As R&D tax credit professionals, Acena Consulting recognizes that research and development tax law is always changing. We also know that CPAs and financial specialists can struggle to stay up-to-date on the latest R&D tax credit legislation. As a result, it can be difficult for them to both properly advise their clients on the R&D tax credit and ensure they receive the maximum credits available.

That’s where the Acena Consulting team steps in. We prioritize understanding the changes in R&D tax legislation and how they directly impact taxpayers. Our R&D tax credit experts work with financial professionals across a wide range of niches to help them understand how to best help their clients. 

Three recent updates and a friendly reminder we believe would be helpful for our CPA partners to know include: 

Amended Returns

A chief counsel memo released in the fall of 2021 addressed a new process for filing an amended tax return with an R&D tax credit. Typically, business owners are allowed to file an amended return up to three years from the original date of filling. Beyond filling out the form for the R&D tax credit, the list of additional items that taxpayers have to provide includes:

• The taxpayer must identify all the business components to which the research and development tax credit claim relates for that year
• For each business component, the taxpayer must: 
  • Identify all R&D qualifying activities performed
  • Identify all individuals who performed each qualifying activity
  • Identify all the information each individual worked to discover

• The taxpayer must also provide:
  • Total qualified employee wage expenses
  • Total qualified supply expenses
  • Total qualified contract research expenses

Additionally, taxpayers filing an amended tax return must include a signed declaration verifying that the facts provided in the filing are accurate. It is important to note that facts should be sent as part of a written statement instead of through a production of documents. However, if documents are included, such as a credit study, it’s essential for the taxpayer to designate the exact pages that support each specific claim. Put simply: including multiple documents without context will not meet taxpayer requirements. 

At Acena Consulting, we work with our CPA partners and financial advisors to ensure they understand that misfiled amendments will be given a one-year grace period. The IRS will send the return back for the needed changes. If the changes aren’t made within the one-year period, it will be denied. 

Changes for Hawaii Businesses

In 2020, the state of Hawaii released legislation that made research and development credit 20% refundable, which is great news. However, taxpayers had to submit their application by 3/31/22.

R&D Expense Capitalization

The latest TCJA regulations have implemented some significant changes to R&D tax laws. The current legislation states that taxpayers can no longer deduct R&D expenditures in the same year they are incurred. Instead, qualifying research and development expenses must now be amortized over 60 months. 

R&D Tax Deadline is Quickly Approaching 

While not a new update, it is important for CPAs and financial advisors to remind their clients of the quickly approaching R&D tax credit deadline. The extended deadline is now September 15, 2022, for businesses categorized as a(n):

• LLC
• Partnership
• S-Corp

For C-Corps and Individuals, the deadline is October 15, 2022. 

Connect With an Acena Consulting Professional Today

The most important thing when helping your clients optimize cash flow with the research and development tax credit is to act now. While there’s still time for filing, it’s critical to begin the process as soon as possible. Acena Consulting can help. Our team of R&D tax credit accountants can help you evaluate your client’s research and development qualifications, documentation, and calculation. Contact us today to learn more!