The IRS warns business owners to be careful with any 3rd party that promotes itself as an R&D specialist. Our resource use all of the proper documentation and are licensed in this field.
Here are the requirements.
Any company that encounters and resolves technological challenges may be eligible for the R&D tax credit. That said, eligibility depends largely on whether the work a company does meets the criteria established by the IRS’s four-part test:
* Elimination of uncertainty. A company must demonstrate it has attempted to eliminate uncertainty about the development or improvement of a product or process.
* Process of experimentation. A company must demonstrate—through modeling, simulation, systematic trial and error, or other methods—that it has evaluated alternatives for achieving the desired result.
* Technological in nature. The process of experimentation must rely on the hard sciences, such as engineering, physics, chemistry, biology, or computer science.
* Qualified purpose. The purpose of the research must be to create a new or improved product or process, resulting in increased performance, function, reliability, or quality.
Steps to properly claim the Research Credit
Eligible taxpayers may claim up to 20 percent of qualified expenses above a base amount by completing and attaching Form 6765, Credit for Increasing Research Activities, to their tax return. For tax years beginning in 2016, eligible small businesses may use the Research Credit to offset the alternative minimum tax. Also, qualified small businesses may elect to use a portion of the Research Credit as a payroll tax credit against the employer’s portion of the Social Security tax. They make this election on Form 6765 and must complete and attach Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities, to their Form 941, Employer’s Quarterly Federal Tax Return.
To claim the Research Credit, taxpayers must evaluate and document their research activities contemporaneously (that is, over the period of time in which the research occurs) to establish the amount of qualified research expenses paid for each qualified research activity. While some expenses may be estimated, taxpayers must have a factual basis for the assumptions used to create the estimates.
Unsupported claims for the Research Credit may subject taxpayers to penalties. Taxpayers should carefully review any reports or studies prepared by third parties to ensure they accurately reflect their activities. Third parties who are involved in the preparation of improper claims or research credit studies also may be subject to penalties