Research & Development Tax Credit for Startups
Startups often miss out on R&D tax credits due to assuming they haven't grown or grossed enough to qualify. The eligibility for these credits was also expanded by Congress relatively recently with the Protecting Americans from Tax Hikes Act (PATH) of 2015, which isn't common knowledge.
Effective January 2016, small businesses like yours can use the innovation tax credits to offset the FICA employer portion of the payroll taxes, annually, up to $250,000. This was also expanded to include startups that are not paying income taxes yet.
It's a no-brainer that these innovation tax credit benefits can directly impact your company's cash flow and overall profitability. The problem is that most startup founders are either unaware of the tax credit's availability to them, how to qualify for the credits, or how to claim them.
Historically, you could only use R&D tax credits to offset income tax, which generally excluded pre-revenue startups. With this new provision, they now qualify. We have found at Acena that too few startups are taking advantage of these significant benefits – and it's our sole purpose to create awareness that helps your business save and grow.
Timing Matters for Receiving the Credit Benefits:
You should know that the payroll tax offset is available on a quarterly basis beginning in the first quarter, after filing your federal income tax return.
f you file your 2020 tax return in the second quarter of 2021, you can apply your payroll tax offset on your Q3 Form 941.
- Less than $5 million in gross receipts in 2020, and
- Gross receipts for 5 years or less
Depending on your company's size and activities, it can also offer up to:
$700,000 for 10 employees/payroll
$70,000 for R&D credits identified
$44,000 for FICA refund
$26,000 for R&D credit carryover
Ready to See If You Qualify?
As a nationally recognized specialty tax credit authority, we can help you determine your eligibility and how to claim the available R&D tax credits. Fill out the form below to check eligibility.
Acena, a specialist in the R&D law, bridges the gap between the qualified activities and the associated costs.