Contact UsShould we keep working to gather information for the Research and Development tax credit even though it hasn't been extended yet? What is the likelihood that it will be extended, and when do you think this might happen?
We have to gather information (payroll, expenses, project time tracking information) to provide to our preparer for the purposes of filing for the Research and Development tax credit. It's not too overwhelming, but it does entail some work on our part to gether the information. We just don't want to spend the time right now if the credit will not be extended.
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Tax Professional Answers
Ray Gering
While I understand that no one would like to do work with no guarantee that it will be used, and admit that there is nothing guaranteed 100% when it comes to the tax code, I would advise that you look at the history of the Research and Development Credit. It has existed, in some form, since 1981 without ever having been made permanent. It is generally extended by one year, although there have been times when it has been extended for two years. It has expired eight times and has been extended thirteen times. All that said, again, there are no guarantees. However, I would ask you to consider a few key factors before making the decision:
1. When does your tax year end? If you are on a fiscal year rather than calendar year basis, it may be better to wait it out until it the credit has been extended. If you are on a calendar year though, it gets a bit more risky. If you file promptly on 3/15 and the credit is extended on 2/1, you only have about 30 days to gather all of the necessary information, and identify projects and related costs. If the credit is extended after the 3/15 deadline though, then you would have more time to gather the necessary information.
2. Do you track projects, and people’s time to projects? If so, then hopefully the main bulk of the work is identifying which projects qualify, and then any associated costs outside of wages. If not, it might be well worth going through the exercise now so that you are not scrambling at the last minute, which may mean that you report something inaccurately or, even worse, inadvertently exclude something.
3. Do you have a state Research and Development credit? If so, it may or may not be dependent upon the Federal Credit calculation. If it is, and if the credit is worth the effort (even without the guarantee of the Federal Credit), then you will need to proceed as you would if the Federal Credit had already been extended. If it is not based on the Federal Credit, then you will need to decide if the State Credit is worth the effort alone.
I am sorry if I provided too much information in one response. We have over 25 years combined experience working with the Federal as well as many states’ Research Credits, and I know that each circumstance/business is different. If you would like any more information or if I can answer your question more specifically, please let me know—I’m glad to help!
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600 weeks ago
1. When does your tax year end? If you are on a fiscal year rather than calendar year basis, it may be better to wait it out until it the credit has been extended. If you are on a calendar year though, it gets a bit more risky. If you file promptly on 3/15 and the credit is extended on 2/1, you only have about 30 days to gather all of the necessary information, and identify projects and related costs. If the credit is extended after the 3/15 deadline though, then you would have more time to gather the necessary information.
2. Do you track projects, and people’s time to projects? If so, then hopefully the main bulk of the work is identifying which projects qualify, and then any associated costs outside of wages. If not, it might be well worth going through the exercise now so that you are not scrambling at the last minute, which may mean that you report something inaccurately or, even worse, inadvertently exclude something.
3. Do you have a state Research and Development credit? If so, it may or may not be dependent upon the Federal Credit calculation. If it is, and if the credit is worth the effort (even without the guarantee of the Federal Credit), then you will need to proceed as you would if the Federal Credit had already been extended. If it is not based on the Federal Credit, then you will need to decide if the State Credit is worth the effort alone.
I am sorry if I provided too much information in one response. We have over 25 years combined experience working with the Federal as well as many states’ Research Credits, and I know that each circumstance/business is different. If you would like any more information or if I can answer your question more specifically, please let me know—I’m glad to help!