A trusted CPA is a valuable resource for any business. From tax preparation and auditing to consulting and financial planning, the right CPA lends expertise where business owners simply need assistance.
And although a licensed CPA has passed the CPA exam and fulfilled state education and work requirements, they’re generally not very knowledgeable about the Research and Development (R&D) Tax Credit. Why not? Knowing the R&D Tax Credit and all of its subtleties is a specialized skill set that isn’t covered in the CPA exam, nor is it usually top-of-mind for CPAs, who regularly concentrate on their core competencies.
Conducting an R&D Tax Credit Study
Claiming the R&D Tax Credit, especially during recent economic challenges, is an opportunity many companies are seizing to generate additional capital and reduce past, current, and future years’ tax liabilities. It simply requires a commitment to properly conduct a study, which could result in an ROI of up to $6,000 or more for every hour invested. Impressive results are becoming a reality more and more as the light shines brighter on R&D, especially within the manufacturing and software development industries.
A key to claiming the R&D Tax Credit is investing in a comprehensive study that requires professional insights to identify the QREs (qualified research expenses) and properly document them in order to qualify for the credit. This is an investment by a company that wants the best possible experience and results at the lowest price and with the least amount of audit risk.
But, what if a business owner isn’t even aware of the R&D Tax Credit? That company’s CPA may know it exists, but will that news even be shared with their customer? Some CPAs are resisting uncomfortable customer conversations during which they need to admit they’ve overlooked the R&D Tax Credit for years but should claim it now.
There are some larger specialty tax firms that offer their version of an R&D study. Some even charge as much as one-third of the total tax credit (which could be hundreds of thousands of dollars). While this may seem steep for some business owners, others simply trust their CPAs who recommend a tax provider with such a high fee structure.
On the other hand, a specialized R&D Tax Credit firm that puts their customers’ best interests ahead of their own, and has deep knowledge of manufacturing and software development, will uncover QREs that others won’t see, and do it at a fair price. And the more complex a study is, the greater the chance of finding QREs that often get overlooked.
Charging a fixed fee based on the work effort versus a percentage of the credit amount is one way to ensure the customer’s best interest comes before their own, and keeps audit risk to a minimum.
Collaboration: The Key to a CPA/Specialized Firm Union
Top firms that specialize in the R&D Tax Credit are always willing to work with a CPA’s sponsorship and support to conduct a study and uncover all QREs. Throughout the process, the goal is always two-fold: 1) Get the maximum possible tax credit for the customer and 2) Make the CPA look good.
Specialty firms are eager to inform and educate CPAs on the ins and outs of the tax credit to help them evaluate if their customers are performing R&D. These collaborative relationships are really in the best interest of the customer, with all parties benefiting from R&D Tax Credit opportunities.
So, what does the “customer’s best interest” look like? Well, for a large study, the ROI can range from 500%-1000%. That means every $1 invested earns $5-$10 in reduced tax liability. An ROI on that level isn’t unusual and is worth the time to investigate further.
As I stated earlier, the typical CPA isn’t an R&D Tax Credit expert, but working with the right specialized firm can make them the hero, grow their skill sets, and generate customer loyalty. The rewards are so big that everyone can celebrate its successes.
Opportunities for All
Nobody is perfect, and we should all be constantly learning. Not knowing the details of the R&D Tax Credit isn’t a dealbreaker in the CPA/customer relationship, it’s an opportunity. At Black Line Group, we’re helping to educate both CPAs and business owners (and their CFOs) on the many benefits of the R&D Tax Credit.
I also want to mention the three values that set BLG apart, at least in our customers’ eyes:
• Focus — Not wasting people’s time, working hard, and getting things done right
• Integrity — Always putting customers’ best interests ahead of our own
• Collaboration — Being flexible and easy to work with helps everything run smoothly
While R&D may not currently be a top-of-mind issue for CPAs, the door is open for manufacturers and software development companies to learn more and connect with a specialized R&D Tax Credit firm. Bringing all parties together creates better relationships and inspires future growth and profitability.
At Black Line Group, our team is ready when you want to learn more. For a complimentary consultation, reach out to our team of experts.
Wow! One manufacturer was able to achieve $6K+ savings per hour invested in their study and reinvest it in their business. Read more...