How to Claim California’s R&D Credit

The nation’s third-largest state offers one of the best Research & Development tax incentives in the country.

The California R&D Tax Credit can be a significant addition to revenue for Silicon Valley startups, Los Angeles Architects, San Diego Breweries and beyond. Any C-Corp, S-Corp-, LLC or Partnership is eligible and should look to partner with a team of national tax experts that can guide them through the process of attaining the lucrative credit.

Although the Research and Development tax credit is open to small, medium and large size businesses, it’s no surprise that companies with the largest footprint often receive the largest R&D tax credits, both in California and across the US. This is mostly due to resources and availability of information. The process, while complex, can be navigated efficiently and effectively by any size business with the right help.

The first step to applying for R&D in California 

Any business that is considering applying for the Research & Development tax credit must consider the IRS’s Four-Part Test. This checklist is outlined in the following ways:

  • Technical uncertainty. An activity performed to eliminate technical uncertainty in regards to the capability, methodology or design of the project or product.
  • Process of experimentation. The business must prove how its components progress step by step from planning, prototypes, testing, and release, and that this process resolves uncertainty.
  • Technological in nature. The project or activity must be rooted in the hard sciences, such as engineering, physics, chemistry, or computer science.
  • Qualified purpose. The business must have undergone the process of creating a new or improved product or process (computer software included) to increase performance, function, reliability, or quality.

California’s R&D tax credit requirements follow those of the federal credit closely. Here are some specific differences:

  • Qualified Research Expenses (QRE’s) must be performed in California to receive the state’s credit.
  • The Alternative Simplified Credit (ASC) method does not exist in California
  • Unused R&D credits can be carried forward indefinitely in California, versus federal credits that can be carried forward twenty years.
  • California has a different definition of gross receipts that should be closely followed

For companies operating from San Francisco to Sacramento, San Diego to Silicon Valley, as well as in other parts of California, the Research and Development tax credit can be a valuable tool for increasing their bottom line. If you are considering claiming your R&D tax credit, partner with trusted tax experts. Call National Tax Group at 561-257-3436 to start your free assessment.

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Our specialty tax experts have worked with CPAs hand in hand for decades, helping them unearth additional savings for their clients by introducing them to our specialty areas of tax code. When CPAs refer qualified clients to us, we can leverage their business activities into real-world tax savings. In turn, CPAs earn up to 10% commissions for referrals. Our exclusive CPA+ partnership maximizes your client’s dollars while you earn valuable commissions. 

What are the benefits of partnering with a third party?

Partnering with a third-party specialty tax firm allows CPAs to provide unprecedented savings for their clients. For the average CPA, these unique areas of the tax code are hard to focus on, often requiring experts in the field. That’s when our team of tax professionals, engineers and client specialists come in. Our experts will guide our partnered CPAs and their clients step-by-step through the claims process, from assessing eligibility to submitting documentation to the IRS. We also provide audit support at no cost if you or your clients need it. 

Here to help it work best for you

National Tax Group recognizes that every CPA’s relationship with their customer is different and we have tailored our offerings to support that. It is up to you if we interface directly with the client on your behalf or we work through you. We are happy to offer any level of transparency you require.

Offer your clients more

We are proud to partner with CPAs to ensure that their clients are completely satisfied. This is a collaborative process, and we want you to feel like we’re part of your team.

Through our partnership, you will be able to offer these highly lucrative deductions: 

  • 179D Energy Efficient Tax Deduction – Tax deduction rewarded for energy efficiency
  • Research & Development Tax Credit – Tax credit given to businesses performing qualifying research activities
  • Cost Segregation – Engineering-based study that accelerates depreciation and increases cash flow
  • 45L Home Credit – Tax credit rewarded to homebuilders and contractors who incorporate energy efficient measures

Once you sign up for our CPA Partnership+ program, you will receive a welcome package in the mail that includes an introductory gift, a welcome letter, and an informational pamphlet for your office and clients. Additionally, our team will work with you to identify what clients are eligible for our service areas and provide you with dedicated support throughout the entire process. Partner with us to expand your tax reach and add savings to your clients’ wallets today.

