Research and Development Startups! Receive up to $250k to offset payroll liabilities
Are you a startup company performing research and development? Whether that be machine learning, biomedical engineering, robotic design, or anything in-between: the government may want to provide you incentives for your innovation!
Qualified Research activities (determined by a four-step test) performed by startup companies are eligible for a payroll tax credit that can be used to offset quarterly payroll taxes! The four-step process (see section II below) is used to determine which projects your company performs that meet the requirements.
The wages paid to employees working on these qualified projects, as well as associated cloud computing costs, are included in a calculation for qualified wages! On average, your company can receive 5–15% of these expenses as a future reduction in payroll tax liabilities.
Projects Qualified For R&D Credit. The Four Step Process.
- Qualified purpose: The research activity should be aimed to result in new or improved functionality of a business component. The business component can be any product, formula, invention, software, etc.
- Elimination of uncertainty: The project must attempt to eliminate uncertainty in the development or improvement of the business component.
- Process of experimentation: A company must demonstrate that it evaluated multiple alternatives for achieving the project objective. For example, software development and clinical research evaluate more than one approach in the project design.
- Technological in nature: The process of experimentation must rely on the hard sciences, such as engineering, physics, chemistry, biology, or computer science. It’s important to note companies aren’t required to exceed, expand or refine existing scientific principles.
Employee wages, contractor costs, and cloud computing costs paid for each qualified research project qualify as R&D tax credit qualified expenses. Approximately 5–15% of these qualified expenses can be received in the R&D credit.
How To Apply
We assist startups calculate and file for their tax credits. The process is as follows:
- List the qualified research activities and which business component they were targeted to improve.
- Allocate the percent of each employee and contractors total hours worked that were spent on the qualified research activity.
- Explain what the employee aimed to discover during that research activity, as well as their annual wages paid.
- List the business’ revenue and date of incorporation.
- The calculations and paperwork will be generated and shared to your accountant to include in the annual tax filing.
- A portion of the R&D credit may be used to offset your quarterly payroll tax liability. Add us as an accountant on your Gusto, ADP, etc. account and we’ll handle this process.
Here’s How To Begin
Download the Research and Development tax credit worksheet and fill in the first four steps listed above in this excel file. I am happy to discuss each step with a team member to verify the projects are in-fact qualified and that each step is being completed correct.
Want to get started? Email Adrian@Kwantx.com or call me directly at (401)935–4878.
Kwantx is a technology startup in Silicon Valley that helps companies receive tax credits! We’ve processed $900,000 in tax credits thus far. Our mission is to help Startups grow! See us online at www.kwantx.com.