What is the Research and Development Tax Credit?

the Research and Development Tax Credit is one of the best opportunities for businesses to reduce their tax liabilities. Companies that find themselves in several industries can qualify for federal and state tax savings high enough to allow them to hire new employees, invest in products and service lines, and increase operational efficiency. Due to several modifications and expansions over the years, more businesses can benefit from this valuable incentive.

Research and Development Tax Credit is a tax incentive from the government that rewards companies for conducting R&D in the United States. The credit was instigated to incentivize innovation throughout the economy and keep technical jobs in the United States. The research and development tax credit is for companies of all sizes, not just major corporations with research labs. Other companies from numerous industries related to applied sciences and other technological projects can qualify.

Then comes the question, "What constitutes as Research and Development?". If your business does any of the following, you will likely qualify for the research and development tax credit:

Designs or develops new products or processes

Enhances existing processes or products

Develops or improves existing prototypes and software

How do I claim the R&D Tax Credit?

A number of factors go into claiming the research and development tax credit, but the potential savings make exploring the credit worth investing. Since credit might be claimed for both current and prior tax years, businesses can benefit from documenting their R&D activities. To claim the credit, the taxpayer must evaluate and record their actions to establish the number of qualified research expenses paid for each eligible activity. While taxpayers might estimate some research expenses, they must have factual evidence for assumptions used to create the estimates. Examples of such documentation include:

Project notes

Payroll records

General ledger expense detail

Project lists

Other documents a company produces throughout the regular course of business.

The Research and Development Tax Credit is one of the most significant domestic tax credits under current law. Despite the fact that the R&D tax credit has been available since 1981, less than a third of eligible businesses recognize that they qualify for the credit. If you need help to see if your company qualifies for the research and development tax credit, contact Engineered Tax Services. We navigate through the government's jargon and make sure you get what you deserve. Visit www.engineeredtaxservices.com or call 800-236-6519.

Engineered Tax Services helps businesses qualify for the Research and Development Tax Credit.

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