R&D Tax Credits

Your organization could be eligible for the R&D tax credit if it:

  • Devotes time and resources to creating new or innovative products
  • Improves existing products
  • Develops processes, patents, prototypes, or software
  • Hires designers, engineers, or scientists

How Much Can You Save?

We’ve helped hundreds of our clients reduce their tax burden, often in sums that have made a vital difference to their business. Below are some representative examples of companies—across industries and of varying revenue sizes—that benefited from the credit, as indicated by total taxes saved. Amounts claimed are based on qualified expenses:

Additional Tax Savings Opportunities

Alternative Minimum Tax
Eligible small businesses with an average of $50 million or less in gross receipts over the past three years may claim the federal R&D tax credit against their alternative minimum tax liability beginning in 2016.

Payroll Tax
Companies may be able to apply the federal R&D tax credit against payroll tax if they’ve never had gross receipts or have only had gross receipts within the last five years; and if they also have less than $5 million in gross receipts in the current year. Learn more >

The Four-Part Test

To be eligible for the credit, your R&D activities must meet each of the following IRS criteria, known as the four-part test:

  • Uncertainty. You must demonstrate that you’ve attempted to eliminate uncertainty about the development or improvement of a product of process.
  • Process of experimentation. You must demonstrate—through modeling, simulation, systematic trial and error, or other method—that you’ve evaluated alternatives for achieving the desired result.
  • Technological in nature. The process of experimentation must rely on the hard sciences, such as engineering, physics, chemistry, biology, or computer science.
  • Qualified purpose. The purpose of the research must be to create a new or improved product or process that results in increased performance, function, reliability, or quality.

Which Expenses Qualify?

Many do, including W-2 taxable wages for employees offering direct support and supervision of research, supplies used in research, and certain subcontractor expenses (provided the subcontractor’s tasks would qualify if they were instead being performed by an employee).

R&D tax credits can also be retroactive. Depending on when your tax return was filed, you may be able to claim R&D credits for three prior open tax years. Several other special situations may enable you to take R&D tax credits even further.

IRS and State Exam Defense

Because R&D tax incentives save taxpayers billions of dollars each year, taxing authorities scrutinize many claims for R&D credits and deductions. That’s why we’re there for you: We have extensive experience in both the exam and appeals stages of audits related to R&D tax issues and have successfully defended hundreds of these claims in the past. We help you respond to the government’s questions and requests and guide you every step of the way.

Usability Analysis

Rules govern how much credit you can realize in a current year, carry back to prior years, and carry forward to subsequent years. We can help you work within those rules and identify a beneficial credit allocation depending on your company’s specific facts and circumstances.

Learn more about R&D tax savings opportunities >

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