The R&D tax credit is full of opportunity. It’s also confusing to know if you qualify.
Innovation keeps businesses moving forward. The businesses of the future don’t simply adopt the status quo, but instead look for ways to expand what they’ve done and create new ideas. As your business works to improve existing products and services and develop new ideas, know that there is a tax benefit to these types of activities that could help you improve cash flow.
Depending upon the nature and timing of these organizational investments, you may be eligible for the research and development (R&D) tax credit.
How does the R&D tax credit work?
The R&D tax credit incentivizes businesses to undertake specific types of research and development related activities, including:
- Development of new, improved or more reliable products, processes and techniques
- Development or enhancement of software applications
- Development of prototypes or models
- Design of tools, jigs, molds, fixtures and dies
- Automation and/or streamlining of internal processes
The R&D tax credit was permanently extended in December 2015. Funding from the credit can potentially be retroactively applied.
How Do I Take Advantage of the Research and Development Tax Credit?
In order to qualify for the R&D tax credit, activities must meet the requirements of a four-part test.
- Permitted purpose. Develop a new or improve an existing product, process or software.
- Eliminate uncertainty. Discover information to eliminate uncertainty concerning capability, methodology, or appropriateness of design.
- Process of experimentation. Most activities involve a process of experimentation.
- Technological in nature. Discover information that fundamentally relies on principles of hard sciences.
Choosing the Right Firm to Help with Your R&D Tax Credits
The potential of the R&D credit is immense. The confusion surrounding whether your activities qualify can be crippling. Working alongside a trained professional who specializes in these tax credits can help. Not only can your CPA help identify if you qualify for the R&D credit, but they can also help you gain maximum benefit.
Eide Bailly’s R&D tax credit team takes the time to understand your organization’s situation and how you can take full advantage of qualifying for the credits. Our team brings thorough knowledge of tax laws and regulations to finding tax credits and helping our clients qualify and benefit.
How Eide Bailly's R&D Team Saved This Company Four Times Their Previous Credit
See how Tige Boats utilized Eide Bailly’s R&D team for maximum benefit.
What Our Research & Development Tax Clients Say
What our company does appears simple on the surface, but it's very complex in the execution. The Eide Bailly team understands this complexity and has worked to ensure our R&D tax incentives are properly documented and supported."
Eide Bailly takes the time to get to know their clients. They don’t charge forward with a one-size-fits-all approach. They understood what our firm does and brought to us the idea of the R&D tax credit—otherwise we would not have known about it. Their process was simple to follow, succinct and direct, and provided great outcomes for our firm."
As a small business, we need every legitimate tax benefit that is available. The tax savings from the R&D credits that Eide Bailly helped us receive allow us to invest in new product development while keeping our profit margins at our targeted amounts."
How We Can Help
What types of organizations typically receive the research and development tax credit?
The R&D tax credit has no specific industry requirements when it comes to utilizing the credit. The application of the credit lies more with the types of activities a particular organization is participating in.
Industries in which we have seen the R&D tax credit make an impact include:
- Manufacturing and Distribution
- Software/Technology
- Architecture and Engineering
- Agriculture
- Financial institutions
- Construction and Real Estate
The Impact of the R&D Tax Credit
Find out how Eide Bailly’s specialized R&D tax incentives knowledge found $500,000 in credits for a software company.
Is the R&D tax credit right for you?
The R&D tax credit has a lot of benefit to many organizations. But how do you know if it will benefit you? Utilize our R&D tax credit calculator to see what type of benefit you could receive.
Why Choose Eide Bailly?
- Knowledge of tax laws, regulations and finding tax credits
- Proven track record of helping clients utilize the R&D credit across a wide variety of industries
- Top 25 CPA firm
- Extensive experience working the IRS and state tax authorities on R&D credit exams
- Business advisors with experience in tax savings, tax credits and tax compliance
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