THE GOVERNMENT CAN GIVE YOU A BREAK ON YOUR BUSINESS TAXES.
This article was written as a collaboration between David Fleischer of Business Resource Services (of South Burlington VT) and Bryan Ducharme of Venture 7 Advisors.
Wouldn’t it be great if federal and state governments invested in your business process improvement projects, or if they helped you bid on new jobs? Well, they can do just that!
The Research & Development Tax Credit covers a much broader range of activities than we imagine when we hear the term "R&D". You may be eligible to receive up to 20% of your investment in the form of federal and state R&D tax credits if your business invests in developing or improving new products, manufacturing processes, software efficiency projects and even the design/engineering you do while bidding on construction or engineering jobs.
Specifically, business activities that qualify for the tax credit include:
Developing or improving products or processes using specific know-how that is treated as a trade secret, or is patentable.
Developing a new or improved product that “advances the state of the art”, and requires one or more redesigns, simulations, mock-ups and/or experimental trials.
Attempting to develop a product or process improvement which was eventually abandoned. (A project does not have to be successful to be eligible.)
Costs incurred for any of the following:
Fees to consultants, subcontractors, contracted test labs
Development of software with the primary purpose to be sold, or internal use software for improving efficiencies.
Development of special purpose tooling.
Design and development of prototypes for clients.
Development of new equipment, new manufacturing techniques or processes.
IT’S NOT THAT HARD TO DO.
Many people believe you need to spend a lot of time documenting your product and process, and tracking your time to claim the tax credit. Not true! While there are requirements for documentation, there are specialized financial firms like Business Resources Services, which specialize in helping you calculate the credit, and prepare all supporting documentation to claim it.
THE BEST PART.
And the best part is that you can go back and claim the credit for the past 3 years of activity! Even if you can’t use the credits right away (e.g. you have Net Operating Loss (NOL) carry-forwards), they stay on your balance sheet for up to 20 years and provide tax shelter for future tax returns and even future owners.
The companies most likely to benefit from R&D tax credits have:
Gross sales generally greater than $2,000,000, or
Annual payroll generally greater than $700,000
Maximizing the value of your business involves minimizing your tax burden, and R&D tax credits can play a significant role in that process. Even if you’re preparing to sell your company, tax credits can strengthen your balance sheet and increase your business valuation.
About Business Resource Services
Business Resource Services is a team of financial specialists and engineers with expert knowledge of IRS regulations. BRS provides no cost R&D Tax Credit assessments and fixed-price fees to complete the studies that claim the credits. With over 25 years of experience, BRS's team has never had a claim denied by the IRS or any State Tax Agency. For more information, please visit their website, brsvt.com, or contact Dave Fleischer at 781-640-6610.
About Venture 7 Advisors
Venture 7 Advisors was built from the ground up to help business owners grow and successfully exit their companies. We think like business owners because we are business owners. We offer practical business advice here on our website, through public speaking engagements and through professional publishers such as CFO University. We encourage business owners to contact us for a free brainstorming session: no sales pitch, just business ideas and support from experienced business owners like you. Contact Venture 7 at 802-489-7700.