Expensive laboratory tests and analyzes. From pipette drops feces with symbol of money dollars into test tube.“No problem can withstand the assault of sustained thinking.”

— Voltaire

Businesses are started with good ideas and a lot of hard work. Companies are sustained by applying that same hard work to the challenges and problems they face along the way.  The Internal Revenue Code benefits businesses for dedicating funds to the pursuit of new and improved business components. Section 41 of the Internal Revenue Code provides a tax credit of 20 percent of a taxpayer’s Qualified Research Expenses (QREs) over a base amount related to previous research expenses.  Essentially, it rewards taxpayers for increasing the amount of money they spend on research and development to improve of develop new business components that will benefit the economy and their customers. However, as with any tax benefit, there are strings attached.  In order to qualify, taxpayers must meet a four part test and certain identified expenses don’t count. Also, the IRS has scrutinized these credit claims regularly during audit and, if necessary, forced taxpayers into court to defend their claims. Preparation and documentation is key to surviving IRS scrutiny and, if necessary, prevailing in any subsequent litigation.
Continue Reading The Tax Benefits of Research and Development Expenses (IRC Section 41)