What is the Research and Development Tax Credit (R&D tax credit)?
The Research and Development Tax Credit (R&D) is a tax credit for businesses of all sizes that conduct R&D in the United States. The R&D tax credit can be extended to a wide range of companies and industries that exceed far beyond scientists and research labs.
The R&D tax credit was created to incentivize US-based research and development activity. Each year, more and more companies take advantage of the R&D tax credit.
The activities that qualify for the R&D tax credit are the same ones driving growth in your business.
- Developed new products
- Improved existing products
- Developed software for internal or external
- Improved manufacturing processes
Have any question?
We're here to help.
By providing a few basic details, our Flex Experts can guide you on your path to claiming R&D tax credits. Reach out to us today! If you’re eligible for the R&D tax credit, we’ll establish an account for you to ease the process.
Two-step registration process:
Alex Kwan
+1 (415) 860-6288
alex.kwan@flextcg.com
Onboarding
Schedule a consultation with our specialists, and we’ll set up a member portal exclusively for you to monitor your R&D acitivies.
Credit Study
Update the details on our platform. Our CPA will collaborate with you to claim the credit. Our Tax Team will prepare your Tax Return.
Use the data you already have
Version Control
Most software teams collaborate by using Version Control, which saves every version of the codebase in case it needs to be referenced later. It records every line of code that an engineer changed, just like “Track Changes” in Microsoft Word. Software engineers use Version Control to share code, develop new features, and figure out when bugs were introduced.
Project Management Software
Many companies use Project Management Software to help teams track and assign tasks, issues, or tickets. These tasks aren’t the code itself, but they usually include specifications written by managers, and descriptions of the work engineers do.
Who Can Claim the R&D Tax Credit?
Many people used to think R&D tax credits only applied to those that wear lab coats or create new best-in-class products. This is not the case – R&D credit is much more expansive and far-reaching than most people realize.
Companies of all sizes and across many industries meet the federal government’s test for qualified innovation activities and can claim Research and Development (R&D) Tax Credits. However, many companies are not aware they qualify. There are thousands of companies that are leaving money on the table and not taking advantage of significant federal and state R&D tax credits.
How do I know if
my projects qualify?
All expenses must undergo The 4-Part Test in order to determine whether the claim meets the qualifying criteria standard for approval.
Experimentation
The activities constitute a process of experimentation with the intent to resolve the technical uncertainty through the systematic evaluation of alternate solutions.
Purpose
The research must impart new or improved functionality, performance, reliability, or quality to a product, process, formulation, invention, software, or technique.
Technological
The activity undertaken relies on the principles of “hard” sciences including physics, biology, engineering, chemistry, or computer science.
Eliminating Uncertainty
From the outset of the project, the development team must encounter technical uncertainty regarding the optimal design, methodology, or capability to achieve project specifications.
The 4-Part Test is the most challenging and extensive part of any R&D Tax Filing. It is essential to have an experienced hand to ensure that your R&D Tax Credit return is properly filed to maximize the return R&D tax credits.
What expenses qualify for R&D tax credits?
Here’s a look at the types of expenses your company can claim for R&D Tax Credits.
US Employee Salaries
Supplies Consumed in R&D
US Subcontractors
Offsite Server Rental & Cloud Computing
What documentation will I need to provide?
We’ll work with you to surface all the appropriate documentation to provide a comprehensive report of your qualified R&D tax credits.
- Tax Returns & Financial Statements
- Employee Payroll & Expense Reports
- Project Lists
- Supporting Documentation
These elements will help us to develop a list of expenses related to the development of…
