The largest tax credit provided to businesses by the federal government that amounts to roughly $12 billion a year in savings, goes largely unnoticed by more than 70% of all U.S. manufacturers.
Take advantage of the R&D tax credits for your manufacturing company. Claim the credits you didn’t realize you are eligible for!
‘We probably don’t qualify.’
Self-censoring is one of the biggest reasons for missing this opportunity! Recent IRS changes to the code have greatly broadened who can qualify. Manufacturers are often unaware of these changes. Whether you are big or small — if you are investing in a new or improved product or process, you most likely can benefit from claiming the R&D Tax Credit. The R&D Tax Credit has evolved as industries have grown and changed. In fact, changes over the years have broadened what activities qualifies such that it virtually encompasses most manufacturing or technology organizations in some way.
If you’re a manufacturer who is developing a new process or product, or improving an existing one, you probably qualify for R&D tax credit savings.
‘We’re not big or technology focused.’
Many Fortune 500 companies take advantage of the R&D tax credit, but small and mid-size companies also qualify. In fact, not only is it unnecessary to have a specialized “R&D” department with people tinkering away in laboratories making new inventions, but anyone who is involved with development and innovation of a product or process can qualify. This can include technicians or production personnel who work on projects that improve the efficiencies of your process.
‘We checked, we do not qualify.’
Many small and mid-size businesses are structured as S-Corp’s and Limited Liability Corporations (LLC’s). As such, eligible tax credits “flow-thru” to the shareholders proportioned according to their percentage share ownership of the business.
Up until recently, R&D Tax Credits could only be utilized to reduce “regular tax”, and only then down to the amount of the taxpayers Alternative Minimum Tax (AMT). This greatly limited those that could take full advantage of the credit.
As of tax year 2016, eligible small businesses can now use the credit to reduce AMT as well as regular tax. This greatly expands the number of entities that can now claim the credit and receive immediate benefit.
‘We are a start-up and have no income taxes.’
Prior to tax year 2016, young businesses that had no income and therefore no taxes weren’t claiming R&D tax credits, even though they could carry them forward for up to 20 years.
As of tax year 2016, Qualified Small Businesses are able to offset a portion of their payroll taxes using R&D Tax Credits. Specifically, starting in 2017, qualifying businesses and start-ups may offset the Employer portion of the FICA portion of their payroll taxes using R&D Tax Credits claimed on their 2016 and future federal returns. R&D Tax Credits are applied against quarterly payroll tax payments. In any given year, the maximum payroll tax offset allowed is $250,000. This is a significant positive change to the code that can give “start-up” companies an immediate cash benefit.
‘R&D tax credits are going to go away.’
R&D tax credits were supported on a bipartisan basis in both houses and by every administration since it was first put in place in 1981. In 2015, Congress made it a permanent part of the code and expanded eligibility of who can claim it. With the “Tax Cuts & Jobs Act” (TCJA), the credit was preserved.
It is quite clear that as manufacturers expand, grow, and innovate, claiming R&D tax credits is the way to ensure that they have the dollars needed to invest in a better tomorrow.
The R&D Tax Credit is complicated and requires proper documentation. Allow our experts to help you navigate your way.
BRS’s team of professionals has over 25 years of experience and expertise and can work with you to develop a clear and accurate history of your development efforts, capture all eligible costs, broaden the scope of qualifying activities when appropriate, and prepare the documentation you need to maximize the money you are eligible for.
To learn more and arrange for a FREE consultation with a member of our team, please fill the form below. You may also call us at 781-640-6610.