Can You Claim Research and Development Tax Credit?
If your business is involved in applied research, or practical and technical problem solving, then your company may be engaged in activities that qualify for a Research & Development (“R&D”) tax credit. Even making small improvements to a product or a process could qualify you for the credit.
Less than 30% of eligible companies are aware that they qualify for the R&D tax credit. Even if your company claims the R&D tax credit, you might not be claiming the entire credit to which you are entitled. This is either because you are uncertain of what qualifies for the credit or you do not have the processes in place to properly document the credit.
Who can claim an R&D tax credit?
If your company invests in product or process improvement, you may qualify for research and development tax credits. Further, these improvements need not be substantial, as even evolutionary improvements may qualify.
If your company is working on any of the items below, it is likely that you will qualify for the R&D tax credit.
- New or improved products
- New materials
- Prototypes and models
- New or improved software applications
- New technological concepts
- New or improved manufacturing processes
How is the research & development tax credit different from a deduction?
The credit differs from a deduction in that it is an actual dollar-for-dollar offset against taxes owed or paid. While the computation of the credit can be complex, most companies receive a credit equal to 9-14% of total qualifying expenditures. Most qualifying expenses result from the wages paid to employees that participate in qualifying activities.
If your company engaged in qualified research activities for the last several years, you may be eligible to retroactively claim R&D tax credits. Cherry Bekaert can help you gain cash refunds from previously unclaimed credits and by defending past, present, and future R&D tax credits.
Let us be your guide forward!
While the process to apply for, and ultimately, get cash back from the R&D tax credit is complex, our Credits and Accounting Methods team has developed a systematic approach designed to maximize your R&D tax credit and gain a solid defense against IRS criticism.
Our services can help you capture cash benefits that typically will greatly exceed the investment of this analysis.