5 Reasons CPAs Overlook R&D Tax Credits in Their Tax Planning

R&D tax credits provide small businesses with tax savings that can be helpful. However, many CPAs overlook R&D tax credits when working with their clients for several reasons, potentially missing out on significant tax savings.  We discuss why CPAs may not involve their clients in the R&D tax credit claiming process.

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Lack of Knowledge

Some CPAs do not know enough about R&D tax credits to help their clients with the process. After discovering the complexity of claiming an R&D tax credit, they may find that they are not experienced enough with the process and decide not to offer the service. To resolve this issue, CPAs can partner with an R&D tax credit expert to better understand the process.

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They are Unaware of the Range of Industries that Qualify

A common misconception is that R&D only applies to industries with scientists working in a laboratory setting, such as physics, chemistry, and biology. However, many other sectors perform R&D activities, including those in the applied sciences (engineering, computer science, food science, etc.), apparel, agriculture, and construction, to name a few.

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Overlooked Qualifying Activities

The IRS classifies several activities as R&D that at first glance, may not seem like R&D. These include improving clothing fabric, changing the taste of food, and creating more environmentally friendly packaging. R&D intended to automate a process or remove obsolete components from a business component also qualifies. Moreover, R&D need not be successful in qualifying for the R&D tax credit.

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Risk of an Audit

Some CPAs are inexperienced in dealing with the risk of an audit. One of the misconceptions about R&D tax credits is that it automatically triggers an IRS audit and will be denied, causing some CPAs to shy away from helping their clients make claims. An R&D audit simply examines a claim to verify its compliance with R&D tax credit claim requirements.

A CPA can minimize the chance of an audit by consulting a specialist, gathering all necessary documents, and improving their ability to recognize qualifying R&D activities.

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Solely Focused on Properly Filing Client’s Taxes

In some cases, CPAs are putting their entire focus on filing their client’s taxes properly and promptly. They believe they do not have time to help them with R&D tax credits. However, this is a mistake as dedicating time to help clients claim R&D tax credits can save companies a lot of money by reducing their tax bills and improving clients’ satisfaction. Taking time to learn about R&D tax credits can be a net benefit for a CPA.

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Learning more about the R&D tax credit claiming process can pay off for a CPA. MainStreet brings CPAs and their clients together by sending CPAs the forms required to claim R&D tax credits, saving small businesses valuable time and money. Contact us today for more information.