Last week we took the opportunity to look at five reasons not to take an R&D tax credit (see 10 Reason Not to Take R&D Tax Credits (Part 1)). This week, we look at the final five (or Top five) reasons. I hope you enjoy the tongue–in-cheek look at R&D credits and objections we see in the our travels.
Number 5 – There is too much documentation
I feel your pain; documenting things like starting and ending dates, who worked on a project, the hours spent, how you managed to be successful, overcame those design issues or manufacturing processes challenges can be tough. Truth is you are probably already documenting most of those things in different ways and don’t realize it. It’s OK though, we wouldn’t want those types of metrics available to streamline and improve operations in addition to taking the R&D tax credit.
Number 4 – I’m just too busy
Now we’re getting somewhere; Are you really too busy for lowering your taxes; too busy to make yourself more competitive? I like to ask business owners how much additional revenue they would need to generate in order to receive the same benefit as the tax credit they are potentially choosing to skip. More importantly, how much time and resources would it take to generate that additional profit to make up for the credits you aren’t taking? But it’s OK, I get it, too busy.
Number 3 – It doesn’t pencil for us
(see answer to number 4 above). It might not “pencil” for you given all that extra time you would have to invest (really not that much given the benefit) finding those tax returns, W-2s, 1099s, etc. It would make sense to estimate the credits you won’t be taking just to see how much you are passing up. No worries, I understand.
Number 2 – We might get audited
Yes you might but you might get audited anyway. Forget that you are entitled to the R&D credit, that Congress wants you to take the R&D credit, that documentation can be pulled together to substantiate the R&D credit and that it would help you stay more competitive. Yes you might get audited and find that you sustain your credit. It’s OK, I understand.
Number 1 – I don’t want to be competitive
OK, so maybe I haven’t heard this particular one but I couldn’t resist making it the top reason not to take an R&D tax credit. In the end, all the reasons above result in being less competitive and in our economy today, everyone needs help staying ahead of the competition.
What say you friends?What reasons have you used not to take advantage of a tax incentive? Have you looked into ways to efficiently document your activities?
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.
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