Running your business is hard enough without having to keep up on constant tax updates. Unfortunately, there’s plenty of room for error, not to mention missing out on a possible tax break along the way.
Research and Development Tax Credits are available to a wide variety of industries at both the Federal, and in most cases, the state level. The incentives are designed to encourage U.S. companies to maintain their competitive advantages through continued innovation and improvements. The credit applies to a number of areas within your business including some salaries, materials and contract services for qualified activities. Companies in any number of industries can claim the credit, including breweries, distilleries and companies in food processing, wine production, agribusiness, forest products and more.
R&D Minimum Requirements – The Four-Part Eligibility Test
Though R&D tax credit evaluations can be complex, we can begin by providing these basic guidelines for eligibility:
- The project must be intended to be useful in the development of a new or improved business component, such as a product, process, technique, formula, invention or software.
- The project must be undertaken for the purpose of discovering information that is technical in nature. Thus, the activity must rely on the principles of physical sciences, such as engineering, biology or computer science.
- The project must be intended to eliminate uncertainty related to the development or improvement of a business component. Uncertainty can include the capability, development method or optimal design of the business component.
- The project must evaluate one or more alternative solutions through the development, refinement and testing of different options. Further, technical risk must be present, which means that there is a chance the project will not be successful.
Claiming the R&D Tax Credit
Do not limit your opportunity. Tax returns from prior years can be reviewed to look for opportunities to amend the filing to retroactively secure R&D credit savings. A qualified tax adviser can get you set up using industry best practices to improve your internal documentation and expense tracking to allow you to claim your maximum sustainable credit in subsequent years.
Think your business may be eligible?
BeachFleischman, one of Arizona’s largest locally-owned CPA firms, provides research and development tax credits services in Phoenix and Tucson Arizona and throughout the U.S. If interested in learning more about how our team of certified public accountants can help your business claim the R&D tax credit, please contact BeachFleischman.com or call Adam Cary, CPA at (602) 265-7011
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