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Research & Development
Tax Credit
TAX CREDITS TO PROMOTE INNOVATION
The R&D tax credit is not just for lab coats and space shuttles, it’s for any company investing in new or improved products or processes. Less than one third of eligible companies take advantage of this valuable tax credit opportunity due to common misconceptions.
The R&D credit is different from a deduction in that it is a dollar-for-dollar offset against a company’s tax liability. The R&D credit is 9-14% of total qualifying expenditures.
Wages are often the primary driver of the credit for employees performing, supporting, or supervising R&D activities. If your company has been evaluating new or improved products, you may be able to generate tax refunds for R&D credits not claimed in prior years.
The process of identifying, qualifying, and defending the R&D tax credit can be complex, so it’s important to work closely with a tax credit professional. Taxster develops an R&D credit study by evaluating the unique operational, engineering, financial, and tax aspects of your business to develop a robust and complete credit study that stands up against IRS scrutiny.
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We follow a Four-Part Test to determine whether your company may be eligible.
Four-Part Test
TECHNOLOGICAL IN NATURE
Engineering or Scientific Principles
PERMITTED
PURPOSE
New or Improved Product, Process, Technique, Software
TECHNICAL UNCERTAINTY
Capability, Method,
or Design
PROCESS OF EXPERIMENTATION
Evaluation of Alternatives
How Our Projects Work
ASSESS | IDENTIFY | QUALIFY | REPORT | DEFEND
01 | Assess
We offer complimentary assessments of all R&D tax credit opportunities. We like to have an introductory call to understand what the qualified research activities might be and will request pieces of financial and tax information to perform our assessment. These items can include payroll reports, tax returns, contractor invoices, and employee organizational charts. Once we have estimated the benefit, we deliver the results along with our upfront, fixed pricing proposal.
02 | Identify
We work closely with the client’s subject matter experts to identify the change activities and associated expenses in a given tax year. We evaluate the expenses related to each change activity with our proprietary tools to ensure all possible qualified research expenses are accounted for.
03 | Qualify
We ensure that each change activity passes the 4-part test and isn’t subject to any other statutory or case law exclusions. We also evaluate contract language to ensure all the economic risk and intellectual property rights have been satisfied. Finally, we evaluate the qualified research expenses to ensure they are includible and not subject to any exclusions.
04 | Report
We develop a report that highlights each qualified research activity within your company, and the associated qualified research expenses for each activity. Our report incorporates contemporaneous documentation gathered from our client’s subject matter experts to further substantiate the credit claim.
05 | Defend
We stand behind our work 100%. In the unlikely event of an IRS or state department of revenue audit we will defend our tax credit claim at no additional expense to our clients. We proactively work to ensure the highest work quality for our clients.