Research & Development Tax Credit
Is your process effective and efficient in maximizing and retaining your R&D benefit?
Get a Free Assessment
"TCC's audit-ready approach and innovative technology are above the pack." - SVP, Global Tax, Fortune 500 Technology
Documenting Qualified Research Expenses can be unified and streamlined across your entire organization. For large organizations, those increased efficiencies allow for a deeper, broader level of substantiation, greatly decreasing audit risk.
We plan for the end from the beginning by involving tax controversy attorneys at the start of each engagement. Joining them are CPA's, industry specialists and engineers. That multi-focused team approach ensures we understand and relate to each of the different roles participating in the study.
Experts at Every Stage. Our team will present risk analyses and alternative credit scenarios to ensure that you can make an informed decision based on your company’s risk tolerance.
Quantitative & Qualitative Approach. Our team will speak with your subject matter experts to calculate the R&D credit, and support the credit by preparing technical reports demonstrating qualification.
Our Proprietary Process. Our 30-step process is vetted to stay current with IRS requirements. Developed by a former Big 4 IRS controversy leader specializing in R&D tax credits, the design incorporates input from an external consulting firm of ex-IRS engineering territory managers.
What is the Large Entities Directive?
Released Sept 2017, this Directive allows a safe harbor for certain QREs (for R&D credit purposes) that can be traced back to R&D expense under ASC 730 (for financial statement purposes), such that, the IRS will not challenge such QREs (wages and supplies only) that are reconciled to the amount shown on the audited financial statements (after adjustments).
What are the benefits of the Large Entities Directive?
- Reduction in risk/increased credit retention
- Reduction in R&D credit reserve, leading to increase in earnings
- Reduction in time (and fees) spent in audit
- Reduction in time spent on fieldwork
What is the Small Entities Payroll Tax Offset?
While any company can use the R&D tax credit against federal income tax, for small businesses and startups, who may be in a loss position in their earlier years, they may have to wait several years before they are able to monetize their credit carryforward against federal income tax liability.
The PATH Act of 2015 set forth provisions to allow certain eligible small businesses and startups to utilize their Federal R&D tax credit against the employer’s portion of quarterly payroll tax subject to FICA. This allows for more immediate monetization of the credit than ever before.
What is the Eligibility for a Small Entities Payroll Tax Offset?
In order for a company to be eligible to use their R&D tax credit against payroll tax, the following two criteria BOTH must be met:
Entity must have less than $5 million in gross receipts for the credit year in which the credit is being claimed;
Entity can not have had ANY gross receipts prior to the 5-year period ending with (and inclusive of) the tax year in which the credit is being claimed.
When does the Offset to Payroll Tax occur?
The R&D tax credit claimed on the annual tax return offsets the payroll tax liability in the quarter following the quarter in which the annual tax return is filed.
The credit serves to reduce the payroll tax liability in that quarter, which would have otherwise been due.
Any credit amount in excess of quarterly payroll tax liability is carried forward to subsequent quarter(s).
TCC by the Numbers
24 Years 24 Years
in Business in Business
of the Fortune 500 of the Fortune 500
1 Billion+ 1 Billion+
Tax Credits Generated Tax Credits Generated