R&D Tax Credits

Businesses must innovate constantly if they want to continue growing and succeeding. These efforts may qualify them for the Research and Development (R&D) tax credit. The purpose of the R&D credit is to keep jobs in the United States and to make U.S. manufacturing companies more competitive in the global market. But the IRS estimates that only 10% of the companies that qualify for the credit actually apply for it. 

Who qualifies for the credit?

Any company that develops, designs, or improves products, processes, formulas, techniques, inventions, or software can be eligible for the credit. Research and development can come from engineers, software developers, factory workers, tooling workers, and a variety of other areas.

The research tax credit uses a percentage of wages and the cost of supplies. The credit results in a dollar-for-dollar reduction in the tax liability of the company. If the business is a flow-through entity the credit will flow directly to reduce the taxes of the individual.  If the company is in a loss the tax credit can carry-forward for up to 20 years.

Many small businesses do not take advantage of this R&D credit due to the high cost, audit risk, and painful process of hiring consultants to calculate the credit after the end of a tax year. Because of the importance of this credit to our clients and all closely held companies, we partnered with Titan Armor. The partnership capitalizes on their expertise and software along with our tax knowledge to ensure that all eligible companies receive the credit affordably and without an invasive process.

Eligible Industries

  • Architecture and engineering
  • Biotech
  • Manufacturing, including but not limited to chemical, computer, electronics, electrical equipment and components, medical devices, and plastics
  • Construction
  • Design-build manufacturing
  • Metal fabricating and casting
  • Software development
  • Tool and die

Qualifying Activities

  • Designing new, improved, or more reliable products, processes, or formulas
  • Designing new products for the company
  • Designing tools, molds, jigs, and dies
  • Certification testing
  • New concepts and technology
  • Improving manufacturing processes, including incorporating new equipment
  • Improving production processes, including incorporating new equipment

Using basic information from your tax return, we can perform a quick analysis to see if the credit would benefit you. If we determine there is a potential benefit we request just forty-five minutes of your time, during which we can educate you on the credit and gather information about your companies’ activities. We can then give you an estimate of the credit amount.

Topel Forman is a Titan Armor R&D Tax Credit Software Strategic Partner.

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