The Research and Development payroll tax credit, also known as the R&D payroll tax credit is a tax incentive designed for qualified businesses to offset their payroll tax. It is designed for new companies that perform research and technology development activities to be able to apply up to $500,000 of research credit against payroll tax liability. These R&D credits can be carried forward for up to 20 years.
Which Businesses Qualify for the R&D Payroll Tax Credit?
In order to qualify for the tax credit, a business must meet each of the following criteria:
- Have 5 years or less in revenue
- Have less than $5 million in revenue in the current year
- Have conducted qualifying research activities and expenditures
Documentation Needed to Claim the R&D Payroll Tax Credit
Documentation is extremely important to defending any R&D tax credit claims. This includes having a permitted purpose, technological uncertainty, the process of experimentation, and being technological in nature.
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