A few months ago, President Biden signed the Inflation Reduction Act into law on August 16, 2022. With its passage, R&D tax credits in the form of payroll tax offsets have effectively doubled for qualified small businesses.
The payroll tax offset cap is increasing from $250,000 for the 2022 tax year to $500,000 for tax years starting after December 31, 2022. The government created the R&D tax credit to incentivize companies to develop and maintain their R&D presence within the United States. Withum has several Dealership Technology Services clients entitled to significant R&D Tax Credits; however, most local accounting firms need the expertise or resources available to advise your business through the complex process of substantiating the company’s R&D spending. You must seek expert advice to determine if you are eligible for the R&D Tax Credit in the year the company incurred R&D expenses to avoid the need to potentially amend prior year tax returns, which could trigger a desk audit.
Eligibility Requirements
For 2023-purposes, a qualified small business is eligible if they meet two tests:
- The company generated less than $5,000,000 in sales, fewer returns, and allowances investment income (e.g., bank interest, dividends, royalties, etc.)
- The company did not incur gross receipts before the fifth previous tax year, including the current tax year. For purposes of 2023, taxpayers cannot have had gross receipts before 2019
Next Steps
Our Dealership Technology Services experts are focused on the ins and outs of the R&D Tax Credit, working with researchers, scientists, engineers, and software developers to understand their unique situations. Reach out to our Dealership Technology Services team for a complimentary initial consultation.
Contact Us
For more information on this topic, please contact a member of Withum’s Dealership Technology Services Team.
