4 Items for Your R&D Eligibility Checklist
Foregone Opportunities
The Research and Development (R&D) Tax Incentive was originally established in 1981 as a manner of encouraging businesses to seek innovation by creating new products and technologies or improving upon their existing products and processes.
Each year billions of dollars are claimed, offsetting the liabilities of investing in such research. However, many companies are foregoing the billions remaining in the budget due to a lack of knowledge regarding the tax incentive eligibility.
The majority of these companies are small and mid-sized businesses who may realistically need funds from their tax returns to maintain functionality.
Four Items for your R&D Checklist
Refer to the items below when considering your R&D eligibility.
1. Innovation
If you are revamping your product line, innovating your production capabilities, inventing new market technology or developing internal software you may be eligible for the R&D tax return.
Innovation is key as the information your R&D activities produce must be novel.
2. Uncertainty & Risk
Before initiating the R&D project there must be a question to which, at your current knowledge of the technology, you have no answer or no clear answer. You may have a hypothesis.
The uncertainty and risk involved in the research and development further proves the first point, that your development is indeed producing new knowledge.
3. Qualifying Research Activities (QRAs)
QRAs are the documented evidence of your research and development tasks.This can include anything from the plan writing involved in developing a novel product specific production line to the clinical testing involved in inventing an entirely new technology to detect disease.
Documenting these activities is necessary to substantiate the last item on our checklist.
4. Qualifying Research Expenses (QREs)
QREs go hand in hand with QRAs; these are the documented expenses tied to your research and development activities. Expenses are the labor directly associated with the development or management of development and supplies used during development.
Supporting Innovation
While your company may not be inventing the cure for aging, you may now have determined that the small anti-stick technology you developed for your caramel apple production line qualifies for the R&D Tax return.
If you would like to discuss your eligibility for the R&D Tax Incentive further, please do not hesitate to contact one of Swanson Reed’s offices today.
