Any U.S.-based company performing qualified R&D activities, regardless of industry, may be eligible—even startups or small businesses with no taxable income.

Yes, if you are pre-revenue and have less than 5 years with gross receipts and no more than 5 million in gross receipts in the current year, you could qualify for up to $500,000 in credits which can be applied to offset payroll taxes — essentially cash back on payroll taxes you would pay anyways!

R&D tax credits are claimed as a part of your federal tax return. The deadline for December year-end companies is March 15 for partnerships and S-corps and April 15 for C-corps. The deadline is 6 months past - September 15 or October 15 by filing an extension request with the IRS.

To qualify for payroll offsets you must file timely (by the deadline or extended deadline).

You can apply up to $500,000 in credits to offset your future payroll taxes — essentially this is a cash refund since you would otherwise have to pay payroll taxes.

R&D tax credits are claimed on your federal tax return (e.g. form 1120) and then applied to offset payroll taxes on future quarterly payroll returns (form 941)

If you are paying income tax, then credits are applied to reduce taxes owing.

You must be working to create or improve a product, process, software, technique, formula, or invention. The improvement must be related to function, performance, reliability, or quality — not just cosmetic or aesthetic.

Work must satisfy the IRS four-part test:

• Permitted Purpose (developing/improving a product, process, software)

• Technological in Nature

• Elimination of Uncertainty

• Process of Experimentation

We’ll help you identify, qualify and claim eligible work — don’t worry, we make it easy with smart strategy and zero guesswork.

Expenses must be for R&D performed within the US. Type of eligible expenses include:

• Wages for employees conducting qualified R&D

• Supplies used in R&D

• Contract research expenses

• Cloud computing or hosting costs (in some cases)

Up to 10% of qualifying R&D expenses. If you are performing basic research the credit is up to 20%.

You can amend tax returns for up to 3 years back to claim the federal credit.

In order to apply the credits to payroll taxes, you must claim the credit with the original return (not amended).

The R&D credit is frequently audited. Poor documentation or overly aggressive claims can lead to denials or penalties. To ensure you are compliant work with us to ensure your claim is defensible.

It's highly recommended. While retroactive estimates can work, contemporaneous tracking leads to stronger claims and lower audit risk.

Let us help advise you on setting up proper documentation practices. The earlier that we do this the better to ensure you are well prepared.