax credits.

What would you like to know?

What is the R&D Tax Credit?

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.

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Does my company qualify for the R&D Tax Credit?

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.

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What expenses qualify for the R&D Tax Credit?

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.

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What can the R&D Tax Credit be used for?

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.

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How much can I expect to get in R&D Tax Credits every year?

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.

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Which states offer R&D Tax Credits?

Currently, 36 states offer the R&D Tax Credit. Refer to our state pages for detailed state-by-state information. 

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How does Strike calculate the federal and state R&D Tax Credits?

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.

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Can startups that are/were in losses benefit from the credit?

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.

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Can my company’s chances of audit increase by claiming R&D Tax Credits?

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. 

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My company does not have a dedicated research center or laboratory. Can I still claim R&D Tax Credits for my expenses?

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. 

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Can the R&D Tax Credit be claimed for a prior year?

Yes, federal tax returns can be amended to claim the R&D Tax Credit for three years prior to the current tax year. Most states follow the federal regulations; however, there are some state-by-state variations.

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Which activities are excluded?

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. 

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How much is this going to cost me?

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. 

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Will the ERTC funds run out?

The ERTC is a direct refundable payroll credit and not a loan. While the ERTC funds will not run out, taxpayers have limited time to claim the tax credit.

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How do I check my Employee Retention Tax Credit status?

The best way to check on your tax credit status is to call the IRS at (877) 777-4778. Staffing problems have made reaching a live person difficult but not impossible. We recommend calling the IRS hotline first thing in the morning. Strike sees an average refund time of about 3-6 months from the date the 941-X is filed.

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How do I apply for the ERTC?

If a business owner qualifies for the ERTC in 2020 or 2021 but hasn't applied yet, the only way to apply for the ERTC right now is to file an amended Form 941-X. With up to $26,000 per employee available, filing an amended return makes financial sense.

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As an owner, do my wages qualify in ERTC calculations?

The IRS clarified in Notice 2021-49 that business owners with a majority stake (51%) in a business cannot claim their wages when they apply for the tax credit. Attribution rules, which outline the legal principal owners of a business, must also be applied to determine if family members’ wages can be qualified wages too.

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What is the deadline to file for ERTC?

Even though the ERTC officially ended on September 30, 2021 with the signing of the Infrastructure Bill, the Bill also allowed business owners the ability to retroactively claim the credit up to five years from when they filed their original return (extended from the previous 3-year statute of limitations).

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