Does your business incur research and development costs in the US? Then you may be able to claim a sizable tax credit of up to $500,000* or more. Once approved by the IRS, the R&D credit is applied towards your business’s future payroll tax liabilities.
Businesses across many industries can qualify for the R&D credit – including technology, ecommerce, bio-tech, hardware, and more.
You could save thousands through the R&D credit, so it’s important it’s done right. We handle the tax claims process from start to finish and provide the necessary documentation to back up your claim with the IRS. Claiming the R&D tax credit can be complicated and tedious, but we make it easy.
We conduct an R&D tax study, which identifies the total amount of qualifying R&D expenses you can claim on its federal tax return.
We prepare and file the necessary tax paperwork to claim the R&D credit, if you use Pilot Tax. Otherwise, we provide the right documentation for your tax preparer to file.
We provide required supporting documentation, which is an important prerequisite in case of an IRS audit.
We work with your payroll provider to apply the R&D credit against your payroll taxes and ensure it's accurate throughout the year.
If you use Gusto, we’ve partnered with Gusto to automatically apply the credit, saving you time.
If your business has less than $5 million in annual revenue, and it's been less than five (5) years since your first gross receipts/sales, you can frequently reduce your Social Security Payroll tax liability under the PATH Act R&D credit. If you do not qualify under the PATH Act R&D Credit, you can take regular R&D Credit against income taxes (rather than against payroll taxes).
Qualifying R&D expenses and/or activities are those which pass this four-part test:
Unlimited, if applying the R&D credit against income taxes. These credits can range between 5% and 15% of qualifying R&D costs. If taking the PATH Act R&D credit, a company can receive up to $500k* against payroll taxes and take the remainder against income taxes.
As an example, for an unprofitable 5-person tech startup that has less than $5M in annual revenue with roughly 80% of time being spent on qualifying R&D activities, and average salary of $100k/year, the credit might be between $20k to $60k. Pilot’s fee is a small percentage of the total qualifying R&D expense and easily pays for itself by securing the R&D Tax Credit for you.
*$500,000 for 2023 tax year, $250,000 for 2022 tax year
Yes, we can help you file an amended tax return to claim the R&D credit for previously filed Income Tax returns (past 3 years), but you cannot take the PATH Act R&D credit on an amended tax return.
We help businesses with all aspects of claiming these R&D Tax Credits. Pilot will:
Yes, we can help support you in the case of an audit. For more details, please contact us.
Pilot recommends anyone who claims the R&D credit to get a study done. An R&D study determines the total amount the business should claim and collects the necessary documentation to support that claim.
When filing for the R&D tax credit, you must submit the relevant tax forms to the IRS. However, you must also have the technical and financial justification of what you were claiming prepared in case the IRS audits your claim. If the IRS audits the claim and you can’t produce technical and financial evidence behind what you claimed, you will need to return the money and potentially pay a penalty. The R&D Tax program is on the IRS’s "Dirty Dozen List". Once you’ve been audited, the IRS can also audit your claims for up to 7 years prior – so you need to make sure that each year’s claim has proper and thorough substantiation.
Yes, we’ll calculate the R&D tax credits and provide the necessary documentation for your tax preparer to file. If you use Pilot Tax, we’ll take care of the full process and file the necessary tax paperwork on your behalf as well.
33 states currently offer an R&D credit. Generally, the states follow federal guidelines on what constitutes qualified R&D expenditures with few exceptions. Pilot will provide guidance on state level credits. For example, the CA R&D credit is non-refundable which means it cannot be taken against payroll tax. Work must be done in CA to be considered qualified and CA credits can carry forward indefinitely until exhausted.
Get the peace of mind that comes from partnering with our experienced finance team.