The Research and Development Tax Credit in a Nutshell
If you’re a small to mid-sized company in New York, chances are that you have overlooked the research and development tax credit for which you can qualify. You don’t have to have an on-site laboratory or dynamic research underway to claim this credit; the one thing that you should have is a basic knowledge of how to qualify for this credit and a professional team by your side to help you navigate the regulations that you will find along the way. If you employ engineers in your company or if your business meets a list of other criteria, you should investigate this exceptional way to recover some of your initial costs for starting your business in New York.
Tax Credits Are Attractive to Your Business
The credits have been simplified in recent years so that you and your Executive Team can take advantage of them and reinvest some of your funds in your company’s growth and financial stability. You can claim research and development tax credits for the current tax year and the three years prior to it. If you have an engineer in your business you probably have costs that you could successfully capture with guided assistance from a trusted team of professionals. Along with some other criteria mentioned below, if you research the process of getting a patent and actually acquire one, this activity qualifies as a research and development expenditure.
Documentation is Important
As with any other aspect of your business operations, documentation is excellent evidence of the research and development that your company is doing. You should gather data while the research is underway whether you have a formal plan or not. Keep all diagrams, schematics, and time sheets for the employees who work on your projects. It’s also important to record the percentage of time that your employee is engaged in the process; you will want to claim his entire salary for credit in this case. Make sure that your documentation is accurate, recorded on company letterhead, and stored in a secure location for future reference.
The Four Part Test
The IRS has developed a test that will help to qualify your New York-based company for R & D tax credits; after you explore the criteria and how your business operations compare to the list, you should consider actually claiming the R & D tax credit for your company. The four parts to consider are:
- Is your research technological in nature?
- Does the research have a permitted purpose?
- Are you working toward the elimination of uncertainty about a product?
- Are you engaged in the process of experimentation?
Once you determine that your company will qualify for R & D tax credits, it’s time to find a trusted partner that can work diligently on your behalf to find the amount of credits that you deserve.
As with all legislation and congressional matters and especially with the IRS, you must have a team committed to honesty, integrity, and one that will be knowledgeable about the laws and regulations in New York that govern your claims. If you partner with our professionals at Swanson Reed, you’ll get transparency, insightfulness, and a strong work ethic all in one experienced package. We’ll work to deliver high-caliber results which will bring you the tax credits that you deserve and need for future growth and expansion.