Business owners have a lot on their plate, and financial stability is one of the most challenging aspects of running a business. The Research and Development (R&D) Tax Credit, a government incentive, can be a great source of cash flow for innovative companies. While it can be very lucrative, claiming the credit correctly can be a technical and complicated process. After educating hundreds of businesses about the R&D Tax Credit, we have identified some common concerns raised by business owners.
Here are our answers to your concerns:
1) We do not conduct a lot of R&D, therefore we do not qualify.
A lot of companies have similar misconceptions. Historically, R&D was thought of as scientists in white lab coats but, in reality, the credit is much more inclusive so companies of all sizes, ages and industries are eligible.
Legislation changes over the years have expanded the activities that qualify as R&D, which means there are likely a number of projects your team is currently working on that are considered R&D!
2) Claiming this credit seems like a time-consuming process. I just do not have the time.
It is true that claiming the credit correctly can be a complicated and time-consuming process. With so many things on your to-do list, the right choice may be to let an R&D Tax Credit specialist handle your claim process. An experienced team of tax and industry-specific technical experts can do the work for you without disrupting any of your core business operations.
3) We do not maintain enough documentation to qualify. Is proper documentation important?
While documentation is highly important, it is okay to not have everything in place right away. A dedicated R&D Tax Credit specialist can work with your internal staff to comb through all your ordinary business documentation to identify and support areas of R&D. The right specialist will produce a technical report to substantiate your claim and offer real time document collection throughout the year. This makes the process seamless with minimal effort required on your end.
4) We are already claiming the credit with an accountant. Why work with a specialist?
A company may already be claiming, but it could still be worth having a discussion with an R&D Credit specialist. We have often found that companies are either over or under claiming the credit. With such a highly specialized credit, it is essential to have a team of tax and technical experts to make sure that you are claiming correctly. As a business, the last thing you want is to leave money on the table or raise red flags with the IRS.
5) This sounds too good to be true. Let me talk to my CPA.
A full description of the R&D Tax Credit can be found in Section 41 of the Federal tax code. This credit has been overlooked by companies and CPA firms for decades because it was not a permanent incentive. As of December 2015 (the PATH Act again), you can claim this credit on a yearly basis without concern that it will expire, which means this can be an additional source of cash flow each year. The right specialist will work as an extension of your CPA to make sure that you get the credit you are entitled to.
Still not sure about next steps? Reach out to us at firstname.lastname@example.org. Our dedicated industry teams are comprised of highly experienced scientists, engineers, tax accountants, and attorneys, all of whom are motivated to help your business robustly claim and realize the R&D credit to incentivize further innovation investment.