These credits are not deduction, but rather, dollar-for-dollar credits which directly reduces taxes due or taxes already paid.

These R&D Tax Credits generate “bottom-line revenue.” For example, if your company operates on a 5% net income rate, an R&D credit of $100,000 is the equivalent to gross revenues of $2,000,000.

The credit is known as a tax recovery or reimbursement amount, intended to offer substantial financial incentives to profitable companies engaged in certain types of product development and process engineering activities. It was meant to be used by businesses of all sizes in a variety of commercial activities, including engineering, manufacturing, processing, food production, and other commercial endeavors.

When Congress enacted the R&D Tax Credit incentive, it fully intended for these credits to be claimed by eligible businesses of all sizes. Unfortunately, the scope and complexity of the tax code and extensive documentation requirements have historically made many small and mid-size businesses believe that pursuing the R&D Tax Credits is not worth their while. The companies that took advantage of the credits were generally large manufacturing and high-tech concerns that did “traditional” R&D and could afford to hire the Big 4 accounting firms. Smaller companies who were less familiar with the credit lacked the expertise to determine how they could benefit, especially within the engineering industry.

However, recently issued IRS Regulations have made it easier to qualify for the R&D Tax Credits by broadening the array of activities and industries that qualify and providing greater flexibility in certain record-keeping requirements.

Having a technical understanding of your company’s potentially qualifying R&D expenditures is the first step toward maximizing your savings. Whether or not you qualify is determined by the nature of the activities performed, not by their outcome or the job titles of the personnel performing the activities.

R&D Tax Credit Eligibility
Any company involved in developing new or improved products, processes, or software is potentially eligible. If your company has been engaged in these types of activities for the last several years, you may be eligible to retroactively claim the R&D Tax Credit for federal and state income tax purposes, obtain significant cash refunds, and establish a methodology to continue claiming these credits in future years.

Benefits of Capturing R&D Tax Credits for your Company

• Immediate source of cash (via tax refunds) by capturing and recovering tax credits for prior year(s)
• Reduction of your company’s effective tax rate
• Source of permanent tax savings and financial statement benefits
• Increase in market value, cash flows, and return on equity for your company
• Source of potential benefits for future R&D activities
• Carry-forward of unutilized credits for 20 years

1. Never Claimed R&D Benefits
   If you've never claimed R&D Tax Credits, our approach is phased. After each phase, you decide, based on the results of the previous phase, whether and how you want to proceed.
• Feasibility Study/Assessment (estimate benefit/cost to claim credits)
• Calculate actual credits
• Prepare tax forms and returns
• Document qualified costs and activities
• Develop and implement procedures and methodologies to identify, document, and calculate future credits
• Manage and support exams, appeals and litigation
2. Already Claimed R&D Benefits
   If your company already claims R&D benefits, you probably don't need a full-scale R&D study.

   Our experience, however, is that the majority of companies who have claimed R&D opportunities have not taken full advantage of the benefits available to them, for either financial statement or tax purposes or both.

   We therefore offer the following services:

   • FAS109 Valuation of R&D Claims
     Get the financial statement benefit of your R&D benefits by determining the extent to which you can recognize them. Our valuation review includes identifying audit risks and additional opportunities and recommendations on how to overcome the former and capitalize on the latter.
   • SOX Compliance Review
     We review company processes regarding their R&D credits to identify risks and develop and help implement any needed controls.
   • Calculation Review
     Our professionals have reviewed hundreds of calculations; over 80% of the calculations we've reviewed have had errors, even those prepared by big accounting firms. These errors are a result of law changes, the mistaken use of previous years files and data, start-up rules, acquisitions, dispositions, etc.. Often very quickly detected, these errors, when corrected, have saved some companies hundreds of thousands of dollars for a fraction of the cost.
   • Cost Review
     Because costs are often qualified without reference to stages of the various development process, they are often understated or missed altogether. Using our approach, we have found companies significant additional Qualified Research Expenditures (QREs). We have also helped companies identify non-qualified costs erroneously included in their claims, costs which can taint an otherwise legitimate claim.
   • Proactive Future Planning and Review of Systems & Methodologies
     We've helped companies develop and implement procedures and methodologies to identify, document, and calculate their future credits efficiently and effectively. These services focus first on making better use of a company's existing financial, accounting, and project-documentation systems to accomplish these goals, and second on introducing new systems or procedures.
   • Exam, Appeals and Litigation Support
     We have supported hundreds of million of dollars in R&D benefits. We can help you manage and defend your R&D claims, too.
   
   Your Business may be Entitled to Substantial R&D Benefits
   Our proprietary methodology and expertise can identify and maximize these government R&D tax credits and provide you an immediate source of cash refunds for prior years, and offer your business a significant reduction in current and future tax liabilities.

   Contact your FortisTCS consultant today to learn how FortisTCS can help you capture and recover government sponsored R&D Tax Credits for your business.

   Request a NO-OBLIGATION, NO-COST Feasibility Study that will give you valuable information, specifically the amount of R&D tax credits we can recover for your company as a cash refund for prior years and the potential of significant future tax savings for your R&D qualified activities.

   If you have not already connected with a FortisTCS consultant, please call Santosh Varughese, Managing Director, at (713) 830-7638 ext. 320, or click here to contact the experts at FortisTCS via the web.