Social media and networking companies operate in a broad industry that involves the design and development of many different mediums, including business networks, enterprise social networks, social gaming, social networking and video sharing.
To deliver these products and services to customers, social media and networking companies invest heavily in technology and software to conduct their business. Often, these activities and related expenses are deemed as qualified research expenses for R&D tax credit purposes. Companies not traditionally thought of to have R&D activities are now able to take advantage of these lucrative business incentives. Technological advances have created an R&D-intensive environment for companies to develop cutting-edge technology to stay competitive in the marketplace.
Check out the following three tips every social company should learn to maximize R&D tax credits:
Tip #1: Technical Employees’ Wages Equate Substantial Claims
Social media and networking companies employ highly technical employees with backgrounds in computer sciences, physics and mathematics. One recent company that claimed significant R&D tax credits hired many scientists and managers with doctoral and master’s degrees in computer science and physics.These technical employees are frequently involved in major software design and development projects and activities. Likewise, they perform complex technical work, requiring knowledge of coding, data modeling, content algorithms, social networking analysis, net vitality concepts, network configuration and software design.
Tip #2: Departmental Involvement: Don’t Rule Any Departments Out
Another area of R&D tax credit opportunity is to review and analyze all of the company’s departments that might be involved in the research, design and development of software projects.Below are examples of departments either directly involved in R&D activities or those that directly support them:
- Analytics: Attempts to learn about the behavior of the user (which is achieved by collecting data), processing data to form useful information and establishing goals are focused on the three key components of data engineering, business intelligence and data science.
- Beta Testing: Employees’ roles and responsibilities consist of developing alpha and beta test reporting tools requiring a robust set of features that meet and surpass current feature sets. This department is also involved in the automation and re-architecture of analytics model deployment processes and standardized processes.
- Mobile Engineering: This team is frequently involved in software research and development activities. Its primary focus is to build new applications and platforms, along with rebuilding and redesigning new and approved mobile applications.
- Product Development: This team plans the roadmaps for all customer-facing products consisting of mobile and web-based products. Its role consists of opportunity validation, product specification developments, designs for enhancements, technical meetings with software engineers and progress monitoring to drive product health.
- Quality Assurance: This department is involved in the testing and execution of new or improved software product releases. Some of its activities include web application testing and mobile application testing. Specific testing areas include functional, load, security, regression, usability, performance and compatibility of the system.
Tip #3: Document Everything
This may seem like a small or obvious tip, but it’s actually quite significant in helping to capture every R&D tax credit your social media company qualifies for. Documentation is key to supporting both the research activities and expenditures involved in new software product development.
Frequently, social media and networking companies file for and are granted patents for the new and improved technology they are developing. These types of documents should be retained as additional support for your qualified research expenses.
Due to the complexities of providing proof when it comes to making R&D claims, you should consult with a tax expert in the field of research and development. As rules and regulations continue to change the game, an expert’s insight is critical to maximizing these credits and funding new, exciting social projects.
Ready to learn more about your qualifying research expenses for R&D tax credits? Take the R&D quiz below.
