30 September 2022
Share on

A Comprehensive Guide to Research & Development Tax Credits

The Research and Development (R&D) Tax Credit is a government-sponsored tax incentive that rewards companies for conducting research and development within the United States. These tax credits benefit both small and large corporations alike and are available to a wide variety of disciplines in the applied sciences field and other technical research areas. 

Read on to learn more about the R&D Tax Credit and determine if this could be the right direction for your company! 

The Benefits of The R&D Tax Credit 

The main objective of the R&D Tax Credit is to grant funding so that companies can promote internal innovation, thus helping the overall economy. It is an excellent way for businesses of all sizes to obtain capital while stimulating research activities dedicated to enhancing their products and services. 

The R&D Tax Credit aims to: 

  • Increase a company’s market value and cash flow.
  • Lower a business’ effective tax rate.
  • Reduce federal and state tax liabilities.
  • Allow companies to keep more of their profits. 

Can I Claim The R&D Tax Credit?

Nowadays, most companies conducting product testing, employing engineers, engaging in data science and analysis, or outsourcing product research are eligible to claim the credit. However, please take into account that you will have to present a component of hard science in the research to meet the incentive’s requirements. We advise you to keep detailed records of your business expenses to help prove that you qualify for the incentive.

What Eligibility Criteria Are Followed?

In order to determine eligibility for the R&D tax credit, a four-step, IRS-enforced test is followed to ensure all required parts are met.

The size of your company or the business sector doesn’t matter. The R&D tax credit is for every company that improves its business somehow; it can be processes, products or services. The government rewards 10% of all expenses that companies conduct in activities considered as innovation, research or development at a federal level and might be increased at a state level.

What Information Do I Need To Present To Apply?

As with any other grant application, the more documentation you present relating to your research and development activities, the higher your chances of obtaining the credit will be. Some of the most important documents you should always keep nearby are: 

  • Copies of contracts and invoices paid to any third-party researchers. 
  • Timekeeping records of work plans, meetings, and other activities that can prove you are conducting R&D projects. 
  • Payroll information of employees directly involved in R&D. 
  • A list of business expenses and supplies of both necessities related to R&D and those that are not.
  • Blueprints, progress reports, marketing materials, test records, and any other information that can prove the evolution and impact of your R&D project. 

Does Your Company Qualify for R&D Tax Credit? Find Out Today!

FI Group USA is committed to supporting innovative companies of all sizes in their research and development ventures. If you have recently invested in new products or processes and would like to know if you are eligible for R&D tax credits or refunds,  we are the place for you. 

Contact us today to tell us more about your project; we look forward to collaborating with you! 

× How can I help you?