The world today is significantly different from how it looked 100 years ago. We have mobile phones, the internet, multi-use rockets, robotic exoskeletons, and touch screen glass—everything that seemed impossible during the last century.
But how did we get here?
While tracing back to the origin of the technological takeoff we now enjoy is a complicated task, one thing’s for clear: without the encouragement of governments and incentives to make the everyday task convenient, we wouldn’t be where we are in the tech race today.
The United States of America has always been at the forefront of innovation. From being the first people to land on the moon to building nuclear reactors, we’ve done it all. The R&D tax credit is one excellent way in which the state supports research and innovation.
What is the R&D tax credit?
The government-sponsored incentive supports research and development conducted by companies in the US. It’s a dollar-for-dollar credit against the taxes these companies pay. One of the most brilliant things about the R&D tax credit is that the credit attained through it can account for up to 20% of the costs incurred in research activities.
If you’re a business owner who wants to carry out research in your firm, the R&D tax credit allows you to either carry back the tax credits by one year or carry forward them for up to 20 years. Small businesses can also offset payroll taxes for up to $250,000 per year.
How can your company qualify?
Regardless of the industry that your business operates in, you may qualify for the R&D tax credit if your business activities meet the Four Tests as outlined in IRC §41. These are:
The research must relate to a business function’s performance, operation, reliability, efficiency, or quality. You don’t necessarily have to find some unique in the industry. Working on something innovative to you and your company is enough to qualify for the R&D tax credit.
The project you’re working on must eliminate uncertainty in the following areas:
- If the desired result can be achieved.
- The means of getting to the results.
- The design of the element being created.
Process of experimentation
Your innovative method must involve multiple approaches to achieving the desired result, especially when the end goal’s capability is uncertain.
The research must rely on the principles of biological sciences, engineering, physical, or computer sciences.
Find out whether your company qualifies to achieve R&D tax credit benefits with our financial experts’ help. At The Darson Group, we provide R&D tax credit and WOTC tax credit assistance at unmatched rates. Reach out to us for more information.