R&D Tax Credits

Tax consulting services for research and development tax credits

Does your company take advantage of research and development tax credits? Many of our clients in southern Virginia find the R&D tax credit a great way to be rewarded for spending money on qualified research activities. If your company is eligible, you can generally claim a 20 percent credit for related expenses above a base amount, including:

• Internal expenses for wages,
• Supplies used to conduct research, and
• A percentage of any contract costs.

Originally enacted in 1981 to stimulate research and development spending in the United States, the R&D tax credit of 2011 offers a powerful incentive: a dollar-for-dollar reduction in tax liability. The R&D tax credit is typically available for the current tax return and by amendment for all open tax returns (normally three prior years).

Eligibility for the research and development tax credit is dependent upon the documentation supporting the calculation of qualifying costs. This is where a formal research credit study by Wall, Einhorn & Chernitzer can be very beneficial. We have a proven process for calculating and documenting claims; and a proven track record of sustaining those claims should you be audited.

Our research and development tax credit studies focus on maximizing tax savings and increasing cash flows for businesses that spend money to invent or improve a product, or to improve a business process. A study consists of the following:

• Interviews of key management to determine qualifying projects
• Preparation of R&D tax credit questionnaire in order to scope the engagement
• Review of internal company documents and additional targeted interviews in order to quantify potential qualifying expenses.
• Preparation of report detailing qualified activities, expenses and calculation of anticipated federal tax benefits.
• Establish procedures and methodologies to capture and classify qualifying future research and experimentation expenses.

Companies conducting any of the following activities may qualify for the R&D tax credit:

• New or Innovative Products
• Unique Processes
• Design Engineering Staff
• Qualification Testing
• Patent Development
• Software Development
• PhD Research
• Improvement of Existing Products
• Prototype Work
• Environmental Design

Companies that develop new or improved products or processes, or make significant investments in the development of internal-use software, may be able to benefit from the research and development tax credit incentives. Companies in the following industries are likely candidates:

• Manufacturing
• Biotechnology
• Telecommunications
• Food Processing
• Software Development
• Construction

If your business has invested time, money and resources to the advance and improve products, services or processes, then you likely qualify for the Federal R&D Tax Credit Incentive Program.

New in 2012: The state of Virginia has authorized a limited fund for VA R&D tax credits to be awarded on a first come first served basis.