R&D Payroll Tax Credit for Qualified Small Businesses

Thanks to Joanne O’Brien, Deloitte Tax partner and co-host/panel member at our November Blockchain event (see Event Spotlight section), for bringing this great tax credit opportunity to our attention:

Up to $250,000 payroll tax credit per taxable year for Qualified Small Businesses with qualified R&D activities that have:

Annual gross receipts less than $5 million No gross receipts from before the five-tax-year period ending on the current tax year.

What does this mean? Qualified Small Businesses that are generating revenues for the first time but operate at a taxable net loss for the year can still take this credit against payroll tax liabilities owed with respect to its employees. What’s even better is that the credit can be applied against the requirement to deposit the employer’s portion of taxes when wages are paid rather than waiting until filing the Quarterly Federal Tax Returns – that means more real time working capital available to eligible businesses! The credit will NOT apply against the employer’s hospital insurance or the employee’s share of FICA taxes that the employer is required to withhold and remit.

It’s important to note that to qualify, businesses must not have any taxable income in the prior five years. Even showing $1.00 of revenues, in an extreme example, in the prior five years could harm your eligibility to take the credit even if you are below the $5M in the current year. So it’s really important to get advice early! Speak with your tax preparer to determine whether you are eligible for this credit.


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