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An Incredible Tax Saving Opportunity I Discovered While Running My Tech Firm


Jonathan Cardella

Strike Summary

  • There are certain restrictions when taking advantage of both Sections 174 deduction/capitalization and Section 41, which can be seen in Section 280C.
  • Businesses that choose to elect Section 280C for their federal taxes could also lower their state taxes as well.
  • Taxpayers that want to use Section 280C must plan ahead because it can only be used on an originally filed return.
  • The recent passage of the Tax Cuts and Jobs Act may have have affected whether a taxpayer should use Section 280C in their tax strategy.

Work with Strike to navigate tax changes with ease.

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As an experienced serial entrepreneur, I have been a part of numerous technology startups for the past 15 years. Currently running an Inc 5000 software company at Ventive, my humble beginning into software development happened with NeighborCity. However, only recently have I realized how much the basic knowledge of Research & Development (R&D) Tax Credits could have benefited me and my startups. 

While I have directed the development of numerous internal-use applications, SaaS, and software for sale/lease/license, I only became aware of the federal and state R&D credits four years ago. I am willing to make this admission to help other companies realize the untapped pocket of funds available to help fuel growth and innovation.

First, a Bit About R&D Tax Credits

The R&D tax credit legislation was introduced back in 1981 as a temporary two-year incentive—which has since expired eight times and been extended 16 times—until finally becoming permanent in 2015. Congress intended to provide an economic stimulus that would encourage investment within the United States and incentivize companies to innovate.

In my opinion, it remains one of the most valuable incentives available and provides immediate cash benefits to U.S. businesses.

Unfortunately, I, like millions of other businesses around the country, missed this opportunity to recoup hundreds of thousands of dollars in taxes paid by my previous companies. This oversight happened mainly from my lack of knowledge of the complex tax code, and particularly what qualifies as R&D (read more about the 5 most common misconceptions). My perception was that only state-of-the-art research done by workers in white lab coats was research and development.

I simply didn't know that the software I was developing made me eligible for the R&D tax credit.

Examples of Applying R&D Tax Credit to Startups

We took huge financial risks in developing the Agent Match™ software for NeighborCity, spending millions of dollars on both in-house and contract developers. Given the complexity of what we were developing, I scrapped many versions of the software before we created something usable. After thousands of hours of research, planning, design, development, and testing, I wish I had known my efforts qualified for the R&D tax credit. 

I have come to realize that nearly all the costs associated with my development efforts are Qualified Research Expenses (QREs). Conservatively, I believe NeighborCity could have saved more than $300,000 through these tax credit refunds. These funds would have allowed for additional feature enhancements, resolved dozens of lawsuits we fought, or hired additional staff to increase sales and marketing.

Making It Easy for Other Startups to Save Money

Realizing that many companies—including my own—lack the information and the technical expertise to file for R&D tax credits, I founded Strike, an R&D Tax Credit advisory firm. I want to share my knowledge about tax-saving opportunities for startups.

I’ve assembled an exceptional team with all the technical, legal, and financial expertise needed to maximize the tax benefits for Ventive. Strike is uniquely positioned to help you claim the credit. We have deep experience in the software and technology industries, as well as manufacturing, aerospace, plastics, and hemp. Let me provide you with an initial estimate of how much you could be saving!

Work with Strike to navigate tax changes with ease.

Schedule a MeetingBook a Consultation

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