Frequently Asked Questions

Why does the government take this approach? 

The government aims to foster innovation within the United States by incentivizing companies to undertake projects that they might otherwise find too financially risky. By offering support and reducing potential costs, the government encourages businesses to develop new technologies and advancements domestically.

Why haven’t I heard about this before? 

You’re not alone, even though the credit has been around since 1981, it was typically reserved only for large corporations. It wasn’t until 2016 that the credit benefits were expanded, and the reporting requirements burden reduced, opening the door for millions of additional companies that didn’t have access before.

Can my CPA do this? 

Yes, they can, but most CPAs don’t have the resources or expertise needed to locate and capture the full value of your credits, which is why so many companies partner with specialists like us to handle that part of their return.

Is it worth the time? 

Absolutely! Considering the positive impact on cash flow and/or the bottom line, and that your assessment can typically be completed in 90 minutes. This is the reason why this credit scores very well on something we call the “Good to Grief Ratio” which measures the value you receive vs. the time you have to put in to get that value.

How does it benefit me? 

This dollar-for-dollar credit can be claimed up to three years back, bringing in cash for those years, immediately helping any cash needs, and can be carried forward 20 years, reducing future taxes and therefore increasing your profitability and valuation. There is no limit on income tax credits, and we can go up to 1.25 million in payroll taxes for startups.

How is a credit different than a deduction? 

The essential difference between a deduction and a credit is that a credit directly decreases the amount of tax you owe while a deduction lowers your overall amount of taxable income. A nonrefundable credit lets you reduce your tax liability to 0.

If I claim the credit can I still expense? 

Yes, you get to double dip! This means you can expense the items like you normally would while also claiming the credit to get additional benefits.

 Isn’t the R&D credit just for tech or scientific companies? 

The credit is for all types of companies, and many don’t even realize they are eligible.

What is the startup provision? 

The startup provision allows companies to claim credits against payroll taxes if they’re not paying income tax. This is great for pre-revenue firms that are spending a lot on product development but haven’t gone to market yet. We can decrease your burn rate by getting you money back. You can claim up to 250k a year, and up to 1.25 million in total.

Is the payroll benefit limited to startups or small businesses? 

No, it is not. To qualify, a company must:

1. Have gross receipts of less than $5 million in the taxable credit year.

2. Have no gross receipts for any taxable year prior to the 5-taxable year period ending with the taxable credit year.

3. Utilize the R&D payroll tax credit in that year.

Therefore, even companies that have been around for more than five years and have spent billions in development or improvement can be eligible.

Can companies more than 5 years old get the payroll benefit? 

Yes. Although the law is intended to benefit small businesses, any company formed prior to  2012 that did not receive gross receipts could also potentially benefit. 

What is the 4-part test, and what activities qualify?

The 4-part test consists of the 4 primary attributes used to determine if an activity qualifies  for a credit. Each activity needs to have: 

1. Qualified purpose 

2. Technological uncertainty 

3. Process of experimentation 

4. Technological in nature 

In other words, these activities must attempt to create or improve the process, have uncertainty on whether it will be a success or failure, be technical in nature, and have a process of experimentation. 

What expenses qualify? 

There are three buckets of expenses that qualify: supply costs, contractor costs, and wages. Each of these costs must be assigned to a qualifying project for the expenses to be claimed.

When do I claim the payroll tax offset? 

The payroll tax offset is available on a quarterly basis beginning in the first calendar quarter that begins after a taxpayer files their federal income tax return.

What is the R&D payroll tax credit requirements?

The R&D payroll tax credit requirements vary by country and jurisdiction. It typically involves qualifying research and development activities and meeting specific criteria for eligible expenses and documentation.