Good news for many small businesses. Changes to the R&D Tax Credit rules allow businesses to apply the credit against their Social Security payroll tax liability.
Here’s a quick run down on what to look out for. Overall, check in with your accountants and make sure your tax preparer properly claimed this benefit on your 2016 tax return!
- Q2 2017 is the first eligible quarter to apply the credit against. If you are using Gusto, you need to input the credit amount by July 15, 2017!
- Your company must not have generated revenue prior to 2012.
- Your 2016 revenue must be less than $5 million.
- You must perform qualified R&D activities that are technical in nature, experimental with uncertain outcomes, and with a purpose of improving a product or process.
The maximum benefit for an eligible company is $250,000 per year. More information can be found on the IRS website.
The above is a quick summary of the tax credit but as you would expect with any law, there are more complicated calculations and thresholds to determine the actual credit amount. Contact your accountant, bookkeeper or tax professional to see if your company qualifies.