To minimize the cash tax impact of federal (and state) income tax payments, R&D Tax Credit studies should be considered. The R&D Tax Credit is broad and applies to many industries. Taxpayers do not need to be engaged primarily in R&D to qualify, nor do they need to be in a positive tax position (recent changes allow for “startup” businesses to monetize the R&D Tax Credit via a payroll tax offset).
For tax years starting after December 31, 2024, the IRS is updating Form 6765, which is used to claim the R&D tax credit. To make sure your company provides the right information, it’s now more important than ever to have a formal R&D study in place.
You may benefit from the R&D Tax Credit if you answer “yes” to any of the following questions:
- Are you seeking to develop new or improved functionality, performance, reliability or quality for a product, process, computer software, technique formula or invention?
- Do you have technical-type employees (e.g., engineers, scientists, researchers, CAD technicians, developers, etc.) creating/improving upon products or processes or developing software in the United States?
- Do you incur U.S.-based contractor payments, supplies or cloud computing expenses (AWS, Google Cloud, etc.) for creating products or developing software in the United States?
- Do you pay income taxes or was your business incorporated within the past five years?
If you answered “yes” or maybe to any of the questions above, it may be time to speak with Withum’s R&D Tax Credit Services Team to discuss your individual business needs and start planning as year-end approaches.
Your Tax Strategy Simplified
With continued shifts in tax policy, staying proactive with your tax planning can help you take advantage of new opportunities and avoid unexpected liabilities. Withum’s Tax Planning Resource Center provides timely insights, planning tips and compliance reminders tailored to your needs.
Disclaimer: No action should be taken without advice from a member of Withum’s Tax Services Team because tax law changes frequently, which can have a significant impact on this guide and your specific planning possibilities.