Business Tax Strategy
Tax · R&D Credit
The R&D Tax Credit —
Most Companies Qualify. Most Never Claim It.
When people hear "research and development" they picture lab coats. The tax code does not. If your team is solving technical problems, improving how something gets made, or building anything that did not exist before, you may already be doing the work the Research and Development Tax Credit was written for. Most owners walk right past it because nobody ever told them it applied to them.
A credit, not a deduction
A deduction lowers the income you are taxed on. A credit lowers the tax itself. That makes a dollar of R&D credit worth several times a dollar of deduction, and unused credits can generally be carried forward.
The four-part test, in plain English
The IRS uses a four-part test. Strip out the legal wording and it comes down to four questions about a project:
Was it allowed to be a business expense?
The work has to be a normal, deductible cost of doing business. Wages, supplies, and money paid to outside contractors all count.
Were you trying to make something better?
A new product, a new process, a better formula, a faster line, a piece of software. Better for your company counts. It does not have to be new to the world.
Was there something you did not know at the start?
If you knew exactly how it would turn out, it is not research. If you had to figure it out, it is.
Did you experiment to get there?
Trying options, testing, modeling, scrapping a version and rebuilding it. The trail of failed attempts is the evidence, not a problem.
Businesses that qualify and do not think they do
Manufacturers and job shops
Every time you re-tool a line, cut cycle time, hold a tighter tolerance, or bring a prototype to production, you are doing the work the credit covers.
Software and technology firms
New features, new architecture, integrations that nobody had a manual for. Internal-use software has extra rules but is not automatically out.
Engineering, architecture and design firms
Design work that solves an unknown, not design work that repeats last year's drawing.
Food, beverage and consumer product companies
Reformulating a recipe, extending shelf life, changing a package so it survives shipping.
Contractors and fabricators
Custom builds where the method had to be worked out on the job rather than pulled off a shelf.
The part everybody gets wrong
This credit lives and dies on documentation. Time records, project notes, emails showing the problem and the attempts, and a written study tying the wages to the work. A claim built on a guess is the kind the IRS pulls apart. A claim built on a proper study holds up. There are also newer payroll-offset rules that let some smaller and younger companies use the credit even before they are profitable, which is worth asking about.
We work alongside the people you already pay
We are not here to replace anybody. Most of this work runs through partnerships with the firms already touching your payroll and your return: payroll processors, PEOs, health benefits brokers, CPAs and tax strategists. Your payroll company keeps running payroll. Your CPA keeps filing. We handle the piece in the middle that neither one is paid to go find.
If you are one of those firms, the same door works the other way. We bring your clients a savings conversation you do not have to staff, and you stay in the loop the whole way.
See who we partner withFind out in one conversation
Tell us what your team built or improved in the last three years. We will tell you whether there is a credit worth studying, and we will tell you if there is not.
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Sources
Educational content only. Always consult a licensed CPA before implementing.