What you need to know about the R&D Tax Credit and eliminating payroll taxes
Startups are looking inward at budget and savings more than ever before. One of the fastest ways a Startup can optimize their savings is with R&D Tax Credits.
A dollar saved in expense is greater than a dollar earned in revenue.
The #1 government funded Startup program since 2016
Startup companies may now use credits to offset their employer FICA payroll taxes (6.2% of payroll) regardless of profitability.
Eligible startup companies are defined as those in business 5 years or less and with less than $5 million in gross receipts for the claim year, and may claim up to $250,000 annually.
For example, a Startup with $500,000 in engineering salaries pays $31,500 in FICA payroll taxes. By leveraging up to $50,000 in R&D credits, they can eliminate their payroll taxes completely!
Use our calculator for a glimpse of what you could be saving in seconds.
Up to 10% ROI for 2019 technical expenses
This means that for that for every dollar your Startup spent on technical development on W-2 employee wages, US contractors, and potentially supplies and cloud-computing costs in 2019,you can capture an ROI of up to 10% in the form of a credit that is applied to your upcoming 2020 employer FICA payroll tax liabilities.
When to claim
Its good practice to start planning for claiming the credit as soon as you wrap up year-end financials (i.e. as early as January every year).
Even if you are applying for COVID relief programs right now, it is important to calculate and include the credit on your 2019 Corporate Tax Return.
That way even if relief is denied, or if accepted and relief period ends, you’re equipped with additional savings to continue the payroll tax reduction.
It’s important to note that if you do not include credits on your originally filed return because if you don’t you will not be able to go back and claim for future payroll offset and must wait until next year to claim 2020 expenses.
Timely filing is now extended from 4/15 to 7/15, and extension filing is 9/15 for LLCs or 10/15 for C-Corps.
When to expect benefits
Once you’ve synced up with a specialist to document your qualified activities to meet the incentive’s requirements and calculate your credits, it’s a quick three-step process:
Provide your accountant with Form 6765 for inclusion in your 2019 Tax Return
Provide Form 8974 to your payroll provider – most popular payroll providers like Gusto* and PEOs like TriNet, Justworks, etc. know what to do!
Typical benefits come the quarter after in which you file and continue to reduce taxes each quarter until credits are exhausted
*Gusto now has an option to get your relief as soon as every pay period once you bring your credits to them!
How to get started
Compile your 2019 W-2s and technical related expenses and call TaxTaker!
We offer free estimates and never bill until we successfully deliver your benefits . Our typical client commitment is under 2 hours and turnaround is within days of our team receiving necessary data., seriously!
TaxTaker helps startups save money with R&D Tax Credits. Our automated software and expert support equips accountants and startups with the solution they need to swiftly and securely capture their benefits.