It is common for corporations to hire third-party software developers when conducting research and development activities, and the associated expenses are often overlooked since the consultants are not employees of the corporation.
When contractors perform research for your software development, you may incur both expenditures that would constitute qualified expenses and those that would not. For example, wages paid to a contractor would qualify, but travel expenses or paying rent would not.
As companies look to claim R&D tax credits for their software development activities, one often overlooked expense is payments made to consultants or contractors performing research activities for the company.
This qualifying expenditure for contract research expenses is defined under IRC §41(b)(3)(A) as 65% of “any amount paid or incurred by the taxpayer to any person (other than an employee of the taxpayer).”
It’s not uncommon for a company to rush an R&D tax credit evaluation, where internal accounting personnel are under significant time constraints and manpower to properly analyze costs.
Frequently, pharmaceutical companies wait until their fiscal year ends to even consider evaluating and documenting their qualified research expenses. This approach yields inconsistent and inadequate results that do not meet the IRS’s recordkeeping requirements to sustain the R&D tax credits.
Do not wait until the end of the year to review R&D activities and expenses. You want to set up procedures at the beginning of the year to regularly track, monitor and organize your types of R&D activities and costs that meet the tax credit’s eligibility requirements.
As the need for assisted living facilities is on the rise, the challenge with healthcare financial management is budgeting while also investing in growth. There’s a delicate balance you must strike between reducing costs and making investments to maintain your health system’s competitive edge and provide outstanding patient care.
To relieve your financial worries and take control of future growth, tax incentives free up money to invest back into your long-term care facilities.
There’s no refuting it: Green building incentives are on the rise. As more programs are offered to incentivize businesses to become more energy efficient, the time is ripe for taking advantage of these tax benefit programs.
To truly maximize your green building tax benefit with minimal obstacles along the way, you definitely do not want to launch into claiming these benefits without establishing a proper process. Too often business either don’t capture as many benefits as they could, or worse, are audited due to unsubstantiated claims.
There are specific instances in which CPAs simply don’t know what they don’t know about capturing R&D tax credits, and the choices made can manifest into issues later down the line.
The following are some signifiers of problematic practices for claiming R&D tax credits:
1. The CPA lacks the subject matter expertise (SME) in R&D tax credits (e.g., no R&D specialty practice areas. SME is necessary to close the loophole of properly substantiating credit claims, especially if under scrutiny by the IRS or the state.
As a CPA, when considering real estate tax strategies for your clients, you may be wondering which clients warrant a formal fixed asset review outside of the efforts made by your firm or your client when maintaining annual tax depreciation.
As you consider outsourcing fixed asset review work to a tax consulting firm, keep the following questions in mind:
Deprecation is an important, but sometimes overlooked, aspect of the tax return preparation process – sometimes CPA firms are involved in that process and sometimes they’re not and the answer may vary by client. Many times with smaller or less fixed-asset-intensive clients, the client does the work, sending everything to the CPA for a cursory review before signing off on the tax return. It’s easy to see the potential exposure or missed opportunity that may result from this practice.
The recently issued “repair regulations” provide guidance regarding the capitalization of amounts paid to acquire, produce or improve tangible property.
Final tangible property repair regulations provide rules covering three general areas:
The tangible property regulations provide guidance to taxpayers to help determine the types of costs incurred for a current year expense, versus those that should be capitalized. The determining factors are “facts-and-circumstance-based” and a professional should be consulted to help you navigate the TPR.
The Pennsylvania Keystone Opportunity Zone Program was created in 1998 as part of the Keystone Opportunity Zone, Keystone Opportunity Expansion Zone and Keystone Opportunity Improvement Zone Act.
The program is administered by the Department of Community and Economic Development, and is a partnership between state and local government in collaboration with the Department of Revenue and the Department of Labor and Industry.
The goal of the Keystone Opportunity Zone Program is to revitalize economically distressed urban and rural communities by eliminating taxes through credits, waivers and abatements.
