The Research & Development (R&D) Tax Credit is a permanent credit made available to help companies reinvest in their future. R&D incentives provide significant tax benefits at the federal and state levels by reducing current and future years’ tax liabilities. They can equal up to 10 percent of annual R&D qualifying expenses at the federal level and even more when state benefits are considered. R&D credits are dollar-for-dollar reductions in tax liability.

Many companies are not aware their daily operations could qualify for a reduction of their income tax liability. Opportunities to take advantage of the R&D Tax Credit have grown significantly over recent years. If your company develops new products or processes or enhances existing products or processes, you likely qualify for the R&D Tax Credit.

If your company employs engineers, scientists, or software developers, you’re likely doing research and development work that may qualify you for federal and state tax credits. Often, companies that did not previously conduct R&D work find that through a transaction or merger, they now manage qualifying activity.

A&M’s Research Credits and Incentives Services (RCIS) team helps identify overlooked opportunity areas across a range of industries where qualified credit activities exist and provides the tools needed to complete the complicated credit calculation. In addition, we assist you in preparing and preserving the documentation required to support your qualifying activities and departments. We also offer IRS audit support in the event of IRS inquiries.

This approach is very effective because it ties facts, costs, and activities directly to the law. This enables us to effectively create a “nexus” between your activities and expenditures, making it more likely that all of your R&D benefits will be identified and supported on exams.

The payoff for companies is significant tax relief that can free up cash for other purposes. Upon completion, the taxpayer will also have documentation of the underlying data and credits to sustain an IRS audit.

Who can benefit from the R&D Tax Credit?

Taxpayers undertaking the development of new or improved products, processes, or software in the U.S. should take advantage of these tax credits.

Companies may be surprised by the wide range of industries and activities that may qualify as R&D. Life science, technology, and manufacturing are all obvious industries for the tax credit, but anyone developing software, including artificial intelligence, consumer experience software or warehouse robotics, may qualify. That includes financial firms, retailers, distributors and more.

What are the benefits of claiming the R&D Tax Credit?

Companies can uncover previously unidentified qualifying activity or recover misidentified research and development activities to reduce their tax liability even farther. Companies can benefit from the following:

• Awareness: Many companies can’t keep up with all the tax incentives out there and may not know all the activities and expenses for which they qualify. 
• Reduced tax liability: Tax liabilities of companies can be reduced significantly following an extensive assessment of R&D activities and expenses. Clients can be assured they are claiming all the credits they qualify for and not understate or erroneously include research activities.
• Increased cash flow and earnings per share: Refundable credits can help add liquidity to the business. For start-ups with few resources and no profits, this can provide a source of new cash flow. For profitable companies, it can help improve earnings per share.

Why should you use A&M’s R&D Tax Credit Services?

Many Clients rely on A&M year after year to ensure they are getting all the R&D benefits they’re entitled to under tax incentive program. Our expertise and a proven method of uncovering qualifying expenses help corporations by making sure they are all identified and supported upon examination. Rely on us for:

• Knowledge base: A&M’s national team of highly expert professionals keeps abreast of changes to tax credit legislation and any new wrinkles in tax law on the federal level. 
• Client-focused approach: We tailor our assessment and analysis to the type, size, and particular R&D activity of each Client.
• Proven process: By using a proprietary system of software and tools, we have developed proven processes to ensure credits are fully claimed and fully supported.
• Benefit discovery:  Most companies don’t know with certainty whether they are qualifying for all credits and incentives available to them. We can fill that knowledge gap and discover all qualifying benefits, especially when a business event occurs, such as expansion into new states or during an acquisition or disposition.

The A&M Advantage

Our R&D services are designed to accomplish the following goals:

• Develop an understanding of how your company develops and improves its products, processes, or software
• Determine which stages of that process comprise qualified elements of a process of experimentation; and
• Identify and document your qualified activities, projects, and costs in terms of those stages/elements

If you have never claimed R&D credits, our approach is phased. Our turn-key approach includes the following phases:

• Feasibility analysis (estimated benefit and cost to claim credits);
• Document qualified costs and activities;
• Calculate federal and state credits;
• Assist clients and CPA firms with tax form and return preparation;
• Develop and implement procedures to identify, document and calculate future credits; and
• Manage and support IRS exam and appeals.

If your company already claims R&D benefits, you may not require a turn-key “R&D Study.”  Our experience, however, is that most taxpayers who have claimed R&D credits have not taken full advantage of the benefits available to them.

We offer additional services to enhance your benefit, improve your process, and increase the amount sustained under an IRS or state audit. These additional services include the following:

Customized Services

We provide personalized services based on the taxpayer’s specific needs. Some examples include:

• Subject matter expert interviews;
• Memo reviews;
• High level review of activities;
• Base calculation adjustments for acquisitions and dispositions ;
• Contemporaneous documentation review;
• Creation of a custom time survey;
• Automated solutions;
• Contract review as it applies to funded research; and
• Section 174.

Proactive Future Planning

We can help companies develop and implement procedures and technologies to identify, document, and calculate their future credits efficiently and effectively.  These services focus first on making better use of a company’s existing financial, accounting and project-documentation systems to accomplish these goals, then focus on introducing new systems or procedures.

Federal & State Examination and Appeals Support

The IRS is prepared to hire more than 17,000 employees over the next few years and audits will increase dramatically as a result.  Leverage our expertise in managing a Federal or State Examination of any challenged tax position to avoid unnecessary issues and streamline the process.

Did you know?

Companies spent $441 billion in R&D activities in the U.S. in 2018, according to the latest data available.
Source: National Center for Science and Engineering Statistics