R & D Tax Credit
In 1981 The Research & Development Tax Credit was originally enacted as a Federal Tax Program and was designed to get American companies to invest in innovation. In 2004, tax regulation changed significantly to allow many small and medium sized companies whose activities include design, manufacturing and process improvements to qualify for the credits.
Here are some of the everyday activities that would qualify for the credit:
- Designing the process to fabricate the metal to reduce shrinkage and increase its quality
- Programming CNC machines
- 3D CAD Engineering with programs like SolidWorks
- Developing and testing of prototypes
- Quality assurance – First-piece quality inspections
- Designing and developing of specialty tooling and fixtures
- Considering alternative metals to develop the product
- Considering different metal thicknesses
- Developing engineering drawings
- Developing weld procedures
- Bending of metal (e.g. sheet metal) has to consider the stressing and stretching
- Considering strength of final product for application (meets specifications)
Once companies realize this they ask…"How do we get some of this money?" The IRS allows companies to go back three open tax years to take advantage of the credits they may have missed. About 120 days after submitting the amended returns, you can get cash in your pocket. Additionally, you can even take credits for current and future years if you continue to perform activities that qualify for this credit.
To find out if your organization would qualify ask yourself a few questions:
- Are you expecting to be profitable this year, or were you profitable in any of the last 4 years?
- Is your average annual payroll for these years in excess of $1 million?
- Is your company structure a C Corp, or an S Corp/Partnership?
If you answered yes to all of these items then you definitely need to have an R&D Tax Consulting firm take a look at your organization. You could potentially have a five-figure credit, even higher credits are available for organizations with higher payrolls.
For more details contact Ray Alkalai @ 612-217-0157