At Acena Consulting, we spend a substantial amount of time educating companies on tax incentives and, in particular, the Credit for Increasing Research Activities (better known as the R&D tax credit).
As you might imagine, many of the companies we meet or advise qualify for this particular tax credit because of its broad definitions and applicability. With that said, some companies have chosen not to move forward and take advantage of this opportunity. I thought it might be fun to share some of these reasons with you; almost like a Top 10 list from late night TV (but not really…). Here are the last five reasons; I will post the top 5 next week.
Number 10 – I don’t want to distract my employees
Last time I checked, they are your employees and are there to follow your direction. However, asking them to help you stay competitive by helping document their activities might be too much to handle.
Number 9 – The research credit is too confusing
Yes, you’re correct, the R&D tax credit is confusing and while there are a number of specialists that could help you monetize this tax incentive, you might benefit in the end; best to pass this time around.
Number 8 – I don’t have the records needed
Perhaps you don’t have tax returns from 1984-88 that would be helpful to document your fixed base percentage. Don’t worry about the new Alternative Simplified Method that doesn’t require them, it might help generate that benefit that would help your business.
Number 7 – We don’t track our time and projects
OK, so you don’t track time today; perhaps it would be a lot to ask your employees to document how they are spending their time. I realize there are systems in the marketplace that suggest they could track their time in less than 60 seconds but we wouldn’t want to try that, it might suggest we could be efficient.
Number 6 – We don’t do research and
development
This is one of my personal favorites; you don’t do R&D yet your website says you are the innovation leader in your industry, provide state-of-the-art products, and your customers come to you because you solve their problems with your unique solutions. Even though you might meet the R&D Credit definition of qualified research and development since you don’t have any white lab coats, you don’t do R&D. It’s OK, I understand.
Tune in next week for our Top 5 reasons not to take an R&D tax credit.
Randy Eickhoff, CPA is President of Acena Consulting. With more than 20 years of tax and consulting experience, Randy focused on helping companies successfully document and secure tax incentives throughout the US. He has been a long-time speaker nationally as well as conducted numerous training sessions on R&D tax credits and other US tax incentives.
Other Articles Of Interest
1. Navigating the R&D Tax Credit Minefield (part 1)
2. R&D Tax Credits-Internal Use Software: A Higher Threshold to Achieve
3. IC DISC-Tax Savings Through Exporting
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