Tax credits to reimburse funds spent
Tax season is upon us and many business owners are working to organize their corporate finances for the past year, and file by the April 15 deadline. It can be a stressful time for some, but for many businesses, it’s a time to celebrate as this is the time of year that they are eligible for certain credits that reimburse them for the funds they’ve spent during the past year.
One of these credits is the research and development credit (R&D), and it rewards businesses for making scientific and technological advances in their industries. Unfortunately, many small business owners don’t apply for this credit because they assume their company is ineligible. Or they hear the words “scientific advancement” and think that if their business doesn’t have an internal laboratory, then this credit isn’t targeted towards them. These are common misconceptions of the R&D tax credit and are likely reasons why so few small businesses apply for it.
The R&D tax credit is awarded to businesses that are making any kind of scientific or technological improvements, whether to a new product or process, or one that already exists. Even if your business is working to improve manufacturing processes to run more efficiently or in a more environmentally friendly way, the time and money you dedicate to these efforts are eligible for reimbursement through the credit. And if you are inventing something new, such as software component, the government recognizes your dedication to innovation with these reimbursements.
So don’t be so close-minded when it comes to your eligibility for R&D credits. Keep track of all your expenses throughout the year and hone in on investments you’ve made that better serve your customer base by solving a problem in way that draws upon scientific principles. Once you have this list, visit the IRS website or work with a tax professional to see if these instances qualify for the credit. Don’t count your business out before you’ve given it a shot – you may find that when you take a closer look, you’re making more R&D advances in your business than you thought.