Reduce Tax Liability and Improve Cash Flow

Like most businesses, you allocate significant time, money and resources into improving your business. If you’ve developed new products or made improvements to your products or your processes, you likely have incurred costs that qualify for the Federal Research and Development (R&D) tax credit. In addition, there have been recent developments surrounding R&D that are business-friendly, so now is a perfect time to let the experts at Clifton Gunderson perform a research and development review and find opportunities to reduce tax
liability and improve cash flow!

Is My Business Eligible?

If your company has designed products or improved its production process, the answer is yes. The tax definition of research & development (R&D) includes much more than scientists in white coats. Many companies are surprised to find that more than a few of their activities qualify for the R&D credit.

Qualifying research activities can include

• Developing prototypes and patents
• Improving or developing products
• Operating your internal engineering department • Automating or improving production processes
• Employing contract technical personnel

We have found that businesses in the following industries have research tax credit possibilities

• Manufacturing
• Software Development
• Technology
• Biotechnology
• Utilities
• Environmental
• Agriculture
• Plastics
  

The Benefits

Most companies can benefit in one or more of the following ways

• Claiming immediate tax refunds with interest from your previous tax returns
• Reducing your current-year estimated tax payments
  
• Decreasing your current-year effective tax rate and income taxes
  

Generally, any research credits that cannot be used in the current year may be carried back one year for a refund and then carried forward for use over the next 20 years. Your potential research tax credit could be up to 6.5 percent of your current-year qualified research expenses – not including state research credits, which may be significant. The research credit will also generate bottom line revenue. If your company operates on a profit margin of 5 percent on net income, a research tax credit of $100,000 is the equivalent of increasing your gross revenues by $2,000,000.

At Clifton Gunderson, we want to help you keep more of that hard earned profit. Contact Ed Kidner, Mid-Atlantic Tax Services Practice Leader, and mention “The Future of Barcoding and RFID” to learn how to take advantage of our free assessment of your tax situation or to learn more about R&D and other tax consulting services.

Edward F. Kidner, JD, CPA, Partner
Mid-Atlantic Tax Services Practice Leader
410-453-5563 direct
Ed.Kidner@cliftoncpa.com

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