1. What are R&D Tax Credits?
The federal R&D Tax Credit is the Research and Experimentation Tax Credit, available to companies that incur research and development costs in the United States. The R&D credit is used as a tax incentive for performing qualified research within the United States, resulting in a credit to your company's tax return. This credit was established as a part of the Economic Recovery Tax Act of 1981 and was intended to act as an economic stimulus, encouraging investment within the U.S.
2. Who is Eligible to Receive R&D Tax Credits?
Federal R&D Tax Credit laws apply to all eligible R&D activities, but there are three different types of credits available. These types include: Traditional Credit, Start-Up Credit, and Alternative Simplified Credit. In order to determine which type of tax credits your company is eligible for, your qualified research must meet the requirements outlined in the Four-Part-Test, a quick guide that is available on Swanson Reed's webpage. Most industries and businesses can qualify for the R&D Tax Credit if they can pass this test, which is used by the IRS to determine eligibility.
3. Are R&D Tax Credits Only Available on a Federal-Level?
Not only are industries and businesses able to claim the R&D Tax Credit at a federal level, but if your company exists in Texas, you may be eligible for state-level credits as well. Texas R&D Tax Credits were reinstated for use between 2013 and 2026. This state-level tax credit uses the same information as the federal credit, so you need not worry about gathering two separate sets of information to apply. If you are applying on a federal level, it is definitely worth considering applying in Texas as well because it requires minimal additional effort.
4. Are you Worried About Being Audited?
Many businesses that choose not to partake in the benefits of applying for the R&D Tax Credit do so in fear of being audited by the IRS. In the United States, the government is allowed to audit a company at any time in order to ensure compliance. If you do the proper preparation and planning and understand how to keep your accounts and documentation correctly stored, there will be no need for you to be worried. Developing your business and making improvements to the benefit of your industry and economy is more important than anything else. As long as you've worked through the planning, ensuring that nothing is left to chance, you will have the proper paperwork to support the claim.
5. Who Can Help Prepare R&D Tax Credit Claims?
At Swanson Reed, we are dedicated to helping industries and businesses succeed in their applications for the R&D Tax Credit. We will help you with your accounts management so everything adds up when it is time to file your claim. We will assist in the preparation of your claim, and we are also experienced in dealing with IRS audits. We support our clients every step of the way, eligibility criteria and documentation support included. Contact Swanson Reed today at 1-844-467-9267 or through our contact form to get the R&D Tax Credit process started.