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The Research & Development (R&D) tax credit enables companies of all sizes across various industries to reduce their federal income tax for qualified research expenses. Claiming this credit can potentially result in significant cost savings and an increase in cash flow, making it highly beneficial for startup and existing companies.
Working with an R&D tax credit provider well versed in its nuances is crucial to companies wishing to claim this credit. When seeking credible providers to assist in claiming the credit, keep these questions in mind:
Does Your Provider Assess Their Fee Based on Project Scope or a Percentage of Variable Benefit?
When seeking R&D providers, it is important to understand how their pricing is structured. Most providers expect either a fixed or contingency fee—knowing the difference between the two will assist in selecting the provider that will best suit your budgetary needs.
Fixed Fees: This pricing structure is a predetermined charge that the party receiving the service agrees to pay to the party performing the service, regardless of the time or resources expended. Fixed fees are often scoped out by the provider and provide a clear picture of the costs associated with the service. Fixed fee arrangements simplify budgeting for the agreed-upon work.
Contingency Fees: In this pricing structure, a client is charged a percentage of the outcome of the R&D services performed. Contingent percentages generally range between 25% to 40% of the recovered amount. This structure offers less predictability when it comes to budgeting, as there is no guarantee of the amount that may be recovered after the work has been performed.
The main distinctions between these pricing structures lie in how the payments are organized and the various levels of risk they pose to clients engaging in services. Inquiring about a provider's payment expectations is crucial in selecting the best provider to align with your company's budget.
Does Your Firm Defend Its Work During an Audit, and Is It Included in Its Fee?
It is not rare for the IRS to scrutinize R&D claims. Your provider should be thoroughly prepared to deliver thorough and adequate documentation in the event of an IRS audit.
Does Your Firm Offer a Feasibility Analysis Conducted by a Senior Technical R&D Tax Credit Professional at No Cost?
Seasoned providers should be able to offer a no-cost feasibility analysis to determine the estimated R&D tax credit benefits you may qualify for prior to the engagement. This analysis will help you understand the potential return on investment, thoroughly align expectations and plan your business’s financial strategy.
Does Your Firm Recognize Other Tax Incentive Strategies To Offer Additional Savings?
Depending on the nature of your business, multiple tax incentives, in addition to the R&D tax credit, may benefit you. Your provider should be able to determine what other incentives your business would qualify for and assist you in successfully claiming them.
Why a Client-First Approach is Important
We take a consultative approach, dedicating time to thoroughly understand our client’s history, current direction, and future growth goals. Every year, we reassess eligibility for tax credits and offer continuous recommendations to ensure the highest quality R&D tax credit process. We are proud to say that more than 92% of our clients choose to work with us year after year.
Our pricing is based on the project’s scope, not on a percentage of our clients' benefit, making our fees transparent and predictable. This fixed fee also generally covers audit support through appeals. Our method for identifying and documenting credits is designed to provide a robust defense in case of an audit, and our proven track record with the Internal Revenue Service (IRS) offers our clients peace of mind.
The Three Types of Research and Development
Businesses should consider claiming the Research and Development tax credit for various reasons, but eligibility must be determined and three types of R&D align with the business's nature.
Common Challenges When Claiming R&D Tax Credits
Although claiming this credit can offer considerable benefits for companies engaged in R&D efforts, the process can be challenging.
R&D Tax Credits Can Help Your Startup
Running a startup is all about innovation and making the most of your resources. But what if you're not yet turning a profit?