R&D tax credits are dollar-for-dollar tax credits that allow companies to get a refund on a portion of their research and development expenses. Claiming R&D tax credits can be complex, and one of the questions small business owners often have is how far back they can claim their credits. We answer these questions and more.

Business owners can claim R&D tax credits for up to two years after the end of their accounting period. For example, if a company’s accounting period ended on January 1st, 2022, a company would have until midnight on January 1st, 2024, to claim tax credits for the accounting period spanning from January 2nd, 2021, to January 1st, 2022. It is crucial to note that once a company reaches its R&D claim deadline, it can no longer claim money for that accounting period.

What do I do if I have already filed my taxes?

If a company has already filed its taxes, it can amend a tax return to include R&D tax credit claims. Businesses have up to three years to amend previous tax returns, giving them time to benefit from R&D tax credits retroactively. Becoming familiar with state and local laws is an excellent way to ensure you claim R&D tax credit from previous years.

What if I’m a startup and not paying taxes yet?

In certain circumstances, a startup not paying taxes can offset up to $250,000 of its federal payroll tax liability using R&D tax credits in five different taxable years. To do so, a startup must have the following:

  • Gross receipts of less than $5 million in the taxable credit year
  • No gross receipts for any of the previous four tax years.

When do I claim the payroll tax offset?

Payroll tax offsets are available every quarter after the first calendar quarter that begins after a business files its federal income tax return. For example, if a company wants to apply the payroll tax offset for the third quarter, it must file its federal income tax returns by the end of the second quarter on June 30th.

Businesses opting to extend their income tax return can take advantage of the quarterly offset after they file their federal income tax return. For example, if a company files a return by June 30th, it can take the offset on October 31st.

Retroactively claiming R&D tax credits can be a complex process. Fortunately, MainStreet is available to help businesses get through the cumbersome aspects of the claim process and ensure companies receive every eligible R&D tax credit. Contact us to get started.