The credit for increasing research activities (under IRC Sec. 41), commonly known as the “R&D Tax Credit”, is a federal benefit that provides companies with cash savings for performing activities related to the development, design, or implementation of products, processes, formulas, or software. The R&D Tax Credit can provide your business with much needed cash to increase R&D spend, hire additional employees, make capital investments, etc. The credit is available across a wide variety of industries, including aerospace, automotive, chemical, manufacturing, food & beverage, life sciences, software development, and more.

If your business incurs expenditures to develop new or improved products, processes, software, techniques, or formulations then you may qualify for the R&D Tax Credit. The MVO team is here to help to determine your eligible for the credit.

The amount of the R&D Tax Credit that your business can claim varies based on a variety of factors, including the amount of qualified expenditures, historic R&D spend, and calculation method. As a rule of thumb, the credit amount is typically 5% to 15% of qualifying R&D spend. There is no limit to the credit amount when applying it against federal income taxes, however, business that are applying it to payroll taxes can receive a credit of up to $500,000 (starting in 2023).

Yes! You can file an amended federal income tax return to claime the R&D Tax Credit retroactively for theprior 3 tax years.

Yes! If your business is not profitable, has been in business for less than 5 years, and has less than $5 million in gross receipts for the credit year, you can use the credit to offset up to $500k of payroll taxes starting in 2023. You can also carryforward unused R&D Tax Credits until you have regular federal income tax liability.

MVO can assist your business with all aspects of claiming R&D Tax Credits, including:

• Identify and calculate qualifying R&D expenditures
• Prepare IRS forms required to claim the credit (i.e., Forms 6765, 8974, and 941)
• Prepare all IRS required supporting technical and financial documentation, including qualifying R&D time, payroll expenses, etc.
• Coordinate with your CPA or tax prepared to ensure the credit is claimed correctly

The rules for calculating and supporting an R&D Tax Credit claim are complex and change frequently. It is important for businesses to hire a qualified professional to assist them in navigating this complexity.

Yes! Currently there are 33 states that offer an R&D credit. Generally, the states follow federal guidelines on what constitutes a qualified R&D expenditure with a few exceptions. MVO can assist you with identifying and claiming any state level credits applicable to your business.