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R&D Tax Credit Documentation Services |
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Contact Us |
The R&D Tax Credit is one of the most significant tax incentives available to taxpayers. The benefits of this credit are numerous:
- The R&D Tax Credit is not an income tax deduction-it is a bottom-line, dollar-for-dollar credit against income tax due. The credit can result in a significant reduction of current federal and state tax liabilities and can potentially result in a cash refund.
- Businesses can claim R&D Tax Credits for all open tax years. For companies that are in a net operating loss (NOL) position, R&D Tax Credits are potentially available for additional years.
- The R&D Tax Credit is not a “use it or lose it” credit. Federal R&D Tax Credits can be carried forward for 20 years. Certain state credits have no expiration and can be carried forward indefinitely.
- Companies that claim the R&D Tax Credit see immediate earnings-per-share (EPS) and overall effective tax rate benefits.
Generating required support documentation for the R&D Tax Credit is a time-consuming activity that can potentially overwhelm internal company resources. Because of this, corporate tax departments often explore two primary options for documentation assistance outside of the tax department:
- An external R&D credit study (usually conducted by one of the “Big 4” national accounting firms).
- An internal questionnaire approach that shifts the burden of directly documenting R&D activities to the Engineering organization.
PTCS provides an outsourcing option that is an alternative to the approaches described above. Since our overhead costs are minimal, we are able to provide professional R&D Tax Credit documentation services at a fraction of the average “Big 4” rate for similar services. Our approach also minimizes the disruption of your Engineering organization. Engineering personnel will always be involved in any R&D credit study—their involvement is a necessity since it is their activity that must be documented. The key is to find an approach that minimizes the impact on Engineering while maximizing the credits that can be claimed.
Our Approach
Claiming R&D Tax Credits is not without risks and the credit has recently been elevated to a “Tier 1” issue by the IRS. Because of the IRS's increased focus, it is critical that companies choose an R&D Tax Credit service provider with a proven process for calculating and documenting claims — and a proven track record of sustaining those claims upon audit.
The PTCS approach to gathering and compiling R&D Tax Credit documentation is a systematic process that focuses on identifying and interviewing the appropriate personnel within a client's organization. Information gathered during these interviews becomes the foundation for the written narratives that are generated for the purpose of documenting qualified R&D departments, activities and projects. Our approach also relies on intelligent utilization of pre-existing internal (contemporaneous) documentation to support claims that credit-worthy activities have occurred within a given company. We can help identify internal reports that will have the maximum positive impact in supporting credits claimed. This cost-saving approach allows our clients to save time and money documenting R&D credits by taking advantage of reports that have already been generated for other business purposes.
While each engagement is unique, the typical “flow” for an R&D Tax Credit project includes the following steps:
Our team thoroughly reviews each client's organizational structure prior to beginning the R&D Tax Credit documentation process. A roadmap is generated which identifies the key contacts within the organization who will be interviewed as part of the documentation process.
Payroll and G/L (expense) data is formatted into custom reports to be utilized during the data collection process. These reports (once populated with data) will ultimately become the support for a tax credit calculation. Concurrent with this process, we identify existing reports and other contemporaneous documentation that can be utilized to directly support R&D Tax Credit claims.
A company-specific tax credit presentation is prepared for Engineering Management personnel detailing the benefits of the R&D Tax Credit and providing background regarding the Regulatory foundation of the credit.
PTCS personnel meet with key individuals within the organization gathering support data for the R&D credit calculation. Detailed, technically accurate written narratives are generated for all pertinent departments describing the nature of R&D projects undertaken.
All R&D Tax Credit support documentation is organized into custom binders along with a detailed summary of the data collection methodology utilized by PTCS. The final deliverable is presented in a format that is 100% audit-ready and can be handed over to an exam team upon request.
Contact Professional Tax Contracting Services’ principal Eric Bates to discuss how your business can benefit from federal and state R&D Tax Credits.