Our readers recently shared their biggest concerns surrounding R&D tax credits, and “identifying qualified research activities” was at the top. It’s easy to see why companies would be apprehensive about the R&D credit, for the one reason it can be intimidating is the same reason that it can be so lucrative: taxpayers across a broad spectrum of industries can qualify. 

Are you developing anything new or making improvements to an existing product, process, technique, formula, invention, or computer software? If your answer is “yes”, you’ve already successfully passed the first question in the four-part test.

Are any of your activities/projects technological in nature? Are they grounded in hard science, such as engineering, chemistry, physics, biology or computer science?” If “yes”, you’ve just passed another question in the four-part test.

As you can see from the above, qualifying for R&D tax credits may not be as elusive as you might have originally thought. The good news for taxpayers is that R&D endeavors often line up with a business' products or service lines. Therefore, a knowledgeable R&D professional can quickly identify qualifying activities during short discussions with technical personnel. The goal of those discussions would be to better understand the unknowns and challenges you faced and how you overcame those hurdles.

Once areas of potential qualifications have been identified, a structured approach is used to collect data and further evaluate qualifications. For example, company timekeeping and financial data can provide critical information and reduce consultation time from technical staff. 

Identifying qualified research activity can feel daunting, but an experienced team should be able to work hand-in-hand with your company to assist in this process, outline the optimal approach to calculate and document your efforts, and maximize the R&D benefits on both the federal and state levels.

If you are still unsure whether you have qualifying activities, it would be beneficial to start with a no-cost review of your company and its activities and expenses to thoroughly evaluate credit potential. We can help.

Contact an A&M Taxand R&D specialist today to get started.