Potential Business Tax Goldmine You May Be MissingLinda Jenkins, January 24 2015
Is your company involved in an innovative process? You could be missing out on huge tax savings if you are not taking advantage of the Research and Development Credit.
The Research and Development Credit can save money in two distinct ways:
1. There is a direct deduction for research and development expenditures
2. There is a dollar for dollar credit against your income taxes
Tax payers often miss this credit because they feel their business activities would not qualify. It seems obvious that if you are doing Cancer research or other scientific endeavors, you would qualify; however, there are many general business activities that would also qualify. For example, improving a manufacturing process or inventing a new product, process, technique, formula or computer software. Clearly, this has implications for businesses both large and small.
The credit itself is a somewhat complicated computation; however, generally speaking, the credit equals approximately 20% of expenditures.
According to James Jenkins, CPA, this tax credit seems to be the most overlooked among the small business community. He has had several instances where clients qualified for the credit, but their former CPAs were unaware that they qualified. It is not unusual to see clients saving thousands of dollars in taxes.
Unfortunately, most CPAs, have a very narrow definition of the credit. The reality is that the definition of qualified research is in fact very broad.
For further information, contact the Certified Public Accountants at Jenkins & Company.