Rest assured, R&D payroll tax credit rules have not changed under the CARES Act and payroll tax offsets are still available so long as taxpayers meet the qualified small business requirements. In fact, as many taxpayers pivot their development efforts in 2020 to address the unprecedented needs of the healthcare industry in developing personal protective equipment, we expect to see an increase in the activities that qualify for the R&D payroll tax credit as a result of these challenging times.
Section 2302 of the CARES Act allows employers to delay the payments of social security taxes incurred from March 27 through December 31, 2020 to be paid back, in equal installments, on December 31, 2021 and December 31, 2022 in order to assist with liquidity and retain employees. Despite this deferral, taxpayers who are eligible for the 2019 R&D payroll tax credit should still pursue 2019 R&D tax credit studies in order to timely file for and claim 2019 R&D payroll tax credits. It is important to note that the R&D payroll tax credit is a use-it-or-lose-it opportunity and must be claimed on a timely filed federal tax return. Should a taxpayer forgo and not claim the R&D payroll tax credit on the 2019 federal tax return, they cannot amend the tax return at a later date to retroactively claim R&D payroll tax offsets. Payroll tax liabilities will resume starting in 2021; as such R&D payroll tax credits are still an important part of the tax planning process in order to reduce future payroll taxes.
While all opportunities should be looked at on a case-by-case basis the R&D tax credit is still preferable as it does not need to be paid back.