The Research and Development (R&D) tax credit was originally created by Congress to be a part of the Economic Recovery Tax Act of 1981. The purpose of the R&D Tax Credit was to encourage American industries to invest in R&D activities. Investments would then stimulate R&D activities among businesses through tax incentives.
Benefits of the R&D Tax Credit to Clients
With the R&D Tax Credit, clients would receive millions of dollars in tax credits, resulting in cash back from the IRS for previous open tax years. Benefits would also include future tax savings, and a carry-forward up to 20 years.
The US R&D Tax Credit could be used by a variety of industries, including manufacturing, tool and die, software developers, fabrication, engineering, chemical, pharmaceutical, food sciences, and others.
Important Considerations When Choosing a Consulting Firm for the R&D Tax Credit
Ask whether each individual involved with your study is either a qualified intellectual property attorney with a background in engineering, or an engineer? Both is preferable, but the IRS requires IP attorneys with an engineering background.
Does the firm use the Comprehensive Project-by-Project methodology when conducting their studies as is required by the IRS? Many companies use individuals with no engineering or scientific background to write their reports. Documentation should directly connect the project to the employee, as well as the estimated time that is spent on that project to each of the years under engagement.
Does the firm offer flexible payment arrangements and affordable pricing and? Does the firm work in collaboration with the CPA firm and the client to understand their needs via this program?
What are R & D Tax Credits?
The IRS defines R&D as the following four points. Most manufactures activities fall into this definition.
