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Research &
Tax Credits

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Are you maximizing the potential of R&D tax credits? We will take a close look at operations and uncover missed opportunities to lower your tax liability.

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Research & Development Tax Credit

R&D tax credits are often overlooked or under-utilized dollar-for-dollar tax savings that directly reduce a company’s tax liability and/or offset payroll taxes. The R&D credit is available at both the federal and state level, with approximately 40 states offering an R&D credit to offset state tax liability.

Claiming R&D Tax Credits can be complex, as documentation is required to demonstrate how the underlying activities meet the four part test, federal and state tax laws and regulations are ever-changing, and a thorough review of the qualifying activities is required to determine eligibility. In some cases, companies can look back to all open tax years to claim missed R&D tax credit opportunities

At MGO, our dedicated R&D Tax Credit team brings over 30 years of experience. We will take a holistic view of your operations and research and development processes to identify areas where the R&D credit may apply.

R&D Tax Credit Criteria

Regardless of industry, companies are potentially eligible to save up to 15 percent of qualified research expenses if their activities meet the following requirements, known as the four-part test:

  1. Qualified Purpose

The purpose of the activity must relate to a new or improved product or process, formulation, invention, software or technique that results in increased performance, function, reliability, or quality.

  1. Technological in Nature

The activity fundamentally relies on a hard sciences, such as engineering, physics, chemistry, biology, or computer science.

  1. Technical Uncertainty

There must be uncertainty concerning the capability to develop, method of developing, or appropriate design of a new or improved product or process at the outset of the project.

  1. Process of Experimentation

Substantially all of the activities are undertaken to eliminate or resolve technical uncertainty. This process involves an evaluation of one or more alternatives and is performed through modeling, simulation, systematic trial and error, or other methods.

Qualifying R&D Expenses

Costs related to R&D activities may be eligible to be expensed immediately to reduce overall tax liability. Qualified R&D costs can potentially include the following four categories:

  1. Wages

W-2 taxable wages for employees involved in the R&D process.

  1. Supplies

Supplies used to conduct research may qualify.

  1. Contract Research

Certain subcontractor expenses may qualify, contractual limitations apply.

  1. Computer Rental/Lease Costs

This could also include payments made to cloud service providers if payments are related to hosting new or improved software.

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Tax Credits & Incentives

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