Are you taking advantage of the R&D Tax Credit?
We are committed to helping CPAs and eligible business owners leverage the R&D tax credit effectively.
What is the R&D tax credit?
Congress enacted the R&D tax credit (also known as “R&E Tax Credit,” “Research Tax Credit,” “the Research Credit,” “Credit for Increasing Research Activities”) in 1981. Their assemblies point to technological advancements and innovations achieved through research and experimentation are vital to the strength, sustainability, and overall well-being of the American economy. Congress has reiterated their support for the research credit over the past 3-decades stating tax incentives for research and experimental spending must remain a fundamental tenet of America’s global competitive strategy.
Reward
The research credit is sometimes described as an employment tax credit because it rewards taxpayers who employ or are highly credentialed scientists, engineers, doctors, dentists, and others who conduct qualified activities in the United States.
Value
The research credit has existed for nearly 40 years, becoming an essential part of the nation’s tax laws. It is a valuable and widely used advantage for businesses that develop, design, and improve products, processes, techniques, software, and similar items.
What is the value of the R&D tax credit?
The research credit is a dollar-for-dollar reduction of the federal tax amount owed. Additionally, approximately 38 states also have a similar incentive to that of the federal research credit. The research credit can be claimed on a current tax return as well as for prior tax years still open by statute (generally prior 3 years).
Who can take advantage of the R&D tax credit?
Statistics previously maintained and reported by the IRS show that the research credit has broad application to U.S. businesses of all sizes and industries. Ranging between $7 and $12 billion over the past decade, the research credit is one of the largest corporate tax expenditures in the federal budget. Taxpayers of all sizes claim the research credit. Roughly one-fourth of all businesses that claim the research credit has assets of less than $1 million.
Research credit claimants are widely dispersed across industrial sectors, with the manufacturing industry and the professional, scientific, and technical services sector accounting for 32% of all claimants.
How do I know if my practice is eligible for the research tax credit?
If your business has any of the following, it is likely eligible for the research tax credit:
Developing or improving products
Developing or improving processes (e.g., manufacturing, techniques, formulas, distribution)
Software development
Configuring existing technologies in a new manner
Applying existing technologies in a new manner
Building self-constructed assets
Other federal incentives (Cost Segregation, Section 179D, Manufacturing Deduction)
Engineering (in-house or subcontract)
Skilled trade (welding, fabrication, bending, forming, cutting, coating)
CAD/BIM/Design Modeling
Prototyping, tooling, fixture
1st Article design and production runs
Will the R&D tax credit trigger an IRS audit?
The answer is “NO.” Your CPA will include the R&D tax credit form in your business tax return. That is all the IRS will have access to. The technical report is not submitted to the IRS unless your business tax return is selected for an audit.
What does it take to get an R&D study?
Our staff will work with your CPA to help you claim research tax credits. Our team’s expertise will help your CPA understand the value proposition, including eligibility for claiming research tax credits.
In addition to supporting your CPA in claiming your research tax credit, we will also defend the research tax credit claim should it get selected for audit by the IRS. While claiming the research tax credit will NOT trigger an IRS audit, it is important to be prepared and have the relevant experience and expertise to answer the questions and requests of information asked during an IRS examination.
Why do we need a special tax service for R&D?
Our professionals have over 30 years of experience helping companies claim the research tax credit. In addition, we have deep experience in defending research tax credit claims under audit by the IRS. Our staff has led Big-4 accounting firm research tax credit practices as well as years serving the middle-market.
Why should I use RTS versus my CPA?
The R&D tax credit program has been part of the tax code for over 30 years. During that period, the program evolved through legislation, case law, revenue rulings, and revenue procedures. It is a complex piece of tax code, saying the least.
Many CPAs & CPA firms are generalists in tax practice. They don’t have the expertise to identify R&D opportunities, maximize the benefit you may have earned, and equally important, have the relevant experience to defend R&D tax credit claims under IRS examination. RTS is the firm that can provide this value add.
We have tailored fees to match the needs of our clients. While our experts have vast experience working at Big-4 firms, our bill rates and fees are substantially lower than the larger firms. We tailor our fees based on a work plan based on two deliverables (1) to maximize the credit our clients have earned and (2) to provide the technical support to defend such a benefit under IRS examination.
What is the level of commitment my company must make to use RTS and claim R&D tax credits?
The R&D tax credit is an annual federal benefit. It is eligible to be claimed on your company’s tax return, recognized by the State of Texas also offering an R&D tax credit, entitled the Franchise Tax credit, as the credit reduces franchise taxes owed.
Free Assessment
The RTS process is an un-intrusive process. We offer a free assessment to estimate the number of credits eligible to you, typically accomplished over a brief phone call.
How We Collaborate
If engaged in a study, RTS will strive to limit the interactions with your company. There are no specific record-keeping requirements to be eligible for the R&D tax credits. Nor is there any requirement that you re-create any information. Our experts are very skilled and experienced at understanding your accounting policies and record-keeping culture to ensure that they meet any IRS exam guidelines. Our typical project interaction involves a ½ day visit to your location. Our tools and guidance present a smooth and enthusiastic exercise of claiming R&D tax credits annually.
What does this service cost?
We offer a free assessment without any charge to you. The assessment will estimate the annual amount of R&D tax credits your business has earned and determine whether the credits can be utilized.
If engaged after the assessment, we typically charge a fixed fee for our services. We believe that each client deserves a fee tailored to its facts and circumstances. That said, we strive to offer a fee that delivers a minimum 5:1 ratio of return on investment (credit $$ : Fee $$).
Interested in getting your R&D tax credit started? Let’s discuss your options today.
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