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R&D Tax Credits for the Plastics Industry

If you’re affiliated with a plastics and injection molding company, your industry is an ideal candidate for R&D tax credits, but you might be unaware of it. R&D tax credits are federal and state tax incentives meant to stimulate innovation, technical design, and product development and enhancement and keep the U.S. on the forefront of innovation. These tax credits reimburse companies that develop new products, processes, or inventions and offer a significant percentage back to the company for qualified research activities and qualified research expenses.

A Hidden But Immediate Source of Cash

The R&D tax credit allows companies to realize tax savings, increase cash flow, and stay competitive in the marketplace. In fact, many qualifying activities are considered day-to-day operations in the plastics and injection molding industry. 

If you’re in the plastics industry, the R&D tax credit can provide a hidden but immediate source of cash for you from prior years, and it can significantly reduce your current and future year’s federal and state tax liabilities.

The Four-Part Test

How do you know if you qualify for R&D tax credits? Just take this simple four-part test established by the IRS… Click Here To See If You Pass

What Activities Qualify for an R&D Tax Credit?

The following are qualified research activities for the plastics industry:

  • Design and development of new or improved molds;
  • Developing new or improved injection systems;
  • Designing, constructing, and testing of prototype molds;
  • Designing new compounds or formulations;
  • Developing new applications for existing compounds;
  • Development of new testing methods and protocols;
  • Implementing automation processes or robotics;
  • Innovative product development using computer-aided design tools;
  • Designing innovative manufacturing equipment;
  • Integrating new materials to improve product performance and manufacturing processes;
  • Designing and evaluating process alternatives;
  • Streamlining manufacturing processes through automation;
  • Increasing manufacturing capabilities and production capacities

Common Misconceptions

Another misconception is you must be a C-Corp to qualify, and this isn’t the case.  Any type of entity can qualify, whether a C-Corp, S-Corp, or LLC.  If your business is a flow-through, then the R&D tax credit flows through to the shareholders/members.

Additionally, many believe you must be paying tax to claim the credit. You can claim the credit even if your business is in a loss, since you can carry forward the credit for up to 20 years; and via the CARES Act, you can now carry back the credit for five years. Of course, it may not make sense to claim a credit you can’t use, but if your business is going to be in a taxpaying situation in the near future, it may make sense to claim the credit, and then use it to offset future tax.

Get Qualified Today

Less than one-third of companies eligible for the credit even know it exists, so two-thirds are losing out. Is yours one of them? You can plow your substantial tax savings back into your business, so that you can undertake even more research and win additional R&D tax credits! 

Last year, the IRS made its reporting and record-keeping requirements for R&D tax credits much, much stricter and complex. As a result, it’s to your benefit to only rely on a specialized company with both engineering and accounting capabilities that can undertake a full-fledged technical study. 

As a licensed engineering firm backed by accountants that focuses on federal, state, and local tax benefits, Engineered Tax Services is an expert at R&D tax credit studies. Over the past 20 years, we’ve saved clients many, many millions of dollars. Contact us today for your free R&D tax credit analysis.

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

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