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Payroll R&D Tax Credits

Research & Development Tax Credit for the Payroll Industry

Historically, the R&D tax credit served as a significant and immediate cash source for profitable companies paying income taxes, offering a dollar-for-dollar tax liability reduction for each identified R&D tax credit. But what if you’re a start-up not paying income taxes yet? The Protecting Americans from Tax Hikes (PATH) Act of 2015 introduced new, game-changing legislation for eligible small businesses, expanding the potential R&D benefit to businesses in start-up mode that are not paying income taxes yet.

Starting January 1, 2016, “Eligible Small Businesses” can elect to use the R&D tax credits to offset the FICA employer portion of payroll taxes, annually, up to $250,000.

Qualification:

Your business is eligible if you have:

  • Less than $5 million in gross receipts in 2018
  • Gross receipts for 5 years or less

Benefit Breakdown

Let’s say you spent the following:

10 Employees/Avg. Salary: $70,000
R&D Credits Identified: $50,000
FICA Refund: $44,000

R&D Credit Carryover: $6,000

The payroll tax offset is available every quarter, beginning in the first quarter after filing your federal income tax return. If you filed your return by March 15, 2018, you can apply your payroll tax offset on your July 1, 2018 Form 941 filing.

You can’t reduce your payroll taxes until after you’ve filed your business return.


Acena, a specialist in the R&D law, bridges the gap between the qualified activities and the associated costs.

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R&D Tax Credit in Action

Client Testimonial

"Efficient and Knowledgeable. Randy Eickhoff and Acena Consulting have always provided proactive, efficient, and responsive service. In addition to their strong technical expertise, they bring new opportunities for additional tax savings that apply to our company. We appreciate their ability to be flexible to work within our culture to best fit our needs."

- H.S., CEO, Fast Growing Technology Co., Scottsdale, AZ

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