Manufacturing Payroll Tax Credits

A MISSED OPPORTUNITY... UNTIL NOW!

NEWS UPDATE 9/24/08 (The New York Times): The U.S. Senate has approved an extension to an expired R&D (research and development) tax credit sought by many tech vendors.

 "We need to use every tool available to encourage growth, investment and job creation in our economy. The research Credit is a significant element of President Bush’s tax plan - a plan I fully support and am committed to enacting as quickly as possible. The regulations issued by the Clinton Treasury on January 3, 2001 limited the value of the current Research Credit for those who have chosen to rely on it."

~ Treasury Secretary Paul O'Neil

If your company has invested time, money and resources to the advancement and improvement of your company’s product or processes, then you likely qualify for the Federal R&D Tax Credit Incentive Program. However, many firms are unaware of how or even what to qualify; thus, the opportunity goes unclaimed.

THE TAX CREDIT OPPORTUNITY

  • A hidden and immediate source of cash for many small and mid-size companies;

  • A significant reduction to current and future year’s federal and state tax liabilities;

  • Over $5 Billion in federal R&D tax credit benefits are given out annually;

  • Approximately 80% of the $5 Billion goes to a few of the nation's largest companies;

  • Every successful company is potentially eligible for an R&D tax credit of some amount many companies are unaware their day-to-day operations can qualify for the R&D Credit;

  • The 20% research tax credit is not a deduction. It is an actual dollar-for-dollar credit against taxes owed or taxes paid. Plus the taxpayer may be able to expense all such costs in the year incurred;

  • A business can take the credit for all open tax years - generally the last three, or four years plus the current year;

  • Additional years may be available if taxpayer is in a net operating loss or alternative minimum tax position;

  • Tax credits may carry forward 20 years;
Why Should My Business Conduct An R&D Study Now? The U.S. offers some of the world’s richest R&D tax incentives, but chances are you’re not taking advantage of them and getting the cash you deserve. As the pace of your business accelerates and competition increases, you may be more likely to overlook this source of cash because you lack the time, resources or expertise needed to identify and manage R&D tax credit claims.

Prior to December 2001, the requirements necessary to qualify for the R&D tax credit were rather difficult to obtain. However, in December 2001, the Bush administration issued IRS regulations which made it significantly easier to qualify for the R&D Tax Credit.

The new regulations are in harmony with the intent of Congress and are much more taxpayer friendly. They reflect a profound change in the position of the IRS. The new regulations make it:
  1. Easier for a broader array of companies to qualify their activities as R&D
  2. They provide greater flexibility in certain record keeping requirements
  3. They significantly expand the definition of internal-use software characteristics
What Qualifies as R&D? Many taxpayers tend to regard “R&D” as an activity associated solely with high-tech, biotech and pharmaceutical type companies. We have found many of our clients tend to regard their own efforts to make new, lighter, stronger, less expensive, more reliable products, or to make more precise, more economical and more versatile processes as “just doing my job,” when in fact they have been performing R&D qualifying activities all along.

If your Company is involved in any of the following activities, you may be able to claim the R&D tax credit:
  • Manufacture products
  • Developing new, improved, or more reliable products / processes / formulas
  • Developing prototypes or models (including computer generated models)
  • Designing tools, jigs, molds, and dies
  • Developing or apply for patents
  • Certification testing
  • Applying for patents
  • Testing new concepts
  • Development of new technology
  • Trying new materials
  • Adding new equipment
  • Environmental testing
  • Developing or improving production / manufacturing processes
  • Developing, implementing or upgrading systems and / or software
  • Developing production control software
  • Improving or building new manufacturing facilities
  • Automate internal processes
  • Paying outside consultants / contractors to do any of the above stated activities
 

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