Is Now the Time to Claim the Research and Development Tax Credit?

Is now the time to claim the research and development tax credit?

Is this the right moment to address the R&D tax credit because of today’s turbulence in the stock market, food shortages, and airline travel restrictions?

To put it simply, the answer is “Yes!”

In the face of so much uncertainty, how can we be so convinced that it’s time to investigate claiming the R&D tax credit? For the simple reason that every firm should take advantage of all available tax breaks and deductions.

The federal government provides tax credits for research and development (R&D) to promote domestic innovation, technical design, and manufacturing. Consequently, the plastics industry may reap the benefits of this most potent business incentive. As a result of the legislation’s 2015 extension, the tax credit is now accessible in most states. Credit has undergone several adjustments throughout the years, making it accessible to most qualified firms.

Taxpayers that spend money on R&D in the United States can claim a general company tax credit within Internal Revenue Service ( IRS section 41.

It’s hard to overstate precisely how substantial a tax benefit can be. A tax credit is a one-to-one reduction in taxes that must be paid. Compared to a tax deduction, which reduces taxable income but does not reduce tax obligations, a tax credit is significantly more advantageous.

The plastics business gains considerably more from claiming the R&D tax credit. A tax credit can be claimed by anyone, even if they aren’t already taxed. Since the CARES Act changed, you can claim the credit even if your firm is reporting a loss because the credit can be carried forward towards 20 years and back five years. A recognition that you cannot utilize may not make sense to claim, but if your company is likely to be taxed shortly, it may be worth claiming this credit so that your tax bill can be reduced later.

There’s more: You could take the credit not just this year but also for the previous three open tax years, as long as you meet the eligibility requirements. As a bonus, many states match the period for claiming the benefit, which means that the credit may accumulate quickly for any firm. Using the $100,000 federal R&D tax credit as an example, a corporation can claim $100,000 for four national tax years and four state tax years, totaling an incredible $800,000 in tax credits. According to this example, you might get a credit of $900,000 if your company is located in California and has four open tax years.

Once again, is it appropriate to use the R&D tax credit at this point? The R&D tax credit is ideal for enterprises looking to replenish their cash reserves in the current uncertain economic climate. The number of businesses looking into the R&D tax credit has increased dramatically, and now there’s no better time to file for the distinction.

There is no better person to ask about claiming the R&D tax credit than your experienced CPA since you never want to find out that you have been undervaluing your business.

Jill Mazur is a certified public accountant in Houston, TX, a director of Engineered Tax Services Inc.

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