Learn about our CPA Partnership+ Program and start earning commissions.

Leverage Your Employee Wages into Research & Development Tax Credits

R&D tax credits reward companies with employees performing innovative research tasks.

Many business owners are still learning about the federal Research and Development tax program and its generous rewards for corporate taxpayers. One important aspect of the R&D Tax Credit is the ability for it to integrate payroll taxes in calculating your yearly credit. For many businesses and startups, this is especially valuable. 

Investing in Employees Could Result in Even More Tax Credits

A Los Angeles based architecture firm hired us to examine and audit their 2019 tax season to verify if their business qualified for additional R&D tax credits. After their free initial assessment, we closely reviewed the activities performed by the company staff for Qualified Research Expenditures (QRE), past projects and payroll hours. 

Our tax experts know that employee wages can greatly affect the overall improvement of a company’s tax situation. Our staff received the client’s submission of employee hours, and noted a blind spot in how the company reported employee time. Our staff predicted we could increase the firm’s R&D tax credit by reexamining the employees’ activities. 

We took a second look at specific tasks that the employees were doing that the client had disregarded as insignificant. Our complete review made a big difference in how employee tasks were categorized, and the client saw a $42,000 overall increase in their qualified employee wages.

After our thorough review, the total qualifying employee wages increased by over $42,000.

Schedule Your Free Assessment

At National Tax Group, we can examine your employee tasks and record them to comply with the detailed R&D tax credit guidelines. We have over 20 years of expertise in the field with real-world results. Call our national tax experts at (561) 257-3436 to schedule your free initial assessment.

Ohio Businesses Can Capture Up to Three Years of Unclaimed Tax Credits

This government-sponsored program benefits Ohioans who are blazing the trail in innovation.

What is the Research & Development Tax Credit?

The R&D tax credit was established in the 1980’s as part of a list of sweeping moves to stimulate the economy. Ohio businesses in the industries can leverage R&D to gain credit back on their taxes, with the idea that they will then reinvest in new jobs and growth to support the American economy. 

The Ohio R&D tax credit equals 7% of Ohio qualified R&D expenses in excess of the average tax liability of the three prior taxable years. There is no special application or approval process for this tax credit; the credit may simply be claimed on a tax return. Any unused portion of the tax credit that businesses do not use may be carried forward for as many as seven years.

Who Can Claim It?

Any business currently performing Qualified Research Activities (QRA) in the state of Ohio is qualified. All C-corporations, S-corporations, LLCs and partnerships can all claim R&D on their tax returns. However, while this process is accessible and sounds simple, it can also be quite intricate. Therefore, we recommend the process for itemizing and reporting R&D activities be done with a team of tax experts.

Request Your Free Assessment

At National Tax Group, we will not only fill out your tax forms, but we will also provide a comprehensive report of your company activities and equip you with IRS audit-proof documentation. Call our tax experts today at (561) 257-3436 to see if your startup qualifies for a lucrative R&D tax credit. Your initial assessment is always free. 

You are Likely Missing Out on Specialized Tax Incentives that Your Accountant May Not Know About

Reap significant tax-savings through government-sponsored credits and refunds

Many companies of all sizes are not claiming the incentives they’re qualified for simply because they don’t know they are available. Our goal is to help as many businesses as possible become aware of the tax benefits that they qualify for, so that they can reinvest back in the business. Browse our tax specialties to find out how you can minimize your tax liability and maximize your profits.

Research and Development Credits Reward Your Innovation Efforts

If your company develops, designs, or improves a product, process, or software, there is a good chance you qualify for federal and state R&D tax credit in your area. To officially qualify, you must first pass the IRS’s R&D 4-Part Test. The test evaluates the research initiatives at your company and breaks it down into 4 categories: Nature, Purpose, Process, and Uncertainty.

Once we determine that your research and development activities qualify for R&D Tax credits, our national tax experts will record all qualifying research expenses and submit the audit-proof claim to the IRS.

