Have you gotten your R&D tax credit yet?
If not, it might be easier than you think. On July 2, 2020, Savvi Legal partnered with Nimbl to host a workshop addressing the most important questions to the process: What are R&D tax credits? Who qualifies? How can you claim your credits?
The research and development tax credit is a general business tax credit for companies that incur research and development costs in the United States. In other words, it’s a government incentive to innovate. You love it because it means more cash in your pockets. The government loves it because it makes the U.S. more competitive, creates jobs, and expands business. Win-win.
Saving thousands of dollars every year in Research and Development tax credits should be a given for most tech companies. Nimbl team member Emily Blackham led the workshop and explored the ins and outs of how to do it. Here are some of her main points:
Is your company eligible?
Regardless of your industry, there is an opportunity to qualify for R&D tax credits. As Emily put it, the qualifications are based on a four-part test:
- Is your product new or improved? More precisely, is the product or process improved by way of performance, function, reliability, or quality? If the answer is yes, then you meet the qualification.
- Is your product technological in nature? More specifically, are you applying hard science principles such as (but not limited to) engineering, physics, chemistry, biology, and computer science?
- Has your product undergone a process of experimentation? This qualification can be met with a systematic trial and error, or a process that resolves technological uncertainties.
- Has that process eliminated uncertainties? When you started to research, what was your hypothesis? In order to meet this qualification, the “uncertainty aspect” at the beginning of the experimentation process must be eliminated by the end.
If you were able to answer “yes” to this four-part test, chances are you will be able to successfully receive R&D tax credits this year or next.
New business and start-up companies will see a benefit between 6% and 14% of their eligible R&D costs. Many of your W-2 wages, supplies, or contract expenses used for R&D purposes may be eligible to get this additional tax credit.
In addition, small businesses in their first 5 years of business and under $5M of gross receipts have an option to apply these credits against payroll taxes. This is extremely beneficial for companies that are in net operating losses, but seek to still claim the short-term benefits from these R&D credits.
The bottom line is, these tax credits are low hanging fruit. Emily is both willing and excited to help companies capture those R&D tax credits. In fact, she’s offering a free consultation to companies with a Savvi account—which is also free.
To connect with Nimbl, head to the “Savvi Partners” view in your Savvi account, and complete the “Tax and Accounting Assistance Request” workflow. Or just click here to sign up for your free consultation.
With over 12 years of experience, Nimbl has enabled entrepreneurship by giving business owners affordable access to scalable accounting services and accurate financial data for decision-making. View other services by Nimbl here.