Understanding Section 41: The Research and Development (R&D) Tax Credit
The U.S. government offers the Research and Development (R&D) Tax Credit under Section 41 of the Internal Revenue Code (IRC)
February 2, 2022
Each year, the IRS releases its “Dirty Dozen” list of the top scams taxpayers can fall victim to when hiring companies for tax help. These schemes can happen at any time but are especially rampant during peak filing season. The list serves as a warning to taxpayers about tax promoters who over promise large refunds and underdeliver while charging exorbitant fees.
One scam on the IRS list is the “improper claims of business credits”, or failure to prove qualified research activities and/or satisfy the requirements of the Research & Development (R&D) Tax Credit.
The R&D Credit makes this list - not because people are claiming the tax incentive - but because some companies out there exploit taxpayers with false claims. These bad actors knowingly and aggressively market to a broad audience, promising a large refund while spending very little time to properly qualify clients. They play a type of “audit roulette” with their clientele, believing that only a few may get audited. This strategy is a risk to the taxpayer and anyone they may refer to the company.
So what can taxpayers do to ensure they qualify for the R&D credit and don’t get scammed?
If you’re a small business looking to claim your R&D credit, it is important to choose a company:
1) with known tax expertise; and
2) that spends the necessary time understanding the nuances of your operations.
At Rebate, we merge technology with real industry experts for the qualification process. Our calculator serves as a realistic estimate based on your input - we don’t over promise large sums of money to anyone. From there, we spend the necessary hours to understand your business activities and expenses. We also have a Resources section dedicated to educating you on the basics of qualification, like the IRS Four-Part Test, and how to understand the credit guidelines.
When you work with Rebate - to both qualify for and claim your tax credit - it means you are working with certified tax professionals, not just an algorithm. We know the ins and outs of tax credits, with an approach backed by a team of specialized accountants. We take as much time as needed to understand the details of your company’s activities and expenses to assure the quality and accuracy of your credit.
While it’s unfortunate and dangerous that there are scammers out there cheating taxpayers and the overall system, that doesn’t mean you should miss out on your potential credit. Get in touch with the Rebate team today.