Almost all businesses today have to embrace eCommerce as a basis to survive. Creating and maintaining a digital selling platform can come with challenges. In addition to developing an online presence, businesses have to navigate security risks, Customer Relationship Management (CRM) applications, and supply chain analysis. Implementing these data- and software-focused operations could have the potential to qualify business owners for Research and Development (R&D) credits.
The R&D tax incentive offers a dollar-for-dollar reduction to your federal liability which can be carried back one year and forward for 20 years if your company does not have a current federal tax liability. The Federal credits can be used against payroll tax liability in the first five years of a company’s life cycle if gross receipts are under $5M. In addition, most states also offer an R&D Tax Credit.
A variety of eligible expenses qualify for the R&D credits, including wages, supply costs and other related activities. Examples of qualifying R&D investments include:
- Aspects of ERP or other custom software implementations
- Website development (including customized interfaces with partner portals)
- Development of systems to analyze big data
- Other activities that develop new or improved products
- Analysis for new functional software end requirements, domain, software elements, or scope analysis for a new functional software enhancement
- Conducting requirements, domain, software elements, or scope analysis for a new functional software enhancement
- Development of new algorithms
Determining eligibility for R&D tax credits requires an understanding of the IRS guidance and industry history, as well as familiarity with case law and IRS audit experience. Cherry Bekaert’s tax professionals are familiar with the nuanced IRS guidance, industry history, case law and IRS audit procedures. Learn more about R&D credits by contacting a Cherry Bekaert R&D professional.
