cfo tax planning and preparation services

R&D Credits: 5 Myths and Rebuttals

CFO News: Rebuttals to Common R&D Credit Myths

There are many myths about the R & D credits, and these misconceptions often cause business owners to believe they don’t qualify or won’t be able to benefit. With comprehensive tax planning and preparation services, you can identify whether or not your business qualifies for R&D credits – and save lots of money. 

In reality, the R&D Tax Credit legislation is much more inclusive than people realize – almost any company can benefit regardless of industry, size, or age.

A new client came to us under the impression that they did not qualify for the credit. As your local giver of CFO news, I am happy to report that they have claimed the R&D credit for the last four years for a total savings of $350,000.00

Here are FIVE Rebuttals to Common R&D Credit Myths:


Myth #1: Only scientists in lab coats are doing R&D.


As long as you are working towards an advance in your field and facing uncertainly in how to do it, you could very well be doing R&D.

Myth #2: Only large, profitable companies can claim the R&D Tax
Credit.


Not anymore! The Protecting Americans from Tax Hikes (PATH) Act had some very impactful changes on the R&D Credit in 2015. It introduced a version of the credit designed explicitly for startups or companies with no revenue.

One of the earliest expenses a startup will incur is payroll and, therefore, payroll tax liability. The startup-specific R&D Credit allows qualified small businesses to recapture a percentage of their R&D investment to reduce payroll tax liability.

Myth #3: The risk of audit is very high.

Now that this is a permanent incentive, the government wants businesses to be taking advantage of the R&D Credit so; it does not automatically raise a red flag with the IRS.

Myth #4: The credit is only available on a federal level


More than 30 states offer their version of R&D Tax Credit, and most state credits closely follow the Federal legislation, Section 41. However, some states have also set their requirements. The state credits are in addition to the federal tax credit. Depending on the state, this could potentially double a company’s tax savings.

Myth #5: You can only claim for successful projects.


You can claim R&D tax credits for any eligible R&D project, whether there was a successful outcome or not. Failure can be a good sign of eligibility – what can be more than a seemingly impossible project?

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Contact us for tax planning and preparation services that can help identify all credits that you are eligible for a maximum reward on your return.