Can You Claim Research and Development Tax Credit?
What Is the R&D Tax Credit?
Discover how your innovative business can benefit from the Research and Development (R&D) Tax Credit. Designed to foster innovation and growth, this federal incentive rewards companies for investing in the design, development, and improvement of processes, products, and services.
By engaging in qualified R&D activities in the U.S., companies can receive tax credits, providing a dollar-for-dollar reduction of income tax liabilities. Start-up companies can even leverage a portion of these credits to offset federal payroll tax liabilities. Learn how your business can save money and drive expansion through the R&D Tax Credit today.
How To Claim an R&D Tax Credit?
While the process to apply for, and ultimately, receive cashback from the R&D Tax Credit is complex, our Tax Credits & Incentives Advisory team has developed a systematic approach designed to maximize your R&D Tax Credit and gain a solid defense against IRS criticism. We can help you capture cash benefits that typically will greatly exceed the investment of this analysis.
Determining which activities qualify for the R&D Tax Credit begins by passing the Four-Part Test created by the IRS.
The Four-Part Test for Qualifying R&D Activities
Part 1: Business Component/Permitted Purpose Test
The activity must relate to a new or improved product, process, or design (business component) that is intended to improve:
- Function
- Performance
- Reliability
- Quality
Part 2: Technological in Nature
The activity performed must rely on the principles of:
- Physical science
- Computer science
- Engineering
- Biological science
Part 3: Elimination of Uncertainty
The activity must be intended to discover information to eliminate uncertainty related to:
- Capability to improve product process or design
- Method to improve product process or design
- Appropriateness of design
Part 4: Process of Experimentation
Substantially, all the activities must relate to:
- Identifying uncertainty regarding the development of the product, process or design
- Utilizing a process to evaluate one or more alternatives to eliminate the uncertainty
- Testing, implementing trial and error, or modeling to refine or discard alternatives
Cherry Bekaert’s Technology Driven Process
Discover how our efficient R&D survey process, powered by our proprietary tool, simplifies the allocation of Qualified Research Expenses (QREs) across your organization. Here’s what our process entails:
Scoping the R&D Credit:
- Gather pertinent information
- Collect financial data electronically
- Identify QREs
- Conduct interviews with key personnel
- Estimate federal and state research credits
- Prepare a comprehensive work plan for the research credit study
Performing the R&D Credit Study:
- Accumulate financial and cost accounting data
- Organize documentation for qualified research activities
- Interview technical subject matter experts
- Analyze current and prior year expenses to support base amounts and credit-eligible QREs
- Prepare methodology and interview memoranda demonstrating compliance with Section 41
- Deliver IRS audit-ready documentation
Let Us Be Your Guide Forward
The process to apply for the R&D Tax Credit is complex. Cherry Bekaert’s R&D Tax Credit consultants have developed a systematic approach designed to maximize your R&D Tax Credit and gain a solid defense against IRS criticism.
Our R&D Tax Credit services can help you capture cash benefits that could greatly exceed the investment of this analysis.
Value-Added Benefits:
- Complimentary analysis of federal and state R&D tax incentive benefits
- IRS defense services
- Consultation and analysis regarding credit utilization by a Company, partners and shareholders
- Analysis of whether R&D Tax Credits can be used against federal and state payroll tax liabilities
- Deliverables designed to address potential IRS inquiries
- Proprietary technology tools to survey R&D activities
- Identification of other tax credit benefits for alternative energy investments, hiring and capital investments
