At a time when the economy is suffering from inflation, everyone is affected and each must find the means to stay afloat and be able to continue doing business. There are several ways that business owners can be able to weather the storm and much of this has to do with tax credits. It is a reality that tax obligations put a dent in the finances of any company or business and even households, but the curious thing is that the government offers several tax credits to help the taxpayers but these are not utilized by most. It could be due to the lack of information or the difficulty of applying for the claims, but in this difficult time, all resources must be explored. There is a lot of talk about tax credits these days, which is understandable given how much most businesses have suffered in the last year as a result of lockdowns and quarantines. Generating tax credits can help your company reduce its tax obligations as well as have additional capital to spend back on the business. Tax credits allow companies to obtain back some of the money from their tax obligations, thus if your yearly tax payable is $2000, and your tax incentive amounts to $300, then that implies you only have to pay $1700, you also save the amount in tax credit that is granted to you. There are many tax credits that businesses can leverage the advantage of, but one that generates a greater value of tax credit but remains to be underused is the R&D tax credit. Using the R&D tax credit map, you can determine if the state where your business is located qualifies for the tax credit, and the specific credits available in the area.
Why you should use the R&D Tax Credit Map?
Although the R&D tax credit is provided by the federal government, it must also be by the existing state laws and policies where the business is located. So for every state, the tax credit incentives might be slightly different, so to make sure that you have the correct information you can make use of the R&D tax credit map. You simply need to click on the state in the map where your business is located and it will automatically provide you with the necessary information. You can then proceed to explore what the R&D tax credits require and how you can make use of them for the benefit of your company. If you have several businesses in different parts of the country, then this map will be very useful and handy for you. Also, any changes to the state laws and policies will be reflected in the map and can serve as your baseline if you do decide to pursue the tax credits. On the other hand, knowing that it is available in your state is only part of the process, you would still need to determine if your company is eligible for the R&D tax credit. You can do your research and read up on the tax credit and how it can be used by your company as well as check whether you qualify for it or not. The main premise is that your business should have engaged in research and development activities that led to a new product, innovation, process, or system and this is demonstrated by spending on such R&D activities.
What is an R&D Tax credit?
R&D tax credits are business tax breaks that companies can claim if they engage in research and development activities and incur expenses. The federal government has provided R&D tax credits as an incentive for businesses to engage in research and development activities and innovate products, services, and processes. Research and development are the main drivers of market growth and expansion, and successful businesses also drive the economic growth of the country, so this is a win-win situation for the government. However, of all the tax breaks available to businesses, the R&D tax break seems to be the least popular. A business owner can apply for or file a claim for RD tax credits if they can demonstrate that the company had engaged in research and development activities and has spent money on these activities as part of its normal business operations. According to the policy guidelines, research and development activities that qualify for R&D tax credits include, but are not limited to, planning and implementing improved processes, systems, and sourcing materials, using new software in automating production, operation, purchasing, and sales, using data for decision-making, developing financial models, designing tools, molds, and other materials, and hiring consultants.
How to file for R&D Tax Credit?
Filing a claim for R&D tax credits is a simple process, but it does require a significant amount of work and time that would plainly not be possible if the company owner did it alone, or even with the support of a team. Even those with the right intentions will find it hard to maintain the business running on a daily basis while also working on the requirements needed for filing R&D tax credit claims. In this particular instance, seeking the assistance of experts who specialize in the handling of R&D tax credits claims would be a better option. The experts will conduct feasibility studies of your research and development activities and costs. The feasibility study will be able to identify the qualified research and development activities and expenses, which will be verified through audits, evaluations, and interviews conducted by the team of experts. After which, the firm will present the findings of the feasibility report as well as an estimate of the tax credit that the company may be able to claim. This is also when the firm will present you with their financial costs, and if you agree, a contract will be made, and the firm will begin working with your company to gather the necessary documents, file the claims, and be there to assist you when the IRS comes for an actual audit. Following the submission of your claims application, the IRS will dispatch a team to verify and inspect your claims.
