If your business has less than $5 million in annual revenue, and it’s been less than five (5) years since your first gross receipts/sales, you can frequently reduce your Social Security Payroll tax liability under the PATH Act R&D credit. If you do not qualify under the PATH Act R&D Credit, you can take regular R&D Credit against income taxes (rather than against payroll taxes).

Qualifying R&D expenses and/or activities are those which pass this four-part test:

• Technical uncertainty. The activity is performed to eliminate technical uncertainty about the development or improvement of a product or process, which includes computer software, techniques, formulas, and inventions.
• Process of experimentation.The activities include some process of experimentation undertaken to eliminate or resolve a technical uncertainty. This process involves an evaluation of alternative solutions or approaches and is performed through modeling, simulation, systematic trial and error, or other methods.
• Technological in nature.The process of experimentation relies on the hard sciences, such as engineering, physics, chemistry, biology, or computer science.
• Qualified purpose.The purpose of the activity must be to create a new or improved product or process, including computer software, that results in increased performance, function, reliability, or quality.

Unlimited, if applying the R&D credit against income taxes. These credits can range between 5% and 15% of qualifying R&D costs. If taking the PATH Act R&D credit, a company can receive up to $500k^* against payroll taxes and take the remainder against income taxes.

As an example, for an unprofitable 5-person tech startup that has less than $5M in annual revenue with roughly 80% of time being spent on qualifying R&D activities, and average salary of $100k/year, the credit might be between $20k to $60k. Pilot’s fee is a small percentage of the total qualifying R&D expense and easily pays for itself by securing the R&D Tax Credit for you.

^{*$500,000 for 2023 tax year, $250,000 for 2022 tax year}

Yes, we can help you file an amended tax return to claim the R&D credit for previously filed Income Tax returns (past 3 years), but you cannot take the PATH Act R&D credit on an amended tax return.

We help businesses with all aspects of claiming these R&D Tax Credits. Pilot will:

• Identify and calculate qualifying R&D expenses
• Prepare Forms 6765, 8974, and 941 to gain IRS approval of credit. If you use Pilot Tax, we’ll file on your behalf as well.
• Prepare all required supporting technical and financial documentation, including documentation of research time, R&D payroll expenses, etc. This is an important pre-requisite to support an IRS audit in case that happens.
• Coordinate with your tax preparer, payroll provider, and accountant to ensure your books and taxes are accurate
• Continually ensure the credit is applied correctly against your payroll liabilities
• Email and phone support with R&D credit experts

Yes, we can help support you in the case of an audit. For more details, please contact us.