ERC and 2021 R&D Credits

The IRS has released information and updates surrounding the impact of the Employee Retention Credit (ERC) on the R&D credit for the 2021 financial year. Through an announcement and then an updated instruction set for the R&D tax form 6765, we can see that the IRS has decided companies can benefit from one or the other tax credit.

Previous Rule

The 2020 Tax Year allowed a company to claim both the ERC and R&D tax credit from the same employee wages.

New Rule

The Consolidated Appropriations Act (CAA) went into effect on December 27, 2020. Based on more recent notices in the past month from the IRS, this act has solidified that a company can no longer use the same wages to claim both the ERC and R&D Credits for 2021. 

This means, if you claimed ERC for wages for an employee involved in R&D, this claimed amount cannot be factored into the R&D credit calculation. 

The introduction of COVID-19 stimulus measures has added to the complexity and intricacy of the U.S. tax code. Understanding how each stimulus interacts with the R&D credit is crucial to filing a complete and accurate claim.

Are you conducting research and development activities? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at or contact your usual Swanson Reed representative.

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