Among the many incentives the federal government provides to U.S. businesses, the research and development (“R&D”) tax credit remains largely overlooked and underutilized, meaning companies may be missing out on claiming up to thousands of dollars of credits!
And probably for good reason. The phrases “research and development” and “R&D” usually bring images of lab coats and microscopes to mind. However, the federal R&D tax credit laws define “research and development” so that it can take on a much broader meaning. In fact, you may now be able to recover a significant return on your investments that involve the improvement or development of manufacturing processes, software, products, techniques, and formulas.
Unfortunately, many of these credits go unclaimed because companies are unaware they may now qualify for the credit, regardless of profitability, size, or industry – even though the Protecting Americans from Tax Hikes (“PATH”) Act of 2015 enables more companies to benefit in more ways than ever from this tax credit.
The PATH Act expanded the applicability of the federal R&D tax credit by specifically allowing certain small-to-midsized businesses to offset their alternative minimum tax liability or payroll liability with the federal R&D tax credits. It also made the federal R&D tax credit a permanent
part of the Internal Revenue Code – allowing companies qualified for these credits to incorporate them into their future planning.
While the federal benefit typically ranges in single digits percentage-wise (a percentage of qualified spend – e.g., 6% of qualified spend), companies also may be eligible to claim tax credits in the double digits for their qualified research spending. Keep in mind this tax benefit may be a permanent one with dollar-for-dollar tax savings.
Get Help From Market Leaders
If you are interested in learning more about whether your company may qualify for the federal R&D tax credit, help is available from two trusted companies with extensive expertise: ADP® and KPMG LLP. They are working together to assist companies in determining eligibility and applying for the federal R&D tax credit. In fact, because payroll data figures significantly into determining the amount of an R&D tax credit, ADP is able, with permission, to provide a client’s payroll data in its possession to KPMG which has extensive expertise in R&D tax credits. And thanks to this joint effort, ADP is able to offer companies a tax credit program which helps them get the most from the tax credits and incentives for which they qualify.
Click here to learn how we can help companies like yours get all of the tax credits for which you are eligible, so that you can have a stronger balance sheet.