What is the Research and Development Tax Credit (R&D tax credit)?

The Research and Development Tax Credit (R&D) is a tax credit for businesses of all sizes who conduct R&D in the United States. The R&D tax credit can be extended to a wide range of business and industries that exceeds far beyond scientists and research labs.

The R&D tax credit was created to incentivize US-based research and development activity. Each year more and more companies take advantage of the R&D tax credit. Additionally, in 2015, the Protecting Americans from Tax Hikes (PATH) Act, made the R&D tax credits permanent, while also extending the benefit to startups.

What are the Potential Benefits of the R&D Tax Credit?

The R&D tax credits claimed by a qualifying company can potentially contribute to significant cost savings. These benefits include:

OVER
1.6 BILLION

In credits claimed

Increasing Cash Flow
Federal and State Dollar-for-Dollar Income Tax Reduction
Claim Credits for Open Tax Years Going Back 3-4 Years
Reducing Your Tax Rate

Qualifying for the R&D Tax Credit

Many people used to think R&D tax credits only applied to those that wear lab coats or create new best-in-class products. This is not the case – R&D credit is much more expansive and far-reaching than most people realize.

Companies of all sizes and across many industries meet the federal government’s test for qualified innovation activities and can claim Research and Development (R&D) Tax Credits. However, many companies are not aware they qualify. There are thousands of companies that are leaving money on the table and not taking advantage of significant federal and state R&D tax credits.

The activities that qualify for the R&D tax credit are the same ones driving growth in your business.

Developed new products
Improved existing products
Developed software for internal or external use
Improved manufacturing processes
10,700
R&D TAX CREDIT

Studies completed

How Do I Claim the R&D Tax Credit?

On average, companies are typically able to claim 7-10% of their qualified expenses as a federal R&D tax credit. For example, a single software developer, engineer, or lab technician who receives a W2 of $100,000 a year may generate a tax savings of up to $10,000.

The expenses that qualify for research activities within your company typically include employee compensation, materials, and contracted services. Various forms of documentation are sufficient to support your qualified expenses and may include payroll records, financial records showing supply or contract research expenses, and vendor invoices.

The Source Advisors Approach to R&D Tax Credits

With our consultative approach to the research and development tax credit, we invest time understanding each client’s history, current business direction, and future growth objectives. Each year we re-evaluate a company’s ability to accept the tax credit and provide on-going recommendations to improve the R&D tax credits process. We proudly support a recurring service to more than 92% of our clients.

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No Cost Feasibility Analysis
One of our Source Advisors technical directors along with a business development representative will conduct the feasibility analysis to determine the estimated R&D tax credit benefits. Our professionals are the most experienced in the team and possess an average of 15+ years of R&D tax credit experience.
Understanding the Usability of the Credit Up-Front
We ensure that our clients and referral partners understand the usability of the credit upfront, eliminating situations where a study is completed and fees assessed but the credits does not result in immediate tax savings for the client.
Fixed Fees Include Audit Support
Our fixed fees are based on the scope of a project versus a percentage of the benefit. The fixed fee also includes audit support through appeals. Our approach to identifying and documenting credits provides a strong defense should the study come under audit, and our successful track record with the R&D tax credit irs gives our clients peace of mind.
Dedicated R&D Team
Our in-house dedicated team of professionals includes project managers, CPAs, attorneys, and other tax professionals, most of who were formerly with the Big 4 and average 8+ years of experience working with the R&D tax credit. This enhances both our responsiveness and study completion time. Our project managers remain assigned to clients on a year-over-year basis, which supports project continuity, helps us recognize new initiatives that may lead to more credits, and supports stronger audit defense.
Comprehensive Documentation Support
Our dedicated content compliance professionals have the industry knowledge and insight to identify qualified technologies and activities that support R&D tax claims. Proper documentation is essential to maintaining and protecting the tax credit and our strategy helps substantiate R&D progression, protects company interests, and ensures maximum value.
350 YEARS
OF COLLECTIVE R&D

Tax credit experience

R&D Tax Credit State Benefits Available

Most states offer R&D credits to offset state tax liabilities. We’ll guide you through variations in State and Federal R&D tax credit rules, evaluating any states in which you qualify for and state-specific filing requirements.

SEE IF YOUR STATE OFFERS
R&D TAX CREDIT

CLICK ON ANY STATE TO KNOW MORE

Click on any state to know more

Illinois R&D Tax Credit Summary

R&D TAX CREDIT AVAILABLE

NAME

Research & Development Credit

DOES IT APPLY TO C-CORPS
& PASS THROUGHS?

DESCRIPTION

Nonrefundable credit with similar definitions as federal for Qualified Research Expenses and Qualified Research Activities except only include Illinois-based expenses.

PERCENTAGE

6.5% on incremental expenses over the average of the three prior years.

THE SOURCE ADVISORS R&D TAX CREDIT STUDY PROCESS:

R&D Credit Estimate

Proposal & Engagement

Field Work & Credit Calculation

Documentation

Audit Support

INDUSTRIES

FAQ’s

R&D with Source Advisors

For businesses in multiple industries looking to reduce Federal and State tax liability.