Tips for R&D Tax Credit Claims

R&D tax credits are one of the most sustainable sources of funds for businesses. They reward businesses that invest in research and development by granting them relief from paying taxes i.e. tax credits. However, filing for tax credit when you’re not eligible for it can raise red flags. You don’t want to be blacklisted for claiming credit unduly.

Here are some tips that will help.

Evaluate Your Company Size

Your business can fall into one of three categories:

  • Small-scale
  • Medium-scale
  • Large-scale

Smaller businesses generally qualify for more generous tax credits compared to larger firms. The federal tax collecting bodies will assume that large-scale businesses already have funds to invest in R&D. If you’re unsure about the size of your business, check this out:

  • The number of employees (less than 30 full-time workers makes you a small company)
  • Total revenue is less than $1 million

A business checking both points qualifies for maximum tax relief. But the scale of your business doesn’t decide everything. Consult with R&D tax credit experts to see if you can count on tax credits for the coming year.

Don’t Underestimate Tax Credits

Getting grant funds can bring luck to your business but the government writes off tax credit eligibility for funded projects. If the grant is funding the entire project, you can get part of the development cost in tax credit. So in total, you’ll have the extra funds added to the grant funds you’ve already received, meaning your business will flourish financially.

If the grant funded R&D expenditure partially, you will need to consult R&D tax credit specialists to devise a plan for getting tax credit. It’s true that funded projects reduce the scope for tax credits, but businesses often make the mistake of overlooking tax credits too. Grants and R&D tax credits are not mutually exclusive under all circumstances.

Be Clear About What You Can Claim

Property owners want to claim as much as they can to maximize their windfall. However, claiming wrongly and abundantly can raise the alarm for tax collecting authorities. This could either delay your claim or deny it altogether.

That’s why it’s important to know the qualifying expenditures, which are costs that you can claim for tax credit. They refer to costs incurred for an activity that you have satisfied and paid for and represent R&D cost. This means the activity that incurred that cost was meant to expand the industrial knowledge of your trade and improve or develop your business. You can claim tax credit for such expenses.

However, you must avoid counting costs that were incurred before or beyond the company’s financial year. Check the calendar and time frame for the expenditures before filing your claim.

Before you get your hands in your account books, it’s best to consult our R&D tax credit experts.  If you’re looking for reliable and experienced financial advisors who offer a free consultation, call us today at (775)-298-4122.


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