Federal Research and Development (R&D) Tax Credit

Part one: Credit for Qualified Research

1. Sign in to your Partner dashboard.
2. Go to the Clients section.
3. Click the Actions menu on the far-right.
4. Click Third-party tax credit service.
5. Select the type of business income tax return this company uses.
6. Select the Fiscal Tax Year this company uses.
7. Enter the date this company filed their tax return.
   • The filing date is used to determine the first eligible quarter that the credit can be claimed.
8. If this company filed under a different Federal EIN at any point in their corporate tax year, the previous Federal EIN is required for the Federal R&D Credit filing.
9. Enter the total Federal R&D Credit claimed.
   • This amount can be found on Line 44 of the 6765 Form.
10. Click Save & Continue.

Part two: Previous Credit Claims

1. Select whether your client has claimed part of this credit on a Form 941 this fiscal year or not.
2. If this company claimed the credit in any prior quarters, please enter these values so we may determine their remaining Federal R&D Credit.
3. Click Save & Continue.

Part three: Before You Submit

1. Review the information to make sure everything is accurate. 
2. Once you are ready, click File Tax Credit. 
3. Determine if you’d like this credit to be taken quarterly (free), or in real time.

The client should see the refund from the IRS about 8-12 weeks following the 941 filing (if not claiming the credit in real time).

You need to have an accountant admin in Gusto in order to redeem the tax credit.

After you’ve completed an audit of your company’s R&D expenses with your accountant, and filed Form 6765 with your business’ income tax return, your accountant can set you up to claim the credit in Gusto. By defaulOnly one credit can be claimed at a time until the full amount is used up.

Your accountant will claim the credit for you using their own accountant dashboard. They’ll need a few things first:

• Your business’ most recent annual income tax return;
• Form 6765;
• Any previous Form 8974, if you’ve already claimed part of the credit

Important: Your accountant will need to submit all the necessary information to Gusto by the 15th of the last month of a given quarter in order for it to be included in the quarterly filing.

The R&D Credit cannot start being claimed until the quarter after your Federal Tax Return has been filed.

• Example: If an admin enters in 3/15/20 (Q1) as the Income Tax Return filing date, the credit cannot not start being applied until 4/1/20 (Q2).

Gusto will then complete and file Form 941 as well as Form 8974 so your company can claim the credit and receive the refund. The IRS estimates the refund will take 10-12 weeks to arrive after we file.

Resources

• Form 941 instructions
• Form 6765 instructions
• Form 8974 instructions
• IRS final ruling

Once your company is set up to claim the credit, you can review summary reports about your Federal R&D Tax Credit in the Reports section of your account.

You need to have an accountant admin in Gusto in order to redeem the tax credit.

Only one credit can be claimed at a time until the full amount is used up. You’ll be charged $100/month in any month in which you claim the R&D Tax Credit in real time.

• In 2023, the IRS updated the guidelines to allow for the R&D Tax Credit to be applied to employer Medicare once the employer's share of Social Security is exhausted. For the time being, Gusto will not be applying the real-time credit to Medicare. Gusto will report any Medicare credit amounts on the quarterly filings and the IRS will refund the company. 

Important: This setting only appears in your account if there's a remaining balance to apply credit to. It also depends on when your accountant filed your most recent business income tax return, because you're eligible to claim the credit on the first day of the following quarter. For example, if your return was filed in May, then the credit period begins July 1st (the first day of the next quarter) and runs through June 30th of the next year.  

Steps for an accountant to set up real time R&D Tax Credits

1. Sign in to your Partner dashboard.
2. Go to the Clients section.
3. Select the client's name.
4. Click Go to client account in the top-right corner.
5. In the client's account, click the Settings section.
6. Click the Customization tab.
7. Next to “Real Time Federal R&D Tax Credit,” click edit.
8. Toggle to Enabled.
9. Click Save.

You'll see the R&D Tax Credit savings on the next payroll you process.

Steps for an admin to set up real time R&D Tax Credits

1. Go to the Settings section of your admin account.
2. Click the Customization tab.
3. Next to “Real Time Federal R&D Tax Credit,” click edit.
4. Toggle to Enabled.
5. Click Save.

You'll see the R&D Tax Credit savings on the next payroll you process.

Cancel real time Federal R&D Tax Credits

If you do not wish to take the R&D Tax Credit in real time anymore, you may cancel at any time.

Steps for an accountant to cancel R&D Tax Credit in real time

1. Sign in to your Partner dashboard.
2. Go to the Clients section.
3. Select the client's name.
4. Click Go to client account in the top-right corner.
5. In the client's account, click the Settings section.
6. Click the Customization tab.
7. Next to “Real Time Federal R&D Tax Credit,” click edit.
8. Toggle to Disable.
   • You'll be billed for the full $100 monthly fee even if you disable mid-month.
9. Click Save.

Steps for an admin to cancel real time R&D Tax Credits

1. Go to the Settings section.
2. Click the Customization tab.
3. Next to “Real Time Federal R&D Tax Credit,” click edit.
4. Toggle to Disable.
   • You'll be billed for the full $100 monthly fee even if you disable mid-month.
5. Click Save.

Once your company is set up to claim the credit, you can review summary reports about your Federal R&D Tax Credit in the Reports section of your account.