R&D Tax Credits Overview
Both federal and state research and development tax credits reward companies based on their investment in developing new products and processes. One of the greatest misnomers involving these credits is many companies don’t know they qualify. Credits are not limited to companies that solely provide product development — they are equally applicable to companies that develop new processes including improved efficiencies. Companies may claim the credit for products they have developed to sell to their customers. In fact, many of our clients claim credits based solely on what they invest in developing a new product or process for their customers.
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R&D Tax Credit Services
McGuire Sponsel’s research and development tax credit practice conducts retroactive studies, current year engagements, and risk advisory services. Our professionals combine an understanding of tax law with engineering disciplines to maximize companies’ research credits and reduce their overall tax burdens. McGuire Sponsel provides documentation to withstand the highest level of IRS and state tax authority scrutiny.
We understand Section 174 vs Section 41
McGuire Sponsel understands the confusion surrounding Section 174 and Section 41. Please see a variety of resources below that help explain the technical differences and how CPAs should be approaching this important topic with clients.
Watch our webinar – Distinguishing Section 174 from Section 41
Listen to our podcast – Section 174 updates
Read our article – Yes, companies need to amortize R&D expenses
How McGuire Sponsel Can Help
McGuire Sponsel’s proven, trusted approach involves working with CPAs and their clients to build a credit claim that can withstand the highest levels of IRS or state scrutiny. Educating companies on the qualifying criteria and benchmarking against industry knowledge sets an expectation level for all parties early on in the process. Couple these with the fact that McGuire Sponsel works beside CPAs during the engagement ensures that the client is able to utilize the credits generated by an R&D Tax Credit Study. Our team of CPAs, engineers and consultants take the necessary time to work with clients to explain how the credit intersects with their business in order to optimize the credit claim while reducing any exposure if audited.
IRS Experience
McGuire Sponsel’s team of R&D Tax Credit experts has decades of experience defending R&D Tax Credit claims in front of the IRS and state taxing authorities. The team consists of experienced engineers, CPAs, Enrolled Agents, and R&D Tax Credit specialists who provide a reliable and strategic approach to defending credits in the event of an examination.
Our expertise with the tax code, regulations, case law, and experience with examinations over the years enables McGuire Sponsel to deliver highly effective examination defense services with an excellent defense success rate. We represent our own clients under examination, and also represent clients who have pursued the R&D Credit with the assistance of other service providers.
Every examination is different. And every examining agent has a different approach. McGuire Sponsel’s professionals diligently manage the examination process to ensure minimal disruption and an optimal outcome for our clients.
Do You Qualify for the R&D Tax Credit?
Technical Risk
A company’s ability to claim the R&D Tax Credit is based on the risk of technical failure. The R&D Tax Credit rewards companies based on their attempt at designing or manufacturing a new product, not their success.
Economic Risk
A company must bear the economic risk of their product or process development in order to claim the R&D Tax Credit. In other words, a company must get paid based on their success, not their attempts. In most cases, companies are paid on a fixed-price basis which signifies they bear the economic risk.
What makes a great R&D opportunity?
– Do you employ degreed chemists, engineers, programmers or scientists?
– Do you develop and/or improve new products or processes?
– Do you build prototypes to test?
– Do you incur raw material costs during the product development/improvement process?
– Do you subcontract any engineering or testing functions?
Let's TalkRecent Resources
- Case Study
- Webinar
- White Paper
Design/Build Manufacturer receives $260,000 in Federal Tax Credits
When a company specializing in designing and fabricating turnkey automation systems for Toyota, Nissan and Honda reached out, McGuire Sponsel’s consultative approach helped maximize the client’s R&D Credit. Through fieldwork interviews and extensive analysis of time-tracking data and project documentation, McGuire Sponsel was able to identify $4.1 million of qualified research expenses for the company, resulting in an effective federal tax credit of $260,000.
Criteria of the R&D Tax Credit
This webinar discusses the criteria of the R&D credit, what constitutes qualified research activities, eligible research expenses, and recent R&D tax credit updates. Additionally, the webinar examines recent audit trends and the contemporaneous documentation needed to substantiate R&D credit claims.
T.D. 9786
On Oct. 4, 2016, the IRS published T.D. 9786, final regulations that improve opportunities for businesses that engage in internal use software development to claim the R&D Tax Credit. The final regulations provide guidance in defining qualified research activities related to internal use, non-internal use and dual use software development, effective for tax years beginning on or after Oct. 4, 2016.
Recent Blogs
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webinarsAlliance NetworkFebruary 20, 2023Distinguishing Section 174 from Section 41
by David Seibel, EA & TJ SponselJoin David Seibel and TJ Sponsel as they walk through distinguishing Section 174 from Section 41. David and TJ overview...
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in the newsR&D TaxJanuary 30, 2023
Yes, companies need to amortize R&D expenses
by David SeibelIn Accounting Today, David Seibel discusses the Consolidated Appropriations Act of 2023. This bill included funding for the federal government for...
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podcastsAlliance NetworkDecember 22, 2022
McGuire on the Wire Episode 66
by David SeibelDavid Seibel gives an update on the Section 174 Amortization.
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blogR&D TaxDecember 12, 2022
Section 174 Amortization Updates
by David Seibel12/12/22: IRS Issues Guidance for Obtaining Section 174 Change of Accounting Method Consent; 10/24/22: Section 174 Amortization Requirement Leaves Taxpayers...
