Common misconceptions about the R&D Tax Credit

Businesses that don’t claim the R&D Tax Credit frequently have uncertainty regarding the necessary paperwork, the qualifying activities and expenses, and the credit’s application. To reduce a company’s tax burden and claim the R&D Tax credit, it is necessary to be clear on these issues and establish a good base to apply. 

First, you need to understand an R&D tax credit; it is intended to reward companies that pursue innovation with increasing investment—taxpayers who design, develop, or improve products, processes, techniques, formulas, or software. So you must be seeking to advance science or technology within your industry.

R&D Tax Credit applies to all industries, even those without a traditionally scientific basis. If your company qualifies, R&D tax credits can make a difference to your business by lowering your tax bill and freeing up working capital. Your research efforts are eligible if, among other things, they are technological, they are developing a new or improved business component, they eliminate ambiguity, and you conduct experiments as part of your research.

To know if your company is eligible for the R&D Tax Credit, you need to know that it applies not only to product development but also to activities and operations. Start-ups may also be eligible to apply for the R&D tax credit against their payroll tax for up to five years. Eligible organizations include those that have under $5 million in gross receipts in the current year and no more than five years of generating gross receipts, including the current year.

Depending on when you filed your tax return, R&D tax credits can also be retroactive. There’s no limitation on the expenses and credits that can be claimed yearly. If you can’t use the Federal R&D credit entirely or immediately, any unused credit can be carried back one year or forward for up to 20 years. 

Businesses still believe that certain conditions will prevent them from receiving credit. If you are still unsure if your business qualifies for the credit, IOOGO can be your perfect partner. IOOGO’s R&D Tax Credit service will get you the maximum credit while ensuring you are in full compliance with federal regulations. Let’s talk!

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