Research & Development (R&D)

The R&D Tax Credit is a federal tax incentive designed to promote innovation and improve business operations.   The incentive allows businesses of all sizes, not just major corporations, to receive a tax credit for qualified expenses incurred for research and development.  To date, Kutchins, Robbins & Diamond has helped our clients receive over $2.2 Million dollars in tax credits.  Unfortunately, many companies miss out on this credit because they don’t know they qualify.  The IRS estimates that only 10% of the companies that qualify take advantage of this cash incentive.

Who Qualifies? 

Companies that have invested time, money and resources to design, develop, or improve products, processes, techniques, formulas, inventions, or software may be eligible.  The term product also includes: patent, pilot model, and similar property. Although not all inclusive, the list below provides some examples of qualifying activities:

  • developing or designing a new product
  • develop, implement or upgrade software or systems
  • research and testing new materials
  • designing and evaluating alternatives
  • improve processes or reduce waste
  • product modifications
  • related engineering activity
  • develop prototypes or models
  • systems and integration analysis
  • experimentation and development
  • associated consultation expenses
  • attorney’s fees expended in making and perfecting a patent application

What are the Benefits?

The benefits of the R&D tax credit include current tax incentives, increased cash flow and a lower tax obligation for companies conducting R&D in the U.S.  The credit at the federal level is substantial and may be enhanced through state initiatives (available in many states) based on the business operation’s location. And more recently the R&D tax credit regulations allow eligible taxpayers to “look back” to all open tax years (typically three years plus the current year) for potential R&D credits that were never claimed. More than $5 billion in federal R&D tax credit benefits are given out annually.

KRD Services and our R&D Tax Credit Partners

With over 20 years of accounting and business advisory experience, KRD’s tax professionals, together with the outside consulting professionals that we trust and who specialize in R&D Tax Credit incentives, take part in assisting businesses prepare the proper documentation.

As with all of our services, we take a proactive approach to calculating your tax credit.  We work with our clients throughout the year (rather than after year end) to document transactions that create the basis for your credit claims. Specifically, we review the projects and activities and qualify them on a monthly or quarterly basis. We help select the most tax efficient method that results in the highest claim for your business.  Additionally, we prepare the supporting documentation that is required to sustain the R&D tax credit under audit, if selected.

These partnerships benefit our clients in important ways; decades of experience, including countless and continual IRS defenses that keep us up-to-date on new or evolving issues, company consultation savings, and user friendly and efficient software development that provides essential documentation to verify the tax credit and stand up against an audit.

R&D Tax Credit Audit Defense

The R&D tax credit is highly scrutinized by the IRS and requires a qualified professional team that not only prepares high-level detailed documentation properly, but also is available to defend the credit during an IRS audit.

Through KRD’s partnership with our outside consultants, any R&D credit asserted will be subject to complete off-site audit defense provided by their engineers and specialists at the federal and state levels at no charge. Their experts, along with our R&D tax experts, are knowledgeable regarding the current laws and regulations being utilized in assessing taxpayer claims for the R&D Credit.

How to Get Started

When considering the combined federal and state tax credits that are available, it is beneficial for any company that believes that it may qualify for such benefits to contact our firm.  A complimentary preliminary analysis of your business operations and projects can give you an idea of how the R&D Tax Credit can benefit your company.  For additional information, please contact Allen Kutchins directly at 847-278-4335 or akutchins@krdcpas.com