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Research Credit Benefits for Small Businesses

Industries: Technology

Research Credit Benefits for SmallBusinesses

The Federal Research and Development ("R&D") Tax Credit is now permanent. Click here for our client alert. TheR&D Tax Credit can be used to offset the alternative minimum tax or up to$250,000 of the 6.2% federal payroll tax imposed on the employer's wagepayments to employees if your company meetscertain requirements, and maintains appropriate documentation of the qualifyingR&D expenditures.

For the payroll tax reduction, the company must have gross receipts less than $5million in the current year, and no gross receipts before the five tax yearsending with the tax year of the election. Lastly, to use the R&D Tax Creditagainst The Federal Insurance Contributions Act ("FICA") Payroll Tax, yourcompany must have employees and related payroll. To obtain faster refunds, youshould file your income tax return as soon as possible, meaning you may want tofile before the original tax return due date without requesting an extension oftime to file it. Some income tax return due dates for businesses have changed.Income tax returns for C corporations are now due April 15th, whilepartnership and S corporation tax returns are due March 15th.

If your company is larger and does not meet these thresholds, the R&D TaxCredit can reduce your federal alternative minimum tax liability if your grossreceipts have averaged less than $50 million for the three preceding tax years.

If your company is too large for either of these options, the credit is limited tofederal taxable income and the unused portion can be carried back one year orforward 20 years. 

Please contact me if we can help.


BrooksMalone, Partner

TechnologyPractice Leader

HughesPittman & Gupton, LLP