Cost Segregation Studies for Your Commercial Properties

Most commercial buildings and facilities that were constructed, remodeled, or purchased after 1987 can benefit significantly from a cost segregation study. The first step in the process is to have an experienced cost segregation engineer conduct a thorough study of the property. The advisor will analyze each building component and record all relevant information such as cost data, building plans, and lease agreements.

The goal of the study is to increase your cash flow by accelerating depreciation deductions and deferring federal and state income taxes. Cost segregation is a complex and lengthy project for any business or property owner, so it is recommended that you hire a team of national tax experts with an engineer on staff to complete the process from start to finish.

45L Credit Rewards Energy Efficient Dwellings

Building owners, designers and contractors who have installed energy-saving elements to newly constructed multi-family projects can obtain this extremely rewarding tax credit of $2,000 per dwelling unit. This is a valuable bonus for property owners that achieve a lower carbon footprint. Energy efficiency is also a feature that potential tenants highly value when looking for a home.

Qualified applicants must file for 45L in the same tax year in which the featured properties were completed and leased. In addition, taxpayers can only go back three tax years to claim the lucrative credit, so it’s important to complete the process in a timely manner.

Leverage Your Energy Efficiency with 179D

New buildings or completed renovations that were performed in an effort to reduce energy may be rewarded with this significant tax provision. Taxpayers can earn up to $1.80 per square foot on each qualifying property, $.60 on each energy saving system. Total energy consumption must be reduced by 50% in order to qualify for 179D. Once the project is complete, a qualified professional must also certify it as energy-efficient. Once this process is complete, a detailed report is modeled, analyzed and transferred to a digital version in compliance with the IRS’s requirements.

Take the Next Step in Savings

Our team is composed of tax experts and engineers with over 20 years of experience in specialty tax areas. Contact National Tax Group at (561) 257-3436 for a free assessment and start the process of earning your lucrative tax savings.

Is Your Business Eligible for Maryland’s R&D Tax Credits?

Cash in on Maryland’s lucrative government-sponsored research credit – R&D incentivizes businesses to pursue innovation.

The Research and Development tax is a permanent federal program, and many states, including Maryland, have adopted their own statewide incentives, using the nation’s program as a model. Enacted on July 1, 2017, Senate Bill 200 (“S.B. 200”) makes way for even more Maryland businesses to benefit from the lucrative tax credits awarded to companies by the state’s Department of Commerce.

What are the benefits of Maryland’s R&D tax credits?

In Maryland, the total amount of credits any business receives depends on the amount of eligible expenses incurred with a limit of $12 million for all businesses that apply.​ The Basic R&D tax credit provides businesses with 3% of eligible R&D expenses less than or equal to Maryland’s base amount. If the total credits applied for exceeds $4.5 million, the business’s Basic tax credit is prorated. 

Maryland’s Growth R&D tax credit offers companies 10% of eligible R&D expenditures over Maryland’s base amount. If the total credits applied for are over $4.5 million, the business’s Growth R&D tax credit is prorated.

Small businesses are especially rewarded through R&D in the state of Maryland. A small business is defined as a for-profit corporation, LLC, partnership or sole proprietorship whose net profits are less than $5 million for the tax year. This credit is refundable for cash, in an effort to further drive business growth and innovation from smaller companies.

What is the first step to applying?

According to the Maryland state website, applications for the state of Maryland R&D tax credits must be received no later than September 15th of the calendar year following the tax year in which the expenses were incurred. Maryland Commerce will issue a tax credit certificate with the approved credit amount by February 15th. If a business has already filed their taxes for the current tax year, they can apply to amend their taxes for that tax year, as well as the previous seven tax years.

Qualifying expenditures include wage, contractor, and supply expenses related to a taxpayer’s attempts in Maryland to develop or improve the functionality or performance of its products, manufacturing processes, software, or other components.

Maryland states that the first step to determining the business’s R&D tax credits are to collect the gross receipts for the tax year for which you are claiming credits, as well as the preceding four years. Keep in mind that the R&D credits are limited to activities performed within the state only. This process are best tackled with a team of national tax experts who can guide business owners through these steps one by one.

