Is the R&D Tax Credit something new?
No, the R&D Tax Credit has been available since 1981. However, because it is a specialty area within the tax code that is very complex, many companies have never taken advantage of this lucrative tax credit, even though they qualify. The good news is that in the past few years, there has been significant clarification to the R&D tax code that establishes a more lenient interpretation of what qualifies.
How will this affect my existing relationship with my tax advisor/CPA?
The relationship with your existing tax advisor/ CPA should not be affected. The R&D Tax Credit is a highly specialized area. Black Line Group’s R&D tax specialists work in this one area and this one area alone. That is another way of saying that Black Line Group works with your current tax/CPA firm. It is similar to the relationship of a primary care physician and a specialist. While your current tax advisor is fully capable, they are not likely specialists in the R&D Tax Credit area. The Black Line Group R&D specialist is willing to coordinate the delivery of the R&D study with your tax/CPA firm. We are not in competition and are not looking to replace any existing relationship. Black Line Group just wants to maximize your R&D tax credits.
How long before I realize the cash benefit from this study?
It typically takes three months to receive the credit after the forms are filed. However, you may realize a cash benefit even sooner if the R&D Tax Credit reduces a tax balance currently due (i.e. estimated tax payments).
What does the Black Line Group R&D study cost?
Black Line Group charges on a time and materials basis. On average, a typical engagement can take between 40 and 150 hours, depending on how many years are included in the scope of the project. Black Line Group will be happy to discuss pricing to provide you with enough information to make the best decision for your business.
What is the time commitment from my team?
A typical R&D tax study takes 10-15 hours of your team’s time. The exact amount depends on your company’s structure and the amount of R&D spending your company is currently doing. Usually members of the finance and engineering/R&D personnel should anticipate spending some time with our consultant.
What disadvantages are there if I postpone the R&D study to a later date?
Since the R&D Tax Credit is available for the current year and the three prior years, there is a chance that postponing the study to a later date may result in lost credits from the earliest year. These credits are lost forever!
If I am not developing new products for the marketplace, do I still have any R&D?
Yes, you may qualify for the R&D credit without developing new products. Products and process enhancements/improvements may also qualify. Below is a list of activities that may qualify for the R&D Tax Credit:
- Developing new or improving existing production/manufacturing processes
- Developing formulations – drugs, food or chemicals
- Assisting customers with design or development
- Designing or customizing equipment used in the production process
- Developing or applying for patents
- Designing tools, prototypes, molds or dies.
Spending is down over prior years. Can I still have a credit?
Yes, you may qualify for the credit without increasing R&D spending year after year.