What's the new 2017 Federal R&D Tax Credit all about?
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.
The IRS allows employers to receive the tax credit by applying it against their share of Social Security employment tax liabilities. The credit will be reported on the quarterly Form 941.
How do I claim the Federal R&D tax credit?
First up, complete Form 6765, Credit for Increasing Research Activities and attach it to a timely-filed business income tax return. Once filed, you can claim the payroll tax credit on your Form 941. Make sure to attach a completed Form 8974 as well, so everything is squared away.
Exception for tax year 2016 only: If you missed reporting this credit on your 2016 business income tax return, you can still make the election by filing an amended return by December 31, 2017.
It's important to make sure that your company can actually claim the credit. Check with your CPA or tax advisor if you have any questions about your eligibility.