IRS Tax Credit Helps Pay for R&D

Posted on Mon, Jul 28, 2014 ©2021 Drucker & Scaccetti

In today’s competitive business environment, organizations are constantly changing their products to meet their customers’ demands.  The process can be costly.  Developing software, training staff, refitting machinery, testing ideas and securing new supplies are all part of the process.

 

If your company has technical struggles developing a new product or process, you should consider the federal Alternative Simplified Research Credit (ASC).  In reality, the credit may help finance your company’s R&D activities and increase the owner’s after-tax cash flow. Here’s how it works.

 

Industries that benefit most from this credit are in the technology and/or manufacturing fields.  But, the credit is not industry-specific. For example, a financial institution may be entitled to the credit for monies spent on developing a new accounting or CRM system.

 

To the extent your company has incurred wages, supplies or contacted services in its research endeavor, the company, or its owners, may be entitled to a 6% refund on these costs over the past three years.  Common activities that benefit from this credit include:

 

1)      Manufacture products

2)      Develop new, improved or more reliable products

3)      Develop software

4)      Develop or improve production/manufacturing process

5)      Conduct testing of new products and technology

 

In the past, this credit was riddled with complex computations and requirements.  A new ASC is now available.  More importantly, this new ASC is now permitted to be claimed for the past three years, even though these returns have already been filed. In addition, there is pending and new legislation that will allow closely held businesses to gain greater and simpler access to this credit.

 

If your company is eligible, it should consider this opportunity to increase cash flow by employing the Alternative Simplified Research Credit. The Tax Warriors® at Drucker & Scaccetti are tax experts and can assist you with tax credits like the ASC. We work with companies, big and small, helping them seize tax-advantaged opportunities that give them a competitive edge in the marketplace. If you have been contemplating expanding your R&D activities, let us help you do it in the most tax efficient way.

 

Contact us via the “Ask A Tax Warrior” button below, or at (215) 665-3960 and one of our highly skilled advisors will be happy to discuss your situation. Our decades of experience and suite of business solutions have been a powerful combination for our clients for nearly a quarter century. We are always prepared to help you with this or any other tax-related matter. 

Topics: Tax Credit, R&D, Research & Development, Simplified Credit, cash flow, IRS

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