If you think your business qualifies for any Research and Development tax savings, call National Tax Group at (561) 257-3436 to start your free analysis. 

Going Green? Earn Tax Breaks for Saving Energy

Feel even better about reducing your carbon footprint when you take advantage of the significant tax savings found under 179D and 45L.

In addition to being environmentally friendly, energy-saving properties more often attract modern residents for their “green” stamp, and better retain their value over time. There are two specialty tax benefits that reward eligible building contractors, potentially saving them tens of thousands in tax liabilities. 179D is a tax deduction for commercial building owners and primary designers. 45L is a credit for energy-saving properties that stand at three stories or less.

179D: A Deduction Rewarding Energy Efficiency

Your building does not have to be brand new in order to benefit from this tax perk. Both newly constructed and renovated buildings that have installed energy-saving elements qualify under this tax provision. Ideal candidates for the 179D deduction are commercial building owners, architects, design firms, and groups that have government building contracts.

Even if you have just upgraded one element throughout your properties such as lighting, you may still qualify for a portion of the $1.80 per square foot deduction. Moreover, this tax policy was extended through the end of 2020, which opens an opportunity for businesses to retroactively claim 179D for the 2018 & 2019 tax years.

45L: A Tax Credit for Energy Efficient Homes

Eligible building owners, contractors and developers that reduce energy use by at least 50% can claim the 45L tax credit, which awards applicants with $2,000 in tax credits for each dwelling unit. New energy-efficient systems and installations built or significantly reconstructed from August 5, 2005 to December 31, 2020 are applicable. The credit can be especially valuable for owners of apartment or condominium buildings because each unit is eligible for its own credit.

Furthermore, the 45L tax credit can be retroactively claimed for residential and apartment buildings in the last three years, and any unused credit can be claimed for up to 20 years in the future. Ideal candidates are residential building developers with multiple properties, but any developer, builder, or homeowner may qualify.

What is the first step to claiming my deductions?

A site visit by an independent, qualified party is required to verify the installation of the property’s energy-efficient elements. Certifications must be obtained to verify that the home meets specific government-issued requirements. To get started on your claims, work with a trust tax team who can walk you through every step of the process. To find out if your properties pre-qualify, contact National Tax Group at (561) 257-3436 to claim your free tax analysis report.

 

National Tax Group’s 3-step R&D Tax Credit Claim Process

Our straightforward 3-step process ensures audit-proof tax credit assessment and preparation that puts money in your pocket.

Innovation and development happen in many industries across the board and all over the country. The Research and Development tax credit was created to reward these businesses’ activities and encourage innovative practices at American companies. Less than ⅓ of qualified companies claim this lucrative credit and you would be surprised just how many small businesses can qualify.

Step 1: A Free Initial Assessment

National Tax Group provides free initial assessments to any business owner wanting to determine whether or not their activities are characterized as “Qualified Research Activities.” One of our tax experts will ask you detailed questions about your business, employees, tax history, and any other relevant information that could qualify you. To be deemed as a Qualified Research Activity, they must first pass the 4-Part Test, created by the IRS.

4 part test diagram

The IRS established criteria consists of:

  • Purpose: The research is done to improve the quality, function, or reliability of a process or product.
  • Process: The research activities must involve stimulation, logical trial and error, assessing alternatives, and refining hypotheses.
  • Uncertainty: The qualified activities must identify information to remove ambiguity in the development or improvement of a production process.
  • Nature: The research done relies solely on physical sciences, biological sciences, computer sciences, or engineering.

Step 2: Technical Evaluation of Your Qualified Research Activities

Our knowledgeable staff will request employee wages, industry and business information and past years of tax returns to get started determining whether or not your business can claim R&D tax credits. Our tax technicians have the knowledge to identify the business items and worker salaries that are specific to the Research and Development credit. Furthermore, they can look at the activities outside of the office, such as offsite contract research, that can also be added to your file. 

Step 3: Formulation of Your State and Federal R&D Credits

After a thorough calculation, National Tax Group will prepare and organize all research activities performed that qualify you for the R&D credit. Our team of tax-saving experts will create and provide the needed documentation to ensure your tax credit. In the case of an audit, our work meets IRS standards and will ensure a smooth process. 

