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How Do I Claim The R&D Tax Credit


Several factors go into claiming the credit, but the potential savings make it worth exploring the credit. Since the credit may be claimed for both current and prior tax years, companies can benefit from documenting their R&D activities to ensure they are positioned to claim the credit in both situations.

To claim the credit, the taxpayer must contemporaneously evaluate and document their research activities to establish the amount of qualified research expenses paid for each qualified research activity. While taxpayers may estimate some research expenses, they must have a factual basis for the assumptions used to create the estimates.

Examples of such documentation includes:

  • Payroll Records
  • General Ledger Expense Details
  • Project Lists
  • Project Notes
  • Other documents a comoany produces throughout the regular course of business

These records combined with credible employee testimony can form the basis of a R&D Tax Credit claim –our team can help identify and gather this information to substantiate your claim, ensuring you are receiving the full value you are entitled under relevant IRS guidelines and Treasury regulations.


Tax Filing Information

  • 1. To offset income taxes, businesses have the flexibility to amend all open tax years (typically, the last 3 years from the tax year).

  • 2. To offset Social Security taxes, the R&D tax credits must be specified and elected by a qualified small business with its timely filed (including extensions) income tax return for the taxable year to which the election applies. You can then begin offsetting your Social Security taxes for the calendar quarter that begins after you file your income tax return with the payroll tax credit election.

  • 3. The deadline for C Corps with a December fiscal year is on or before April 15. The deadline for C Corps with fiscal year ends other than December (except June) is on or before the 15th day of the fourth month following the end of the fiscal year. The deadline for C Corps with fiscal years ending on June 30 is on or before September 15.

  • 4. The deadline for S Corps with a December fiscal year is on or before March 15. The deadline for S Corps with fiscal year ends other than December is on or before the 15th day of the 3rd month following the end of the tax year.

  • 5. Six-month extensions are available for both C Corps (7 months for C Corps with a June fiscal year) and S Corps.

  • 6. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is the next working day.

  • 7. Can a tax return be amended to offset Social Security taxes if the election was not made on an original income tax return as filed?

  •   a. A qualified small business must elect to utilize R&D credits to offset Social Security taxes on or before the due date of its timely filed income tax return, including extensions.

  • 8. Can the R&D tax credits be used to offset Social Security taxes relating to all employees or only that portion which relates to R&D employees?
  •   a. It can be used to offset the employer’s portion of Social Security taxes for all employees, not just the R&D employees.

  • 9. How and when do I see the benefits of the Social Security tax offset?

  •   a. You can start offsetting Social Security taxes for the calendar quarter that begins after you file your income tax return containing the R&D tax credit form with the payroll tax credit election.

  •   b. Businesses are required to pay 6.2% of each employee’s salary up to $137,700 as Social Security tax. This is reported once a quarter on Form 941 – Q1’s Social Security taxes are reported in April, Q2’s Social Security taxes are reported in July, Q3’s Social Security taxes are reported in October, and Q4’s Social Security taxes are reported in January.

  •   c. If you file your 2017 R&D tax credit claim along with your federal income tax return by March 30, 2018, you can offset Social Security taxes starting the second quarter of 2018. As a result, the earliest you are likely to see a benefit from 2017’s R&D tax credits is July 2018.

  •   d. When the credits get applied to Social Security taxes, you receive a refund check from the IRS within 6-8 weeks of the filing of the quarterly Form 941 which includes the Social Security offset.

  • 10. What if I can’t use all my R&D tax credits to offset Social Security taxes this quarter?

  •   a. If the credit amount exceeds a company’s Social Security tax liability in any given quarter, the excess will be carried forward to the next calendar quarter.

  •   b. Once you no longer meet the criteria to be classified as a qualified small business, any unused Federal R&D credits that are not elected to offset Social Security taxes may be carried forward for up to 20 years and used to offset income taxes when you become profitable.

  • 11. Am I eligible for the Social Security offset to claim if I am using a Professional Employer Organization (PEOs)?

  •   a. Provided the PEO is certified or has authorization from the IRS, you will be eligible for the Social Security offset. Since the PEO is specified as the employer on the W2s of your employees and is responsible for filing the Form 941 to report Social Security taxes on behalf of your company, the PEO needs to handle the Social Security offset and relay the funds to your company once it receives the refund from the IRS.