Possibilities Story: Sleepless in Salt Lake City

possibilities story

As the owner of an engineering firm in Salt Lake City, Utah, I’ve been concerned about the recent downturn in the economy—like a lot of people. The fact is, like many engineering firms, my company’s profit margins are thin. And because of a set of factors outside my control—namely inflation, the supply chain crunch, and rising interest rates—I’ve been worried I might have to lay off employees to balance my books. In fact, I even found it hard to sleep for few nights, because I was asking myself: Okay, who do I lay off first? You see, we’re a very close-knit shop, and it would pain me a lot if I had to start decreasing headcount. We’re like family.

Salt Lake City
Salt Lake City, Utah

Possibilities Revealed With This Tax Credit

Back in March, I visited my accountant, to deliver the paperwork she needed to submit my tax return. She looked at my numbers and saw we’d spent almost $20 million in employee wages related to R&D expenses last year. We spent a lot of that money focused on building a hotel built in the shape of a pyramid that was being erected on an artificial island created entirely by landfill. The engineering challenges were enormous; we had to ensure the foundation was rock-solid secure.

We talked for a little bit longer about my project, and then she asked,

“Have you ever heard of R&D tax credits?”

As I recall, my reply was something along the lines of, “I’ve heard of it, but I haven’t done much research on it.”

She explained to me that they were tax incentives offered by the federal government and are available in 35 U.S. states. They reward companies that promote innovation in their field by reimbursing them with a tax credit. This credit can be invested back into your business and really help with the growth of your company.

“Based on what I am seeing in the numbers, you could get a lot of money back,” she said. “Your research activities classify as Qualified Research Expenses.”

“Are you sure that I qualify?”

“Yes, I can see you’ve kept meticulous records, and it looks like you pass the Four-Part Test. But I’m not surprised that you feel like you don’t qualify. Most companies have that same impression, but it’s just not true. It’s amazing that only one third of the companies that are eligible for the credit know they’re entitled to it.”

After our meeting, she sent me an email and put me in touch with a company that knows all about R&D tax credits and been very successful at helping thousands of businesses claim the credit for over 20 years. Within next two days, I was on the phone with one of their specialty tax experts, who did an amazing job analyzing our payroll record. He even interviewed many of our in-house staff and contractors to figure out exactly what tasks they worked on and for how long. He explained that the R&D tax credit is primarily a wage credit. It’s personnel expenditures that really make up the majority of your R&D expenses. Fortunately, we kept detailed records relating to who worked on what part of our various projects and how much time they spent. He explained, “That’s crucial when you submit an R&D tax credit claim to the IRS.”

R&D Tax Credits Saved My Business

After we submitted our claim, my company got back $1,175,120 in tax credits. That’s over a million dollars in taxes I didn’t have to pay last year, and I reinvested it in my business. I kept everyone on my staff and was even able to hire one new employee to manage the team. This opened up my time to concentrate on being an owner, working on development projects, and growing my business.

Author

Engineered Tax Services

Engineered Tax Services

Recent Posts

Establishing Your Accounting Firm On Social Media

Establishing your accounting firm’s voice on social media should be a top priority. If your firm doesn’t have a brand guide that includes its tone of voice, now is the perfect time to create one. It doesn’t have to be a full-blown brand guide⁠—just something that helps to establish and maintain a consistent brand voice.

Read More »
employee retention tax credit scams

How to avoid employee retention tax credit scams

A survey by the National Federation of Independent Business (NFIB) found that only 4% of small business owners are “very familiar” with the Employee Retention Tax Credit program. Furthermore, only 32% said they were “somewhat familiar” with the incentive. Scammers are taking advantage of this unfamiliarity to collect high fees from business owners. Unscrupulous companies

Read More »
accounting firms

Tips for Accounting Firms looking to get started on Social Media

Getting started on social media can be confusing and hard to understand. Especially for accounting firms that keep putting it off. Yet it truly is not as bad as it seems. Trust me. I manage over 20 social accounts, many of which I created from scratch. With the busy season behind us, now is the

Read More »

Contact Us