R&D Tax Credit Detailed Overview

The Research and Development (R&D) tax credit was created by Congress as part of the Economic Recovery Tax Act of 1981 to encourage American industry to invest in research and development activities. The purpose of the credit was to stimulate R&D activities among businesses through tax incentives. However, due to the stringent requirements that existed under the provisions of the Credit, a vast majority of the small to mid-size companies were unable to reap the substantial benefits of the R&D credit. Recently, new IRS regulations were issued that have made qualifying for the R&D tax credit more appealing to many more companies. The new regulations are taxpayer friendly and reflect a profound change in the position of the IRS and state taxing authorities. The new regulations:

• Broaden the traditional tax definition of R&D.
• Apply retroactively to prior tax years.
• Generate refunds of previously paid federal and state income taxes.
• Provide greater flexibility in certain record-keeping/documentation requirements.
• Expand the definition of internal-use software.

IRS Definition of Qualifying R&D Activities

In December 2001, new tax regulations enabled small to mid-size companies to be eligible to take the R&D (wage-based) Tax Credits.  Documentation and Discovery requirements were relaxed.  The goal was to keep innovation and creativity in the U.S. and encourage economic growth.  Clients can now receive cash back and/or tax credit benefits for conducting technical activities and meeting the tax regulation requirements.  The traditional definition of Research & Development has a new Tax Definition that includes:

1. New or Improved Business Components.

• Product,
• Process,
• Software (Internal or External),
• Technique,
• Formula or,
• Invention.

2. Technological in Nature

3. Elimination of Uncertainty

4. Process of Experimentation

Many more firms meet the criteria and can take advantage of the benefits than ever before.  Realizing this, many new companies are jumping into the R&D arena.  Beyond the fact that our Staff includes the industries most experienced IP Attorneys, R&D Engineers,Scientists, and IRS Audit Experts from national tax consulting firms
Why should you chose Paradigm Partners?

THE PROCESS

Most of our competitors:
Use a "Reasonable Estimation" method of calculating the credit. Although approved by the IRS, auditors take advantage of this to substantially reduce the credit amounts up to 6 months after a Study has been completed which results in losses not only in terms of high audit defense costs, but refunding of fees back to clients and asking clients to refund cash back to the IRS - something neither they nor their CPAýs are ever happy about.

Paradigm Partners:
Utilizes a comprehensive approach in both quantifying and qualifying credit amounts. Thus, for example, instead of identifying and documenting only 3-5 of the biggest projects conducted by a client in prior year, Paradigm identifies EVERY qualifying activity and ties up every employee with every qualified activity and the corresponding sections of the code and appropriate legal documentation that substantiates the credit.

THE FEES

Most of our competitors:
Bill on the gross identified credit.

Paradigm Partners:
Bill on the NET identified credit that the company will actually receive or carry-forward.

THE 'EXTRA MILE'

Most of our competitors:
Complete the Study, deliver the forms and schedules to the CPA and walk away.

Paradigm Partners:
Follows up with the CPA, answers all questions regarding accurately amending returns and also reviews all amended returns for errors.

Schedule a no-obligation consulation:

For more information about the BizActions R&D Tax Credit Alliance Program contact Mike Braun at 303-952-9855 or via email at mbraun@bizactions.com.