Businesses can save up to $250,000 or more through an R&D tax credit.
What is the
R&D Tax Credit?
Does your business incur research and development costs in the US? Then you may be able to claim a sizable tax credit of up to $250,000 or more. Once approved by the IRS, the R&D credit is applied towards your business’s future payroll tax liabilities.
Businesses across many industries can qualify for the R&D credit – including technology, eCommerce, bio-tech, hardware, and more.
Do I qualify for R&D tax credits?
If your business has less than $5 million in annual revenue, and it's been less than five (5) years since your first gross receipts/sales, you can frequently reduce your Social Security Payroll tax liability under the PATH Act R&D credit. If you do not qualify under the PATH Act R&D Credit, you can take regular R&D Credit against income taxes (rather than against payroll taxes).
What activities qualify for R&D tax credit?
Qualifying R&D expenses and/or activities are those which pass this four-part test:
Technical uncertainty. The activity is performed to eliminate technical uncertainty about the development or improvement of a product or process, which includes computer software, techniques, formulas, and inventions.
Process of experimentation.The activities include some process of experimentation undertaken to eliminate or resolve a technical uncertainty. This process involves an evaluation of alternative solutions or approaches and is performed through modeling, simulation, systematic trial and error, or other methods.
Technological in nature.The process of experimentation relies on the hard sciences, such as engineering, physics, chemistry, biology, or computer science.
Qualified purpose.The purpose of the activity must be to create a new or improved product or process, including computer software, that results in increased performance, function, reliability, or quality.
How large will my R&D tax credit be?
Unlimited, if applying the R&D credit against income taxes. These credits can range between 5% and 15% of qualifying R&D costs. If taking the PATH Act R&D credit, a company can receive up to $250k against payroll taxes and take the remainder against income taxes.
As an example, for an unprofitable 5-person tech startup that has less than $5M in annual revenue with roughly 80% of time being spent on qualifying R&D activities, and average salary of $100k/year, the credit might be between $20k to $60k. The Summit Groups Fractional CFO fee is a small percentage of the total qualifying R&D expense and easily pays for itself by securing the R&D Tax Credit for you.
What does The Summit Groups R&D Credit Service include?
We help businesses with all aspects of claiming these R&D Tax Credits. The Summit Group's Fractional CFOs will:
Identify and calculate qualifying R&D expenses
Prepare Forms 6765, 8974, and 941 to gain IRS approval of credit.
Prepare all required supporting technical and financial documentation, including documentation of research time, R&D payroll expenses, etc. This is an important pre-requisite to support an IRS audit in case that happens.
Coordinate with your tax preparer, payroll provider, and accountant to ensure your books and taxes are accurate
Continually ensure the credit is applied correctly against your payroll liabilities
Utah Research and Development Tax Credit Summary
The Utah R&D Tax Credit is a non-refundable tax credit available to taxpayers with qualifying research expenditures in Utah. The Utah R&D Tax Credit mirrors the federal Section 41 Credit for Increasing Research activities with a few exceptions. Below are some of the highlights of the Utah R&D Tax Credit:
The Utah R&D Tax Credit is permanent and does not expire.
The definition of qualifying research expenditures is the same as the federal Section 41 definition with the exception that only qualifying research expenses incurred in Utah may be captured towards the credit.
Gross receipts are only those attributable to sources within Utah.
The Utah research and development tax credit is the sum of:
5% of a taxpayer's qualified spending that exceed the base amount;
5% of payments made to qualified organizations for basic research in Utah that exceed the base amount; and
7.5% of qualified research expenses for the taxable year.
Credits that exceed a taxpayer's tax liability may be carried forward for a period of 14 years.
Credits calculated using 7.5% of a taxpayer's qualified research expenses may not be carried forward.
The Summit Group's Fractional CFO platform ensures real-time analysis of tax liabilities for founders and employees.
Ready to discuss tax liabilities for your company?
Request a Free personalized Tax Analysis. 801-396-5596