Federal Research & Development Tax Credit

What is the Federal R&D Tax Credit

Beginning in 2017, qualified small businesses may be eligible to claim a federal tax credit for costs related to their research and development activities, up to $250,000 per fiscal year. In general, small businesses with less than $5 million of gross receipts, who have had gross receipts for five years or less, and who have qualified research and development costs may qualify.

The IRS allows employers to receive the tax credit by applying it against the employer’s share of Social Security payroll tax liabilities. To claim the credit, you must report it on your quarterly Form 941 along with a completed Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities. You should consult your tax advisor to determine whether the credit is available for your business.

How to claim the Federal R&D Tax Credit with Gusto

After you have completed an audit of your company’s R&D expenses with your accountant and filed Form 6765 with your business’ income tax return, you can proceed with claiming the credit in Gusto.

The first step is to make sure your accountant has been added as as an admin in your Gusto account so that they can assist with claiming this credit. After your accountant has been added as an admin, please email support@gusto.com to let us know you will be claiming the credit.

Your accountant will claim the credit for you via their own dashboard. They will need your business’ 2016 income tax return and Form 6765 to complete the process. If you have already claimed part of the credit, they will also need your previous Form 8974. Please remember that your accountant will need to submit all the necessary info to Gusto by the 15th of the quarter end month to be included in the quarterly filing.

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 6-8 weeks to arrive after we file.

Available amount of credit

This credit is taken against your Social Security taxes, so your refund will be capped by the amount of Social Security taxes you owe. Your actual refund may be less than your total eligible credit, but don’t worry, you won’t lose the credit - you can carry it over into future years.

Cost of Federal R&D Tax Credit filings with Gusto

Quarterly filings to claim the Federal R&D Tax Credit are free for all Gusto customers.


Georgia R&D Tax Credit

Learn more about how to claim the Georgia R&D Tax Credit here.


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