How is the Research and Development Tax Credit Determined?

By August 22, 2017 April 30th, 2018 Uncategorized
While claiming the Research and Development Tax Credit can be extremely beneficial to companies, it is also a complex task requiring a deep understanding of tax code legislation. Here at Indago, we are a full-service tax credits service provider with extensive experience in dealing with both the federal and state government through numerous tax incentives. The Indago team consists of professionals with experience in all facets of the tax credits industry, including: CPAs, Engineers, Lawyers and Software Developers. We determine the feasibility of a prospect to engage in our services through a high level assessment. This is complimentary for all potential clients.

Our main goal is to ensure that our clients receive the maximum benefit possible, whilst their focus remains on the daily operations of their business. Our services include on-site reviews and assessments of past, present, and future tax saving opportunities. All the materials needed for the study are collected in a thorough and unobtrusive manner of data examination and analysis.

Here at Indago, we divide the Research and Development Tax Credit Study into three phases:

  1. Identify and Document Qualified Research Activities

For an activity to qualify as a QRA it has to fulfill the “IRS Four-Part Test”. The “IRS Four-Part Test” has four requisites:

  • New or Improved Business Component
  • Technological in Nature
  • Elimination of Uncertainty
  • Process of Experimentation
  1. Identify, Accumulate and Document Qualified Research Expenditures

The IRS defines Qualified Research Expenses (QREs) as the sum of “in-house research expenses” and “contract research expenses”. Those in-house research expenses include

  • Wages: Taxable or subject to self-employment tax of individuals performing, directly supervising or supporting the qualified research.
  • Supplies: Amount paid or incurred for materials used to conduct the qualified research.
  • Contract Research: Payments for the conduct of research. The taxpayer must be at risk when conducting the research
  1. Calculate the Research and Development Tax Credits

We pride ourselves in maximizing the credits to their full potential and our audit record is impeccable. We also do complete analysis of open tax years and provide the client with the information for determining whether or not they would like to amend tax returns. We continually monitor and respond to constant tax rule changes, like the recent law which makes the Research and Development Tax Credit permanent.

Email or visit our website so Indago can help your company take advantage of this tax incentive that will benefit your company’s bottom line while also helping promote its overall strength and viability in the marketplace.