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THE APRIL 18TH TAX DEADLINE IS APPROACHING FAST
DON'T FORGET TO CLAIM YOUR R&D TAX CREDIT! BOOK A CALL TODAY
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THE APRIL 18TH TAX DEADLINE IS APPROACHING FAST
DON'T FORGET TO CLAIM YOUR R&D TAX CREDIT! BOOK A CALL TODAY
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Days
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February 15, 2022
1 min read
Last September, in an effort to keep companies from retroactively claiming questionable expenses under the IRS R&D Tax Credit, the IRS Office of Chief Counsel issued a memo with new requirements for backing up claims. The new guidance required a much more detailed accounting of which business components and employees were directly involved in the research and development work at the company. The guidance applies to any company filing an amended return — these are used to claim R&D credits against past tax returns in one or multiple years.
The R&D Tax Credit is designed to incentivize innovative work within the United States — companies can claim a 10% credit on qualified expenses, which include:
With the new IRS guidance, companies claiming the credit via an amended return will now need to identify all the research activities they’ve performed and the names of employees or contractors who performed each specific research activity. As of September 2021, they also must include the information each individual sought to discover during their R&D activities.
After pushback from tax professionals about the new burden of the guidance, the IRS made a new announcement Wednesday February 9, 2022 expanding the timeframe for “perfecting” a company’s claim from 30 to 45 days. Any amended R&D Tax Credit filed between January 10, 2022 through January 9, 2023 that is missing “proof” that the research was qualified will have a 45-day period to provide the IRS with that information.
The good news for those using Neo.Tax to prepare their R&D Tax Credit: we always provide a Study along with the forms your company files. This Study was built in-house by cofounder Stephen Yarbough, who spent two decades in the IRS processing hundreds of R&D Credits. The new guidance from the IRS demonstrates a new, more stringent view of amended returns — the burden of proof is on the company and will need to be even more detailed — so waiting to amend the returns may become more expensive and cumbersome going forward. That means it’s more important than ever to claim your R&D Credit on your original returns and Neo.Tax makes the process simple and easy.
Happy Tax Season!
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At Neo.Tax, we talk to scores of controllers and Heads of Tax every month. One thing is clear: the old way of filing for R&D Tax Credits has become a burdensome pain. You’d think that so many businesses moving their project management and payroll online, via software like Jira, Rippling, and Workday would simplify the filing process. But, in some ways, it’s made it harder.
The payroll and project management output is a rich dataset, but it’s also, well, voluminous. If that data is not inputted perfectly—and let’s be honest, it never is—that means it’s up to a controller or Head of Tax to sift through the mess to create the filing. Engineers need to be trained (and retrained) on the correct project tagging process, and then cajoled to sort out any inputting errors. It’s a waste of time for your filer and your engineering teams.
Which is why Neo.Tax created our AI system.
No one starts a company because they’re excited about accounting and taxes. Well, no one except the Neo.Tax founders :)
But for those other 99% of founders, here’s a cheat sheet and guide to ASC 350-40, an accounting guideline that pertains to Internal-Use Software Development Costs. Maybe you’ve never heard of ASC 350-40, but you should get to know the rule if you ever plan to go public.
