Have you claimed your R&D Tax Credit?

Many of our clients are utilizing federal and state R&D tax credits to save hundreds of thousands of dollars. The credits can be used on a variety of projects you’re probably already working on right now.
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You’re probably eligible, you just don’t know it yet

Whether you have never heard of, considered, or utilized R&D tax credits in the past, SingleMind has developed a guide to help organizations become better acquainted with this strategic opportunity to help you achieve your business goals. R&D tax credits are now permanent in the federal tax code and incentivize the very thing we do with our clients: Innovate.
In this interactive infographic we attempt to dispel myths, provide options, and present a simple guide forward in your innovation journey. You will need to discuss your individual circumstance with your tax professional, but as the saying goes, “All great journeys begin with a single step.”

Who is it for?

The R&D tax credit is for taxpayers that design, develop, or improve products, processes, techniques, formulas, or software. It’s intention is to incentivize innovation from companies in all industries, not just technology.

Are you eligible?

To be eligible a company must meet some basic requirements. Our guide will easily help you see if you qualify and how to take the next steps towards launching your projects at a much lower cost.

How to apply?

If you are considering exploring this tax advantage further, it would be important to first review this four-part test provided by the IRS. (For once), the IRS makes it fairly easy to get on your way.

When to get started?

If you’ve gotten to this portion, the short answer is get started now. It could take some time to compile your documentation, but it will all be worth it. We’ve given you a few points to consider and the next steps.


Common Misconceptions

Even with the permanence of the tax credit, there are common factors that companies assume prevent them from claiming the credit.

Regardless of the state your company is located, you can take advantage of federal R&D Tax Credits. State credits are in addition to federal tax credits, and although many mirror the fed, they can vary. Again, we highly recommend you discuss this with your tax professional.

Start-up companies and small businesses may be eligible to apply for up to $1.25 million,or $250,000 each year for up to five years, of the federal R&D credit to offset the Federal Insurance Contributions Act (FICA) portion of their payroll taxes each year.

To be eligible, a company must meet two requirements:

  • Have less than $5 million in gross receipts for the credit year.
  • Have no gross receipts or interest income dating back more than five years.

It’s not only high-tech or life sciences companies with dedicated research departments that qualify for the R&D tax credit. Actually, most companies don’t have R&D laboratories and instead perform R&D in their test kitchens or fields, wineries or distilleries, or on production floors. Wherever experimentation occurs, R&D may be found.

Just because you don’t have engineers or scientists with high level degrees does not mean you don’t qualify. Experimentation happens from anywhere and anyone. Both employees and third party contractor’s experimentation work would qualify under the current tax code.

Let’s be very clear here, innovation can apply to the individual company. It’s calculated on the basis of increases in research activities and expenditures, and as a result, it’s intended to reward companies that pursue innovation with increasing investment.

R&D doesn’t have to be new to the industry. It simply needs to be new to the company, which must have activities that meet the four-part test.

Learn more about the four-part test

Unlike a tax deduction, an R&D tax credit is a dollar-for-dollar credit; this reduces a filer’s tax bill by a full dollar for each credit dollar. A six-figure tax credit ,which most of our clients receive, increases earnings after tax by the full amount of the credit.

A tax credit that can be used to reduce the taxes to be paid means more cash in the company’s bank account.

Obligatory Legal Jargon

The material appearing in this communication is for informational purposes only and should not be construed as legal, accounting, tax, or investment advice or opinion provided by SingleMind, Inc. This information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although these materials have been prepared by professionals, the user should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. SingleMind, Inc assumes no obligation to provide notification of changes in tax laws or other factors that could affect the information provided.

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