Tax credits can be awarded for hiring employees, testing new ideas, establishing new processes, expanding business operations, and other activities that are routine for many businesses.
How to Explore Tax Credits
First, research public information to see which activities related to your business area of interest qualify for consideration for R&D tax credits. The IRS website is a good place to start. Ɏ www.irs.gov/businesses/research-credit Ɏ www.irs.gov/businesses/audit-techniques-guidecredit-for-increasing-research-activities-i-e-research-taxcredit-irc-41-qualified-research-activities The IRS and state taxing agencies maintain a database of rules and activities that are eligible for tax credit. In Florida, the areas for R&D credits are limited, and they are explained here: https://taxapps.floridarevenue.com/CorporateTaxCreditRD/ Instructions.aspx Next, confer with employees and professionals who can assist the business with its financial processes (payroll and taxes), recruitment and hiring (HR) and operations (including engineering, marketing, manufacturing and logistics). Records and documentation are essential for earning the credit. Align all parts of your company and the services of your advisors to ensure that innovation activities and investments are noticed, recorded and shared. You need to present a complete picture of your company’s innovation commitments.
How to Qualify
Qualifying for tax credits involves diligence in recordkeeping. To claim the tax credit, the business must both 1) evaluate and 2) document its research activities in ways that establish the amount of qualified research expenses that relate to each qualified research activity. Examples of such documentation: Ɏ Payroll records. Ɏ General ledger expense detail. Ɏ Project lists. Ɏ Project notes. Ɏ Other documents a company produces throughout the regular course of business.
Government Regulations
An alphabet soup of federal regulations has eased the way for businesses to claim R&D tax credits. In light of the COVID-19 pandemic, new regulation is being created that will stimulate innovation and economic recovery. R&D tax credits represent an exciting and often underused resource for companies as they emerge from the challenges posed by the 2020 pandemic. Because this legal, financial and tax landscape is changing so rapidly, businesses should seek advice from experts who follow these trends regularly and understand the differences between programs their eligibility requirements. ▯
i4Biz.com | NOVEMBER/DECEMBER
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