Can Your Company Cash in on the Modified R&D Credit?
The modification of the R&D credit, enacted as part of the 2015 PATH ACT, creates a major cash saving opportunity for startup and small businesses. Qualifying companies can put the credit to use towards their payroll tax liabilities and keep the cash where it matters most – invested in their business.
For tax years beginning on or after January 1, 2016, Qualified Small Businesses (“QSBs”) will be able to elect to apply the R&D credit towards their payroll tax liability rather than their income tax. As a result, the benefit of the R&D credit that was once limited to profitable companies can produce substantial cash savings in the technology startup and life sciences industry, where early-stage tax losses are prevalent and the R&D credit typically goes unused.
So, do you meet the standards to qualify as a QSB? Are you a corporation (including an S corporation) or partnership:
(a) with gross receipts of less than $5 million for the current taxable year, and |
(b) that did not have gross receipts for any taxable year that occurs before the five taxable year period ending with the current taxable year? |
If you answered yes to the above questions, and have research and development expenses, you may be eligible to apply the R&D credit towards your payroll tax liability, up to an amount of $250,000!
Contact Withum today to find out how to take advantage of this opportunity.
Author: Christine Mellusi, CPA | [email protected] and Tyler Tedesco, CPA | [email protected]
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