Aprio offers full service studies and audit defense of the Federal and State Credits for Increasing Research Activities (R&D Tax Credits). Our team also offers comprehensive international R&D services. These include services relating to Canada’s Scientific Research and Experimental Development (SR&ED) tax incentive program, as well as R&D tax credits for companies operating in the United Kingdom.
The R&D Tax Credit results in an immediate benefit to a company since it can reduce past, current and future years’ federal tax liability, thereby creating a ready source of cash. The credit provides a dollar-for-dollar offset against taxes owed or paid, which differs from a deduction.
Starting in the 2016 tax year, the credit can be used to offset Alternative Minimum Tax and payroll withholding in certain circumstances. As one of the largest research and development tax credit practices in the southeast, Aprio’s dedicated research and development tax credit team works exclusively on R&D Tax Credits, providing unparalleled expertise to help clients maximize the benefits of these valuable tax credits.
Any company that designs, develops or improves products, processes, techniques, formulas or software may be eligible. R&D relates to development before commercial production for related U.S. activities. Every year, companies leave billions of dollars in potential savings on the table because they either don’t think the credits apply to their business activities, or they fear that claiming these credits will make their companies susceptible to audit. This makes this r&d tax incentive one of the most overlooked and misunderstood tax credits out there today.
The truth is that, the R&D Tax Credit was enacted in 1981 as an incentive for American innovation and was made permanent in December 2015. This valuable tax credit applies businesses that fall within a wide variety of industry segments, including:
If your team uses an iterative process based on hard sciences such as engineering or computer sciences, their time qualifies. The time of staff performing direct research & development activities including direct technical supervision and support qualifies for the credit.
This includes the time of roles such as engineers, software developers, line operators, plant managers and contract research resources. Some common activities that apply within an iterative product development life cycle include:
Any consumable materials used in the process can also be applied to the credit. This means that many of the everyday activities and expenses that your business engages in may qualify you for this valuable tax credit. The money you save can be reinvested to develop new products, offset operating costs or hire strategic talent.
Each year, U.S. companies save billions of dollars in tax obligations through research and development tax credits. These credits can be utilized regardless of the age of your company.
Aprio has more experience than any firm in the country with the payroll withholding aspect of the credit. We work closely with the rest of your tax team to determine if these credits are a good fit for your company. We have developed a turnkey methodology that leverages our expertise in the credit calculation and reporting of substantive documentation to maximize the credit benefit to you. Our methodology includes the following steps:
1. Education: We educate your company personnel on activity qualification criteria. This includes an overview of the tests outlined in the Internal Revenue Code and associated Regulations. Companies need to perform qualified research, undertaken for the purpose of discovering information that is technical in nature and intended to be useful in the development of a new or improved business component.
2. Investigation: We closely investigate qualified activities and associated qualified costs within your company. An initial research and development tax credit study requires the investigation of prior years’ activities.
3. Technical Staff Interviews: Aprio interviews your company’s technical personnel, and analyzes project and historical data to identify projects, processes and technologies where potential qualifying R&D expenditures may be found. We will spend additional time on site to better understand your company’s facts surrounding these costs to determine which of them may qualify. Our process has been proven successful through claims audited by the IRS.
4: Calculation of the credit: Since its initial enactment in 1981, there have been several changes to the credit calculation. We will leverage our technical expertise in preparing a calculation that maximizes your benefit. In addition to calculating the credit, we will substantiate the credit claim by referencing amounts to applicable source documentation.
5. Summary and executive report: We summarize our findings in an executive report. Our findings will also serve as audit support in the event the credit claimed is audited by taxing authorities.
If your business has recently designed, developed or improved a product, process, technique or formula, you may be eligible to claim the research and development tax credit. Aprio can perform an R&D Tax Credit study to determine the maximum value of your federal and state credit(s) and help you secure these credits.
Aprio performs hundreds of R&D Tax Credit studies each year, for companies performing R&D all over the country. These credits can provide your company with savings that can be reinvested into your business or used to improve your bottom line. Get started today.