R&D Credit for Innovators

August 10, 2021

Are you innovating things and creating new processes that involve new technology and new ways of doing things? If so, you may qualify for the research and development credit. Now this is a pretty complex credit, but we’ll narrow it down. Let’s talk about what it’s for and who it’s useful for.

Sometimes it’s useful for businesses that don’t even realize there is such a credit, and it doesn’t seem so obvious. First off, you want to make sure that you are developing a new and improved process or procedure. It doesn’t have to be new to the world, just new to your organization. So experimenting with alternative designs, resolving technical uncertainty, and making sure that the process is developed to do things in a better way than it was before.

Now, it doesn’t necessarily have to mean you’re a chemist or that you are engineering a new world or creating a mathematical process and formula. It just means that you have to be innovating a product or a procedure. You also have to make sure that you were the one who maintains the rights of ownership to that process and procedure. So you can’t just pay somebody else to do that for you. They would be the ones eligible for that credit.

So in the R & D credit, everything debased in that credit has to be based on US dollars and workers. So if you outsource some of this information or utilize technology across the lines, outside of the country, that qualification does not count. You must have wages in the US for labor in the US or subcontract labor that is in the US to qualify here.

You can also utilize things like supplies, machinery, things that you may have to buy to innovate, or even subscriptions to products or services that help you innovate a process. So let me give you a little example. We are an accounting firm. Guess what? We qualify because we are doing work that is specific to innovating how people do financial accounting and how the advisory process works.

So we’re actually working on our own R & D credit here. So how much could this mean for you? Well, generally, if we take all of those expenses of wages, subcontract, labor, and supplies, the credit can be between 7 to 10% of that dollar amount.

Now, contractors, we reduce it, it’s only up to 65% of their dollars, but wages in total qualified in that calculation. So a little bit of a complex calculation it’s not a do it yourself or project, but we have some very streamlined ways to help you take advantage of the R & D credit if you qualify.

If you have questions about, if you qualify, I’d love to hear from you. Please shoot me an email and we’ll check it out and see how much we can get for you. And by the way, you can amend your return to up to three years backward, to qualify and get refunds on this strategy. So good luck and let me know if you need some help and we’ll help you get some money that you deserve if you qualify for the R & D credit.

Donna Bordeaux, CPA with Calculated Moves

Creativity and CPAs don’t generally go together.  Most people think of CPAs as nerdy accountants who can’t talk with people.  Well, it’s time to break that stereotype.  Lively, friendly and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna and Chad Bordeaux.  They have over 50 years of combined experience as entrepreneurial CPAs.  They’ve owned businesses and helped business owners exceed their wildest dreams.   They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.