Do you think the R&D Tax Credit is only available to large high-tech, pharmaceutical, or research & development-centric companies? Never considered that your employees’ work could qualify for a tax credit? Think again.
Many small to mid-size businesses don't believe they qualify for the R&D Tax Credit, so they have never even considered it. But we're here to tell you that small to mid-sized companies in many different industries have received tens, hundreds of thousands, and even millions of dollars from this tax credit. Still not sure if your activities are even worth considering?
Here are five surprising myths about the Research and Development Tax Credit that may be keeping you from enjoying this tax break.
Myth 1: The R&D Tax Credit is Only for Large High-Tech, Pharmaceutical, or Research & Development-Centric Companies
The R&D Tax Credit is not limited to any industry. In fact, companies have used it in industries such as agriculture, architecture, construction, engineering, food and beverage, life sciences, manufacturing, and software, just to name a few. In short, no matter what line of business you're in, many of the activities you perform every day may qualify for the R&D Tax Credit.
Myth 2: Your Company is Too Small to Qualify
Companies both big and small can qualify for the R&D Tax Credit. There are no organization size or revenue requirements. It is based entirely on the type of qualified activities and expenses.
Myth 3: Your Accountant Can Help You with the R&D Tax Credit
Though full instructions to fill out IRS Form 6765 to claim the credit can be found on the IRS website, most accountants are not fully aware of the complexities involved in the required calculations, nor do they have the required industry knowledge to properly account for all qualified expenses. As knowledgeable as your accountant may be as a generalist, it's best to seek help from an R&D Tax Credit expert.
Check out the video below as Dan Digre of MISCO Speakers discusses the importance of industry knowledge in relation to the tax credit.
Don't worry, this won't interfere with the relationship between you and your existing CPA. The partnership of a CPA and R&D Tax Credit Expert is really more like a general practice doctor working with a cardiologist to best service your health.
Myth 4: Your Work Doesn't Qualify
Many companies do at least some work that qualifies for the R&D Tax Credit whether they realize it or not. In fact, there are likely many activities your employees do that are considered research and development. From creating a custom sales package, hosting design meetings to meet custom spec’s, to much more, there are many aspects of your business that could qualify. And it may be worth asking an R&D Tax Credit specialist whether your companies’ activities qualify - as it could lead to significant tax savings.
Myth 5: The Savings Aren’t Worth it
It’s important to note that this is a credit, not a deduction. So any money you save is taken dollar for dollar off taxes owed by you or your company. Typically by investing an hour or two of your time, you can determine whether the anticipated savings are worth the time and effort - And the right R&D Tax Credit specialist can make the process simple, easy and more than worth it.
So, stop believing the myths and talk with an R&D Tax Credit specialist today! Not only will they work with you work to determine what your R&D Tax Credit is for the coming tax season, but you may be able to claim the past three year's worth of credits when you first apply. And those tax savings can really add up.