The Research & Development Tax Credit The Tax Deadline Has Been Extended – Should we wait on claiming the R&D Tax Credit?

The Research & Development Tax Credit The Tax Deadline Has Been Extended – Should we wait on claiming the R&D Tax Credit?

With every thing in this world being turned upside down, our country is making changes to our daily lives, and this has recently included changes to filing our 2019 taxes.  The Treasury issued a statement that they will now be moving the actual filing deadline from April 15th to July 15th to coincide with the already extended date to make payments.

Individual and corporate taxpayers are still being encouraged to file on time, especially for those taxpayers who anticipate a refund and can use the cash during this difficult time.

During our current economic environment, should businesses that have activities that qualify for the Research and Development Tax Credit, even consider talking to their most trusted advisor, their CPA, about claiming the tax credit?  As it turns out, this is probably the best time to discuss all available tax mitigation strategies with your CPA.

Every business is concerned with operating capital, now more than every, and the R&D tax credit is one of the most powerful tools to enable a business to get cash now.  The R&D tax credit is a dollar for dollar savings against income tax, and many states also offer a form of the tax credit, and this credit is an immediate offset to tax.

However, due to recent changes resulting from the Coronavirus Aird, Relief, and Economic Security Act, a business can now carryback NOLs arising in taxable years after December 31, 2017 for each of the preceding five taxable years.  This carryback provision in the CARES Act is extremely valuable as the corporate tax rate for tax years prior to 2018 was 35% as opposed to the current 21% tax rate.

Most 2019 tax returns have not as yet been filed, and as a result, this is an excellent opportunity to benefit from the NOL carryback.  Prior to the CARE Act, if a company could not utilize the R&D tax credit, the credit could be carry forward for up to 20 years, and now businesses are in a wonderful position to carryback NOLs, so this is a great time to explore claiming the R&D tax credit for many businesses.

Even if NOLs could not benefit a taxpayer, claiming the R&D tax credit is a wonderful opportunity to offset current income tax obligations, and every business, now more than ever, is trying to keep every penny to which it is entitled. 

Of course, every decision about claiming any incentive should be discussed with your CPA, and chances are that every business has been in touch, or will be in touch with their CPA in the very near future.  Now is indeed the perfect time for every business to explore all tax mitigation strategies, and to claim every credit and deduction to which they are entitled.  You never want to find out you have been leaving money on the table!

Jill Mazur, CPA

Director

Engineered Tax Services

949-350-6369 / [email protected]