Research Credits – Not sure if you qualify?

As 2016 concludes, you’re most likely wrapped up in holiday festivities and gatherings that don’t leave much time for your business.  However, it’s probably wise to consider tax benefit strategies that can make a big difference in your bottom line for 2016 and generate increased margin going forward.

One of the biggest impacts to the tax benefit services industry occurred on December 18th, 2015 when Congress enacted the Protecting Americans from Tax Hikes (PATH) Act.  This act permanently extended the R&D tax credit and extended its reach:

  • Permanent extension of the R&D tax credit effective January 1, 2015.
  • As of 2016, Eligible Small Businesses are able to use the R&D tax credit to offset AMT (Alternative Minimum Tax).
  • Startups less than $5 million in gross receipts and having gross receipts for no more than five years are able to use the R&D tax credit to offset the FICA employer portion of payroll tax up to $250,000 for each eligible year.

The biggest question surrounding the R&D tax credit seems to be whether or not a business has enough Qualifying Research Expenditures (QRE’s) that would result in enough tax credit to make it worthwhile to go after the credit.  How can you figure that out?

  1. Review our R&D Credit Opportunities Checklist and Examples of Qualifying Activities that will help you determine activities you engage in that may qualify.
  2. Test the result via our R&D Credit Rules Overview.  This will help you disqualify those activities which don’t fit within the IRS Regulations.
  3. Get a rough idea of the Qualifying Research Expenditures (QRE’s) for your business.
  4. Decide whether you can provide documentation of the identified expenditures in a cost effective manner by reviewing Examples of Contemporaneous Documentation.

It’s not as hard as you think to benefit from the R&D tax credit.  If you qualify, you may also be eligible to look back three to four years depending on when your taxes were filed AND you may also be eligible for State R&D tax credits.

If you believe you have QRE’s in excess of $100,000 per year, please contact ThreeFive at 612.353.6372 to get the process started.

Our process is painless:

  • Initial Consultation: 30-minute phone conference to determine scope of project.
  • Phase I Study: Our experts work with you to determine the potential benefit by reviewing your prior three years of tax returns, current year income statement trial balance, legal entity structure, wages paid and full review with your subject matter expert.  There is no cost for this phase, only a commitment to move forward with ThreeFive® should we find the benefit is worth pursuing.
  • Phase II Study: Our experts obtain detailed wage information and specific GL data along with fleshing out expenditures that qualify and can be documented.  Ultimately, our final deliverable provides you and your tax professionals with all you need to file for and receive your credits.

Let’s take the first step together, we’re here to help!