RedGage

Often times the payable amount is overstated as the concept of tax credits is not entirely grasped especially by middle and small sized companies. One such deductible is the research and development tax credit. Most corporations still hold on to the traditional definition of this tax credit and therefore fail to benefit from Americas biggest tax credit to companies. R&D tax credits amount to over $10 billion every year and it’s very unfortunate if your business fails to benefit from this welcome relief due to misconceptions regarding the facility. Let’s take a walk through some of the commonly held misconceptions as we try to set the fact straight.

1. The R&D tax credit is for Companies that are doing something to do with technology invention.

Wrong!! The qualifying criterion is now broad and includes businesses that develop, design or improve software, technology, processes and formulas.

2. The R & D credit facility is for big entities

This is a wrong belief that is held by most small and medium scale businesses. It has resulted in a situation whereby only the big corporations are enjoying this tax break. No matter the size of your operations, you need to be proactive and claim your share.

3. The credit amount won’t make a difference given my small-sized operations. Working with entities who know how to identify, qualify and quantify your expenses can be very beneficial. Small businesses have been known to get as much as tens of thousands to millions of dollars in credits.

How it Works

• Two methods exist for claiming your research and development tax credit that are tied to the size of your company. There is one for the large companies and another for the small to medium scale businesses.

On your company tax return, put an X (box 99 for SME and box 100 for big company). For both cases, enhanced expenditure goes in box 101(spent amount by 130 or 225% whatever the case). Enhanced amount also goes into (box 3) profit or (box 122) loss calculations.