 

Call National Tax Group at (561) 257-3436 to see if your business qualifies for this potential cash flow opportunity. We will walk you through every step needed to claim your credit now. 

  

What the 2020 CARES Act Means For Your Business Taxes

The government’s new stimulus package includes significant opportunities for businesses to access cash, but only if you know about them.

In March of this year, the Coronavirus Aid, Relief and Economic Security (CARES) Act passed the House of Representatives in an effort to stimulate the economy in the face of the COVID-19 pandemic. President Trump then signed the bill into law, sighting significant benefits for COVID-impacted business owners. Company owners should speak to a tax expert and assess how this new law could set up their business’ finances for the coming year and beyond.

NOL modifications mean tax credit wins for American businesses

The provision of the CARES Act where businesses can access sizable dollar amounts is called Modifications for Net Operating Losses. Normally, businesses operating at a net operating loss (NOL) can report this loss for 3 previous tax years (2017, 2018 or 2019.) However, the CARES Act now makes it legal for businesses to carryback NOL’s to five years.

The inclusion of two more tax years can potentially generate a lucrative tax recovery for businesses, because tax rates before 2018 were considerably higher than their current rates. This can translate into a sizable cashflow that businesses can use to invest in their operations and into the economy at large.

How tax experts can help you apply for CARES Act benefits:

  • Summarizing your company’s investments and expenses
  • Cataloging your company wages
  • Leveraging your activities for minimum tax liability
  • Ensuring compliance with all applicable tax laws and regulations
  • Filling out and filing the appropriate tax forms
  • Preparing your tax returns and related documentation for a possible audit

Working with a national tax expert experienced in business tax can mean thousands of dollars for your company. Finding the right tax company who fits your needs is easy. Contact National Tax Group at (561) 257-3436 to claim your free tax analysis report.

Idaho’s R&D Tax Credit Could be a Gamechanger for Your Businesses

The IRS’s Tax Day extension provides Idaho business owners with the opportunity to assess their financial assets and examine any advantageous tax credits they may have overlooked.

Though the Research and Development tax credit is a federal program that rewards businesses investing in innovative efforts across the country, there are also efforts on the states’ behalf to incentivize these efforts as well. On the federal level, taxpayers can benefit from a dollar-for-dollar reduction on tax owings, as well as an offset to payroll taxes for some qualified businesses. 

Idaho has its own state laws in regard to the state Research and Development tax credit. Businesses that conduct qualified research in Idaho may be eligible for a 5% income tax credit that can be carried forward for up to 14 years. 

Though this lucrative business tax credit appears to be limited to the science and technology industries, many businesses, from electronics manufacturing to food processing, may be able to take advantage of the R&D tax credit and see a benefit to their bottom line.

What Industries Qualify for R&D in Idaho?

In the present day, technology has become an essential part of the workflow across many industries, and companies can leverage this use to qualify for the Research and Development tax credit. Craft breweries or wineries who are using mobile apps to elevate their communication may be eligible. An ammunition company that uses fingerprint technology to increase handgun safety at home may be able to claim it. Even companies in the investments and accounting industries, who have to keep up to date on cybersecurity software, can apply for this immediate source of cash flow.

What is the R&D four-part test?

Companies that apply for the Idaho Research and Development tax credit must prove that their activities meet the following criteria:

  1. Technological in Nature: Activities must rely on hard scientific evidence to be performed and proven.
  2. Permitted Purpose: Activities must be performed with the purpose of improving a business component or making it more efficient.
  3. Eliminate Uncertainty: Activities are seeking concrete answers about the development or improvement of a product.
  4. Experimentation: Activities must include prototypes, modeling, sampling, trial and error, or other scientific methods of experimentation.

Our team of tax experts will give you a free assessment to see if you qualify for Research and Development credits, as well as its payroll tax provision. We are here to help you earn your maximum tax benefit. Call us at (561) 257-3436 to speak with one of our qualified staff members.