What is the
R&D Tax Credit?
What Is the FICA Tip Tax Credit?
The Research and Development (R&D) Tax Credit remains one of the best opportunities for businesses to substantially reduce their tax liability. For what amounts to their daily activities, companies from a wide range of industries can qualify for federal and state tax savings high enough to allow companies to hire new employees, invest in new products and grow operations. Now, due to recent modifications and expansions over the years, more companies than ever before can benefit from this valuable incentive.
The FICA Tip Tax Credit is a federal income tax credit created under IRS Code Section 45B that allows eligible employers to recover the employer-paid portion of Social Security and Medicare taxes (FICA) on employee-reported tips. When employees earn tips, those tips are treated as taxable wages — even though the employer never receives that income. As a result, businesses pay payroll taxes on money that passes directly from customer to employee.
How to Claim R&D Tax Credits
To claim the R&D tax credit, businesses must file IRS Form 6765, Credit for Increasing Research Activities, as part of their timely filed federal income tax return, including extensions. This form reports the qualified research expenses (QREs) incurred during the tax year.
If you missed claiming the credit in prior years, you may also file amended tax returns—typically going back up to three years—to retroactively claim the R&D credit.
Federal and State R&D Tax Credits
Businesses across the U.S. may qualify for valuable R&D tax credits at both the federal and state level. While the federal R&D credit is available nationwide, many states also offer their own R&D incentives.
Each state’s program is unique—some mirror federal rules, others have their own qualifications, benefits, or filing requirements.
Which Activities Qualify for R&D Tax Credits?
Creating improved products, processes, formulas, software, and techniques
Designing tools, jigs, fixtures, and molds
Integrating new equipment
Automating or improving internal manufacturing processes
Automating or improving internal manufacturing processes
Mobile application development
Internet of Things (IoT) development
Development of data center, big data, and data mining tools
Integration of APIs and other technologies
Manufacturing new or improved products
Developing prototypes, first articles, models
Evaluation of alternative materials
Development of firmware
Network hardware and software development and optimization
Developing simulators
*Are you a new business or not profitable yet?
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