Fuel Your Innovation

Innovation is the lifeblood of your business. But did you know that your efforts towards creating new or improved products, processes, or software could qualify for significant tax savings? At Engineered Tax Services, we're here to help you capitalize on the Research & Development (R&D) Tax Credit.

Kickstart your journey by consulting with our R&D tax credit specialists and discover how much you could potentially save with a complimentary tax credit analysis today!

Home » Services » R&D Tax Credits

R&D Tax Credit Services

What Is The Research & Development (R&D) Tax Credit?

The R&D tax credit offers a dollar-for-dollar reduction in a company’s tax liability, or payroll taxes, aiming to encourage innovation and technological advancements in the U.S. It is calculated based on a company’s eligible wages, technical consultants, and consumables for experimentation. The federal tax credit averages *14% of eligible costs. (*the tax credit percentage is subject to prior 3-year average and current accounting principles)

Learn About The History

Do I Qualify?

R&D incentives are available for a variety of activities and expenses. These include software development, payroll expenses related to R&D activities, the creation of new manufacturing processes, and product innovation, among others.

Activities that would otherwise be considered “day-to-day operations,” such as designing new products or analyzing market trends, are eligible under this credit!

The Four-Part Test

To qualify, the IRS has a four-part test you must pass to be eligible to claim the incentives. Most companies don’t know that the development and research activities they’re currently doing might already qualify for this tax credit, and below we will explain each section of the four-part test.

Part 1: New or Improved Business Component for Permitted Purpose

The company needs to be trying to develop a new or improved business component. These activities do not need to be successful endeavors. Whether you’re successful or unsuccessful, these activities may still qualify for pass this part of the test. As defined in the IRS regulations, the business components include:

Product
Process
Technique
Invention
Formula
Software

Part 2: Activities Technological in Nature

The activities must be technological and must involve hard sciences such as:

Engineering
Physics
Biology
Computer Science
Chemistry

Part 3: Elimination of Uncertainty

Qualified research activities must be performed to eliminate technical uncertainties. Even if the company knows the research project’s objectives can be achieved, expenditures can still qualify, provided there’s some uncertainty at the onset when the company is trying to develop a new or improved business component. However, there only needs to be uncertainty regarding one of three things:

Can they do it?
How would they do it?
The ultimate or appropriate design of what they are trying to develop.

Part 4: Process of Experimentation

The company must evaluate different alternatives when trying to develop the new or improved business component. Examples of this include:

Systematic trial and error
Modeling
Simulation

References:

1. Audit Techniques Guide: Credit for Increasing Research Activities (i.e., Research Tax Credit) IRC § 41* – Qualified Research Expenses

Does My Industry Qualify?

Answer: Companies of all sizes and industries can qualify for this tax credit.

Qualifying Activity Examples: Learn about the specific qualifying activities in your industry by clicking the links below:

View All Industries

1. Promotes Financial Savings

The credit can significantly reduce a company's tax liability, leading to substantial financial savings. This can free up cash flow that can be reinvested back into the business, fueling further innovation and growth.

2. Encourages Innovation

As an incentive for research and development activities, the credit encourages companies to pursue innovative projects. This can lead to the development of new products, services or processes that can give a company a competitive edge in the market.

3. Stimulates Job Creation

The R&D incentive can stimulate job creation. By reducing the cost of research and development, companies may be able to hire more researchers, engineers and other R&D personnel, contributing to economic growth.

4. Helps Mitigate Risk

The credit can help to offset the financial risk associated with innovative projects. Research and development often involve a degree of uncertainty, and the potential for tax relief can make these ventures more financially viable.

5. Attracts Investment

Companies that take advantage of the credit may be more attractive to investors. The potential for reduced tax liability can improve a company's financial outlook, making it a more appealing investment opportunity.

Do Start-Ups Qualify?

R&D incentives can be ideal for startups—particularly those of a technical nature, such as in the fields of computer science or pharmaceuticals. The credits can deliver a financial windfall to qualifying taxpayers, but the unique circumstances of startups entail challenges. As a result, it’s wise to engage a seasoned tax and engineering specialty firm.

Learn More

Does My State Have A Research and Development Tax Credit Program?

Learn more about which states have an R&D credit program with our the map below. Click your state to gather initial details on your state's available credits. Each state has a link to its .gov website for the tax credit program itself or the tax credits and incentives page. Keep in mind, these state credits are in-addition to the federal tax credit, which you may qualify for both.

How We Help You Get Your Tax Savings

What to expect when working with Engineered Tax Services.

See If You Qualify

Prepare Your Forms

Claim Your Tax Credit

Wondering what to expect when you work with Engineered Tax Services? Our mission is to simplify the complicated process of applying for and securing lucrative research and development credits, allowing you to focus on growing your business through continued innovation. While each client's situation is unique, we follow a general roadmap as detailed below:

Initial Consultation: You reach out to us, and we help ascertain your eligibility for Research credits based on the IRS’s four-part test.
Kick-off Call: We schedule a meeting involving all significant stakeholders. During this session, we assign a tax attorney or industry expert who will serve as your dedicated project manager throughout the entire process.
Documentation Collection: We request specific documentation that will be instrumental in calculating your tax credits and substantiating your claims in the event of an IRS audit. These documents will vary according to your specific circumstances and may include:
- Employee listings, their W2 box 1 wages and their work locations
- A rundown of projects/initiatives undertaken during the tax years
- Time tracking reports highlighting employee efforts
- Copies of project contracts/master agreements
- Records of expenses paid to consultants on an hourly/T&M basis
- Expenses related to computer rental/cloud services used in development
- An inventory of raw materials/supply costs utilized in development
- Copies of previous years’ tax returns
- Organizational charts, workflow documentation, product information, etc.
Data Review: We meticulously examine your records to pinpoint all Qualified Research Activities (QREs), which might encompass employee wages, supply costs and contract research expenses.
Data Analysis and Interviews: We carry out comprehensive data analysis and conduct technical interviews as necessary to gather further information.
Tax Credit Form Provision: We prepare and provide you and your CPA with the appropriate federal and/or state tax credit forms.
Final Report Delivery: We compile and send the final R&D report to both you and your CPA.

Our carefully designed and implemented process ensures you receive the tax savings you are entitled to while you continue to focus on the growth and success of your business.

Take the Next Step Towards Tax Savings Today

At Engineered Tax Services, we're committed to helping you unlock your potential tax savings. Don't miss out on the opportunity to enhance your company's financial standing through R&D incentives. Our team of experts is ready to guide you through this intricate process. Contact us

Getting an R&D Credit Analysis to see if you qualify is the first step!

eBook: The Architect's Guide to R&D Tax Credits

This comprehensive e-book is designed to help you recognize which of your activities qualify for R&D credits!

Whitepaper: R&D Tax Credits

How can R&D tax credits propel your business to the next level of success?

This comprehensive white paper explains how your company can be rewarded for innovation via a substantial tax break, but one that less than one-third of companies entitled to the credit know they’re eligible. With special chapters on R&D credits for startups and for software and gaming.

Testimonials: Our valued clients

“We work with Kimberly Lochridge and her expertise and work-product is top notch. They are our #1 resource for Cost Segregation Studies for all of our clients.”

“I wanted to thank you for the cost segregation and energy tax work you have done for several of the firm’s clients. The results have been very favorable and have resulted in significant tax benefits. You have a very talented team, and I look forward to working with you more in the future.”

I have worked with Engineered Tax Services for approximately two years and feel that they are the best in the business in terms of providing cost segregation and energy tax services.