If the chaos of 2020 showed us one thing, it’s that businesses need to be ready because things can change quickly. And while CFOs throughout various industries share similar job responsibilities, COVID-19 made doing those tasks challenging and undercut even the most well-developed plans.
One possibly overlooked (or underused) tool you can use to protect your business in the midst of market, economic, and regulatory challenges: R&D Tax Credits. Imagine being the one who helps your company take control of this opportunity to generate needed capital and reduce tax liabilities for this year as well as past and future years. You’d be a hero.
Research and development may not usually be top of mind for most CFOs. Many know that a tax credit exists but haven’t fully explored it, while others have legitimate questions:
- What does it cost?
- How much time does it take?
- Who needs to be involved?
- What’s the audit risk?
- Is it really worth it?
Done the right way, claiming the R&D Tax Credit is a simple and easy process that won’t monopolize anyone’s time, is low risk, and is definitely worth the effort. Hopefully this article can help CFOs see the R&D Tax Credit in a new light, calm any concerns, highlight the opportunities, and position you as a hero as this crazy year ends.
Huge Opportunity. Little Risk.
We understand — your job is to mitigate risk and, on the surface, the R&D Tax Credit seems to increase risk. The reality is that done properly and with the right partner, the process, documentation, and filing are all done to fulfill the requirements of the tax credit’s guidelines, greatly reducing the risk of an IRS audit. And in the rare case an audit occurs, your partner is there to backup every cent claimed.
Another perceived risk is a bit more personal. Will a CFO’s credibility drop if the credit is claimed for 2020 but hasn’t been in past years? Some people will simply avoid any possibility of an uncomfortable conversation with ownership. Yet, with the R&D Tax Credit’s upside being so huge — potentially hundreds of thousands or millions of dollars — any judgment should quickly disappear.
One thing that specialized R&D Tax Credit firms do so well is collaborate with CFOs. Yes, the firm does most of the needed work, but the focus is always on the customer’s best interests. This includes sharing their knowledge of the tax credit, methods for uncovering qualified research expenses (QREs), and pricing philosophy.
A specialized firm that charges a fixed fee based on work effort (instead of a percentage of the credit amount) ensures the customer’s best interest is top priority, and it minimizes audit risk.
No Longer Missing the Boat
If you’re unfamiliar with the R&D Tax Credit, or just haven’t yet claimed it, you’re likely at a competitive disadvantage as your competitors are claiming the credit and reinvesting back into their businesses. But, don’t worry! Not only will your company's 2020 R&D qualifying activities be claimed, your filed federal tax and state returns can be amended for up to three years from their original filing date.
But, there’s even better news, and it’s a rare 2020 bright spot. The CARES Act has made R&D Tax Credits even more significant; businesses can now carry back 2020 losses up to five years and receive tax refund checks for previously paid taxes. In addition, your 2020 R&D Tax Credit can be carried back to 2019 as well as forward 20 years. It’s more important now than ever to look into R&D Tax Credits to help sustain your business over the course of the COVID-19 pandemic.
Continue Maximum Protection
Claiming the R&D Tax Credit has always given companies the opportunity to reinvest back into their businesses, perhaps by purchasing new technology and equipment. This year is different, of course, with CFOs likely rethinking how to reach goals while facing tough, new challenges. Simply put, the R&D Tax Credit is one way to get there.
Not all heroes have to go it alone; a trusted teamup is the smarter path. The right specialized firm, such as Black Line Group, is focused on your overall success and generating an impressive ROI from your R&D Tax Credit study investment. Take a look at this metal forming/fabricator that achieved $6K+ savings per hour invested in their study.