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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

#61

Post by gamblor956 »

tedmiston wrote: post #17
cde-v wrote: post #7

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…

Can you clarify sources for what types of R&D activities apply? I've been curious myself and didn't see this mentioned in the blog post.

If your company is looking to see if R&D credits are available, consult with an established major accounting firm or R&D-specialist firm. (But not cde-v's firm.) Most firms that do R&D work will charge a percentage of the R&D credit recovered rather than an out-of-pocket fee, so you generally won't have any financial outlay if your business doesn't qualify.

Generally speaking, any US-based systemic research- or experimentation-based process that results in the development of new or improved (cheaper, better, etc.) business components (broadly meaning goods, services, processes) can qualify for the R&D credit.

Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit

#62

Post by tyrw »

cde-v wrote: post #34
gamblor956 wrote: post #16

Earlier quoted context omitted.

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. 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 "cuttin…

I agree with all but your first sentence... I think you are just underestimating what topics can have peer reviewed scientific papers written about them. http://ac.els-cdn.com/S235197891500013X/1-s2.0-S235197891500... I was more taking a shot at the companies who do a redesign/facelift of their website/customer portal, or a bank struggling to integrate an off the shelf trading tool into their systems.

If you're agreeing with gamblor, you're doing it in a way that sounds completely different and much narrower than what they're suggesting. My take from your parent comment was "don't bother", and my take from gamblor was "this is very doable". Pretty big difference.

Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit

#63

Post by gamblor956 »

webmaven wrote: post #44
cde-v wrote: post #36

Earlier quoted context omitted.

No... one of the requirements is "research which is undertaken for the purpose of discovering information which is technological in nature"

Might a restaurant specializing in molecular gastronomy[0] devising new dishes qualify then? [0] https://en.wikipedia.org/wiki/Molecular_gastronomy

Generally yes. The tricky part is documenting how they qualify for the R&D credit.

Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit

#64

Post by tyrw »

gamblor956 wrote: post #59
cde-v wrote: post #38

Earlier quoted context omitted.

Replying to my own comment since I'm too late to edit. Just read the regs people, the barriers are not as low as the little bit of anecdotal evidence in this thread are suggesting. https://www.irs.gov/pub/irs-regs/research_credit_basic_sec41...

1) Those aren't regulations, those are statutes. It is disturbing that you are attempting to advise people on this subject but do not know the difference. Statutes are written by Congress, regulations are written by the Treasury Department to implement or clarify statutes. 2) The PDF is for the 2004 version of the R&D statutes. They have been revised significantly since then. 3) Current version of the statutes: https…

It really is a shame that this accountant person is tripling down on everything without actually having the needed domain knowledge.

Thanks for following up on each of these -- as a small business owner that might pursue this, it's often difficult to separate signal from noise without having much time to spend on it.

Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit

#65

Post by jliptzin »

gamblor956 wrote: post #57
jliptzin wrote: post #49

Earlier quoted context omitted.

Let's say I pay a programmer to develop that new game engine...why wouldn't I just deduct the expense of paying the developer against my revenue? Why would I even need to look into this tax credit? The only companies I see this benefitting are those with no or negative income, but have high payroll taxes, which doesn't seem to me to be a lot of companies out there.

Deduction applies to pre-tax income, and is based on your tax rate. If, for example, you have a deduction for $100, and your effective tax rate is 20%, your tax liability is reduced by $20. Deductions also generally don't carry over if unusuable. A credit applies against your tax liability. So if you have a tax credit for $100, your tax liability is reduced by $100. Credits generally do carry over to future years to…

Thanks!

Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit

#66

Post by mnierstedt »

URSpider94 wrote: post #58
randyrand wrote: post #41

I've read that Trump's tax cuts are only supposed to help the top 0.4%. I don't think small business owners area allowed to use this tax credit if they're not part of the 0.4%. /sarcasm. Point being, clearly I've been hearing some lies. I hadn't heard of this yet and I'm sad my news bubble is such a bubble.

That's because Trump had nothing to do with enacting this. It was passed in 2015. https://www.mossadams.com/articles/2016/february/r-d-credit-...

Yeah this was passed with bi-partisan support. The idea was to help small businesses be able to take advantage of the R&D Credit that has existed since 1981. Since the amount could only before be claimed against Corporate Income Tax you couldn't utilize the credit unless you had profits to offset. Since most small businesses run at a loss or zero profit this was a solution to allow them to get the benefit.

Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit

#67

Post by tchock23 »

cde-v wrote: post #7

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…

I'm not an accountant, but work in an incubator where a well-known accounting firm came in and presented on this to a bunch of software startups. Their recommendation was to take advantage of this, even if you're not doing anything super novel/cutting edge.

Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit

#68

Post by ceejayoz »

solotronics wrote: post #22
njarboe wrote: post #13

The 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.

If these characteristics of money are appealing to you check out Bitcoin. Its digital, distributed, decentralized, and impossible to counterfeit which as a programmer and engineer I find incredibly fascinating.

I can't tell if you're being sarcastic or if you genuinely think someone on HN hasn't heard of Bitcoin.

Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit

#69

Post by hn_throwaway_99 »

fooey wrote: post #50
gamblor956 wrote: post #16

Earlier quoted context omitted.

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. 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 "cuttin…

At my work, we specifically log hours differently if we're working on new development versus bug fixing to document our work for the R&D credit.

Are you sure that's why? Many companies do this to differentiate between capex and opex, but it's rare that all new development would qualify for R&D credit.

Re: Reduce your startup's payroll taxes through the new Federal R&D Tax Credit

#70

Post by hn_throwaway_99 »

fooey wrote: post #50
gamblor956 wrote: post #16

Earlier quoted context omitted.

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. 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 "cuttin…

At my work, we specifically log hours differently if we're working on new development versus bug fixing to document our work for the R&D credit.

Are you sure that's why? Many companies do this to differentiate between capex and opex, but it's rare that all new development would qualify for R&D credit.
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