As the global lockdown continues to hold, businesses have to grapple with uncertainty and accept the reality of the situation. The impact of Coronavirus, after all, is impacting the business community the most. Amidst this crisis, companies are evaluating their business and making changes to survive.
To get the right support, maintain regular operational activities, capitalize on growth opportunities, and receive short-term funds; many firms are turning towards R&D tax credits. It allows companies to take advantage of tax credits to offset their current tax liability or offset taxes paid in prior years.
We have seen a wonderful transition throughout the country of companies developing new processes and ways to create hand sanitizer, masks, and medical devices to sell or creating new e-commerce capabilities to allow their teams to work remotely throughout the Corona Pandemic
While the changes made may not be new to the industry, to qualify for R&D Tax Credits, the new products and processes only need to be significant and new to the Company. If we follow the Four-Part Test below, the technical changes of making/designing new masks, changing a distillery or brewery into a hand sanitizing operation, or any of the other amazing tasks, can qualify.
This credit then can take the Wages, Supplies, and 3rd Party Contractors costs used during development, which results to about 6-8% back on your federal income tax.