By Mark Sheffield, CPA, Principal
ASL Emerging Business Group
Historically many Silicon Valley start-ups have been unable to generate immediate benefit from the R&D credit because of having no taxable income. The law changed with 2016 tax returns. If you have qualifying research activities and expenditures in 2016, you can now use the credit to offset payroll taxes in 2017. This new and exciting benefit is for start-ups that have gross receipts for five years or less, and less than $5 million of gross receipts in 2016. (more…)
By Erika Diebert, Tax Senior
There is an opportunity for Qualified Small Businesses (QSBs) to utilize their unused federal 2016 R&D credits against their 2017 payroll tax liability (Employer portion of FICA). This was enacted as part of the PATH Act of 2015 but is just now becoming available starting with the income tax filings for the 2016 tax year.
The offset of payroll taxes will be available for R&D credits generated on the 2016 tax return from R&D expenses incurred in 2016. R&D credit carryovers from years prior to 2016 cannot be used. The maximum benefit allowed to be claimed in a tax year is $250,000. An election to use the credit against payroll taxes is made on an originally and timely filed (including extensions) Form 6765 by completing section D of the form. (more…)
It comes as no surprise that R&D credit has been retroactively extended for the 2014 tax year. According to sciencemag.org the credit has been extended 15 times and has undergone five major rewrites. It is likely to be extended again later this year to include 2015 and possibly future years. Due to the federal government’s budget process, making the R&D credit permanent has proved elusive. However, California has managed to make their R&D credit rules permanent.
Almost every prospect we meet is working on a technology idea that will have a significant impact on our daily lives. Most often we are asked if the R&D credit is available for the technology they are developing.