The October 15 C-corp tax deadline is right around the corner. As a result, business owners and CPAs are scrambling to ensure that they optimize tax credits and minimize overall tax burden — for themselves or for their clients.
Are You Tapping Into the Cash Flow Potential of the R&D Tax Credit?
One of the biggest cash flow opportunities you may be missing out on this September? The Research and Development tax credit. Made permanent in 2015 as part of the PATH Act, the R&D tax credit offers a dollar-for-dollar credit for organizations with qualifying operations. Some of the many benefits of the Research and Development tax credit include:
- Generate a dollar-for-dollar reduction in federal and state income tax liability
- Receive up to 12-16 cents of federal and state R&D tax credits for qualifying expenditures
- Boost earnings-per-share
- Minimize tax rate
- Drive cash flow
- Carry forward the credit (up to 20 years!)
- Conduct look back studies to identify unclaimed credits for open tax years
- Leverage the federal R&D tax credit against payroll tax (if applicable)
Unfortunately, not every business owner that qualifies for the R&D tax credit claims it. This is especially true for smaller organizations.
R&D Tax Credit is a “Use it or Lose it” Incentive
In fact, data from the U.S. Chamber reveals that “less than three in 10 businesses who qualify for the credit actually claim it, while virtually every large company makes the claim.”
Not claiming qualifying operations can prove costly; the R&D tax credit is a “use it or lose it” incentive and cannot be claimed on an amended tax return. Qualifying businesses that don’t use the benefit when they originally file will miss out.
Determining Eligibility for the R&D Tax Credit
Do you qualify for the research and development tax credit? Do your clients? Knowing the specific eligibility requirements can ensure you or your clients don’t leave earned tax dollars unclaimed this October 15th. Qualifying companies must meet these requirements:
- Show gross receipts for five (or fewer years); interest income is applied toward gross receipts
- The gross receipt total must be less than $5 million for the year the credit is applied
- Perform qualifying research activities (QRAs) and incur qualifying expenditures
- Establish that they have a payroll tax liability
Most importantly, a business doesn’t have to be profitable to qualify for the R&D tax credit.
Don’t Miss out on the R&D Tax Credit This September
The best way to ensure your business or your clients don’t miss out on the research and development credit is to partner with an accounting team specializing in the R&D tax requirements. Acena Consulting can help. Contact us today to speak with an R&D tax credit professional before the October 15 deadline to ensure you’re not leaving tax dollars on the table.