Are You Maximizing Your Federal And State Research Tax Credits?
Many companies incur research costs to discover new products and/or improve and enhance outdated or legacy products. If you are not claiming or maximizing the research and development R&D tax credit on your federal or state tax returns, you are missing out a potential tax benefit.
What are the benefits of computing the research and development R&D tax credit?
- A dollar-for-dollar reduction of income tax liability
- If there is no income tax liability in the year(s) of computation, the Federal credit can be carried forward for 20 years to offset future income tax liabilities.
- New Jersey and Pennsylvania research credits may be sold, if qualified. NY and NYC offer a refundable tax credit.
What is qualified research?
- Activities that rely on the principles of physical sciences, biological sciences, computer sciences, or engineering;
- Activities that involve a process of experimentation;
- Activities intended to discover information for developing or improving a product or process;
- Activities that relate to a new or improved function, performance, reliability and quality.
What costs qualify for the federal research and development R&D tax credit?
- Salaries and wages of employees engaged in qualified research;
- Materials and supplies used in qualified research;
- 65% of amounts paid to third-party contractors performing qualifying research.
How do you capture all these costs efficiently and determine how to maximize your federal and state benefit?
By performing an R&D tax credit study that will assist in:
- Identifying and analyzing qualified research activities:
- Determining the amount of qualified research expenses;
- Computing the federal and state research credits;
- Preparing a summary report with analysis of the research credit computations.