As an accountant I have had to shoot attempts at claiming this credit down time and time again. Unless you are doing cutting edge/novel research into AI, machine learning, quantum computing, etc you will not qualify for the credit. Think about it this way, unless your research is something you could write a scientific paper on and have it published in a peer reviewed journal, it will not qualify. Also, this is not a…
Reduce your startup's payroll taxes through the new Federal R&D Tax Credit
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Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit
#12Interesting and could be helpful, but I'd like more details about the "new Federal R&D Tax Credit" specifically Is it this (which does not appear to be new) or something else? https://en.wikipedia.org/wiki/Research_%26_Experimentation_T...
2 things are new: - Before, you could only offset your corporate income taxes, so you couldn't claim the credit if you weren't profitable (because you wouldn't have corporate income taxes). Now, you can offset social security taxes, which are based on payroll. So more startups can now benefit from this credit. - Gusto has rolled out an new tool that allows their customers to much more easily claim their R&D tax credi…
Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit
#13Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit
#14The layers of control in the current economy seems boundless. Makes me want to join the goldbugs sometimes. Hard money seems so much simpler and freer. An anonymous, portable, fungible, hard to counterfeit and inflate, universal account of previous work value. People give it to you when you give them something or a service they want. It seems like a system of the people, by the people, and for the people.
Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit
#15What if I have R&D expenses in a side business- can I use the credit to offset my main job's income tax?
I am not an accountant. You may use a loss from a side business in order to offset W-2 income. No need for complicated tax credit forms. Look into the IRS rules around hobbies as they may get suspicious if your "business" loses money for years on end.
Regarding business vs hobby criteria: https://www.irs.gov/uac/business-or-hobby-answer-has-implica...
Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit
#16As an accountant I have had to shoot attempts at claiming this credit down time and time again. Unless you are doing cutting edge/novel research into AI, machine learning, quantum computing, etc you will not qualify for the credit. Think about it this way, unless your research is something you could write a scientific paper on and have it published in a peer reviewed journal, it will not qualify. Also, this is not a…
That's not true at all. In the US, at least. As a tax lawyer, I've had to have this conversation quite a few times with accountants who misread the law and don't think it applies to their clients.
The US R&D credit has 4 basic requirements, and "cutting edge" is not one of them, nor has it ever been.. Generally (broadly paraphrased), it is sufficient that the R&D result in new (or improved) functionality, etc. of a business component (specific to the taxpayer), in a systemic process of a scientific, engineering, or computer-science nature.
For example, a game developer developing a new game engine would qualify for the R&D credit; as would a retail company developing an improved inventory system. (The latter is in fact one of the examples that IRS employees give at tax seminars.)
The real issue with the R&D credit isn't claiming the credit; it's supporting the amount claimed with proper and sufficient documentation. It's the documentation part that gets most taxpayers, since the R&D credit is one of the areas that the IRS still devotes resources to auditing.
Further edit: by the way, Gusto's article is about the new small business R&D credit from the Protecting Americans from Tax Hikes Act (PATH) which went into effect for the 2016 tax year. The original credit is limited to taxable income, so you couldn't use it until you had profits or if you were subject to AMT. The new credit applies against federal payroll and AMT.
Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit
#17As an accountant I have had to shoot attempts at claiming this credit down time and time again. Unless you are doing cutting edge/novel research into AI, machine learning, quantum computing, etc you will not qualify for the credit. Think about it this way, unless your research is something you could write a scientific paper on and have it published in a peer reviewed journal, it will not qualify. Also, this is not a…
Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit
#18As an accountant I have had to shoot attempts at claiming this credit down time and time again. Unless you are doing cutting edge/novel research into AI, machine learning, quantum computing, etc you will not qualify for the credit. Think about it this way, unless your research is something you could write a scientific paper on and have it published in a peer reviewed journal, it will not qualify. Also, this is not a…
Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit
#19As an accountant I have had to shoot attempts at claiming this credit down time and time again. Unless you are doing cutting edge/novel research into AI, machine learning, quantum computing, etc you will not qualify for the credit. Think about it this way, unless your research is something you could write a scientific paper on and have it published in a peer reviewed journal, it will not qualify. Also, this is not a…
Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit
#20As an accountant I have had to shoot attempts at claiming this credit down time and time again. Unless you are doing cutting edge/novel research into AI, machine learning, quantum computing, etc you will not qualify for the credit. Think about it this way, unless your research is something you could write a scientific paper on and have it published in a peer reviewed journal, it will not qualify. Also, this is not a…