Posts Tagged ‘Research and Development Credit’

Congress Gives Taxpayers An Early Christmas Present

Monday, December 21st, 2015

PATH Act Makes Several Key Tax Provisions Permanent

PATH Act Makes Several Key Tax Provisions Permanent | Rea & Associates | Ohio CPA Firm

Congress finally made good on its promise to make take a more definitive stance on the future of many popular tax provisions last week when members voted in favor of making many of them permanent. Other tax provisions received a temporary extension. Read on to learn more.

There is nothing like waiting until the last minute to complete a task. We’ve all been there and we all promise we’ll never do it again. Unfortunately (especially when it comes to determining the future of several valuable tax provisions) our government has fallen victim to the same bad habit.

Year after year, Congress promises to address the future of many expired tax provisions, and year after year they fail to make a definitive decision – opting only to pass legislation that extends the provisions for another year. In the meantime, taxpayers are expected to take on the impossible task of navigating the terrain amidst legislative uncertainty. Happily, things are about to change.

Listen To Our Podcast Taxes Are Like Fishing To Learn More About Tax Strategy

Congress finally made good on its promise to make take a more definitive stance on the future of many popular tax provisions last week when members voted in favor of making many of them permanent. Other tax provisions received a temporary extension. The legislation, Protecting Americans From Tax Hikes Act of 2015 (PATH Act), is retroactive to Jan. 1, 2015, and provides taxpayers a level of certainty that they have been without for quite some time.

This legislation offers a lot of relief to individuals and businesses, alike. Here’s an overview of what you can expect moving forward.

Key Tax Provisions Made Permanent By The PATH Act:

  • 15-year recovery period for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements
  • Extension and modification of the research & development credit, including allowing certain small businesses to claim the credit against AMT liability and employer’s payroll (ie: FICA) liability
  • 179 expensing limitations and phase out increased to $500,000 and $2 million respectively
  • Exclusion of 100 percent of gain on certain small business stock
  • Extension of tax-free distributions from IRAs for charitable purposes
  • Earned income tax credit
  • Child tax credit

Key Provisions Extended Through 2019

  • Extension of the new markets tax credit in which Congress authorized $3.5 billion allocation of credits each year from 2015 until 2019
  • Extension and expansion of the work opportunity tax credit
  • Bonus depreciation is extended at 50 percent for 2015 through 2017, 40 percent for 2018, and 30 percent for 2019

Key Provisions Extended Through 2016

  • Extension and expansion of empowerment zone tax incentives
  • Two-year moratorium on the 2.3 percent medical excise tax imposed on the sale of medical devices
  • Extension of energy efficient commercial buildings deduction

In addition to the extension of key tax provisions, the PATH act also puts more scrutiny on the operations of the IRS. IRS agents will be held accountable for knowing and acting in accordance with the taxpayer bill of rights and prohibits the use of IRS business for political gain.

The passage of the PATH act is a huge victory for American taxpayers, and will allow them to partner more efficiently and effectively with their tax advisors on key issues in years to come without the uncertainty that has plagued them for many years.

Be sure to set up an appointment to speak with your tax advisor or financial planner to talk about how the PATH act will impact your ability to take advantage of tax planning strategies. Do you have questions about specific aspects of the PATH act? Fill out the form on the top, right side of this page to submit your question to Dear Drebit.

By Christopher Axene, CPA (Dublin office)

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Research & Development Credit Benefits Businesses Of All Sizes

Tuesday, April 14th, 2015
Plan For The Future - Rea & Associates - Ohio CPA Firm

While the 2014 tax season is now over, it’s never too early to start strategizing to secure future tax savings. For example, have you thought about improving your current processes to become more efficient? Believe it or not, taking steps to make your company “lean” may be just what you need to qualify for future tax savings.

If you own a small-to-midsize company, you probably haven’t given much thought to how the Research & Development (R&D) tax credit could help you. You might even think that the R&D credit is reserved for big businesses with tons of money to spare on technological investments. If so, then you may want to change your thought process and your business strategy.

Planning ahead is a great way to save your company’s tax dollars and there are many successful strategies from which to choose.
Click here to find out if you should be making a big purchase for your company that will help cut your tax bill.

The R&D tax credit applies to more than just businesses that have research facilities. In fact, many businesses across a range of industries may qualify for this valuable credit, but instead of asking their financial advisor for guidance, they give in to the misconception that they are not “big enough” or that they have not “big enough investments in technology.”

I recommend you avoid this mindset at all costs.

Plan For The Future

While the 2014 tax season is now over, it’s never too early to start strategizing to secure future tax savings. For example, have you thought about improving your current processes to become more efficient? Believe it or not, taking steps to make your company “lean” may be just what you need to qualify for future tax savings.

Are you familiar with Lean Six Sigma and how it can help you improve efficiency and effectiveness?
Read: Can You Explain The Concept Of Waste In Lean Six Sigma? to learn more.

According to consulting firm Smart Devine, in order to qualify for the R&D credit, your company must engage in an activity or initiative that:

  • Is technological in nature – Meaning it must rely on at least one of the following: physical sciences, biological sciences, computer science and engineering.
  • Is being conducted for a permitted purpose – Meaning that it must be intended to improve functionality, performance, reliability and quality.
  • Involves the elimination of uncertainty – Meaning the activity must be intended to identify information required to eliminate technical uncertainty.
  • Involves an experimentation process – Meaning that there must be some elements of experimentation, such as trial and error testing, prototyping, development and analysis of hypothesis.

The expenses that will be used to calculate the credit include your wages for research, supplies and contract research expenses.

Still Not Sure?

OK, so maybe you haven’t committed to an extensive lean-oriented strategy yet. That’s alright. There are many ways to qualify for this credit. Start by asking yourself the following four questions:

  1. Are you constantly developing new products or altering old products for new uses?
  2. Have you had a lean event to try and increase the productivity of a manufacturing facility, a single manufacturing line, or even a specific machine?
  3. Have you developed internal software because you couldn’t find one that met your needs on the market?
  4. Do you constantly develop prototypes to make sure your machines can produce a product that meets customer specifications?

If you answered yes to any one of these scenarios, chances are good that you will qualify for the credit.

Next Steps

If you do indeed qualify to receive the R&D credit, make an extra effort to maintain adequate records to substantiate the credit. This may seem daunting, but you are probably gathering the necessary information already. You probably just need to filter or tweak what you are already doing.

Email Rea & Associates to learn more about the Research & Development Credit and how to identify expenses that could qualify while promoting your company’s overall growth and sustainability. You may also be eligible to claim the R&D credit retroactively, contact us to learn more.

By Ben Froese, CPA (Wooster office)

 

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Are Research and Development Tax Credits Dead?

Friday, August 27th, 2010

Although R & D tax credits expired at the end of last year, Congress has made a few attempts to continue them by passing an extenders bill. So far, those attempts have not been successful, but most tax experts believe R&D credit will be passed and that Congress will make the tax breaks available for 2010.

Click here to learn more about R&D credits and how they can help your business.

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