specialized tax credits within your reach r&d (manufacturer’s) tax credit presentation for...
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Specialized Tax Credits Within Your Reach
R&D (Manufacturer’s) Tax CreditPresentation for MFG.Com
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Specialized Tax Credits Within Your Reach
CORPORATE OVERVIEW
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• Corporate Headquarters in Houston, Texas.
• Assisting CPA’s, Alliances, and their clients to recover millions in R&D Tax Credits.
• We specialize in legal, technical (engineering) and tax knowledge of the Internal Revenue Code (IRS) Section 41.
• Our Staff includes the industry’s most experienced IP Attorneys, R&D Engineers, Scientists, and IRS Audit Experts from national tax consulting firms.
Specialized Tax Credits Within Your Reach
HISTORY - R&D TAX CREDIT – IRC §41
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• In December 2001, new tax regulations enabled small to mid-size companies to be eligible to take the R&D (wage-based) Tax Credits.
• Documentation and Discovery requirements were relaxed.
• The goal was to keep innovation and creativity in the U.S. and encourage economic growth.
• Small Business Jobs Act of 2010
• Clients can now receive cash back and/or tax credit benefits for conducting technical activities and meeting the tax regulation requirements.
Specialized Tax Credits Within Your Reach
IRS DEFINITION OF R&D
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Tax Definition
1. New or Improved Business Component
• Product,
• Process,
• Software (Internal or External),
• Technique,
• Formula, or
• Invention.
2. Technological in Nature
3. Elimination of Uncertainty
4. Process of Experimentation
Traditional Definition
Specialized Tax Credits Within Your Reach
Small Business Jobs Act of 2010
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Made Three Critical Changes to this Credit:
1. Any company under 50M in Sales could now take the credit
2. The 2010 (and 2011) credit can be used to offset ANY TAXES PAID, including the Alternative Minimum Tax for up to 5 years prior.
3. “Qualified Research Expenditures” was changed to “Qualifying Activities”. • Definition of what was Qualified Activity expanded• New 12 point Test Established
Even companies over 50M in Sales benefit from the new definitions established.
Completely changed the audit paradigm for the IRS.
Specialized Tax Credits Within Your Reach
12 Point Test Established
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Does your enterprise perform any of the following technical activities:• Manufacturing • Fabrication• Engineering• New Product and Process Development or Improvement• Developing New Concepts or Technologies• Design – Layout, Schematics, AutoCAD• Prototyping or Modeling• Testing or Quality Assurance: ISO 900X, UL, Sigma Six, or other certifications• Integration of new machinery (CNC, SLA, SLE, etc) into existing process• Software Development or Improvement (internal use or for external sale) • Automating or streamlining internal processes• Developing tools, molds, dies
If Yes to any of the above, then they qualify for the credit!
Specialized Tax Credits Within Your Reach
QUALIFIED ACTIVITIES
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Wages• Form W-2, Partnership Earnings subject to Self Employment Tax, Schedule C, bonuses paid to employees• Excludes 401(k) & fringe benefits
Supplies• Cost to fabricate prototypes / items consumed in R&D process• Any tangible property used in the conduct of qualified research other than land or improvements to land, and property subject to depreciation
65% of Contract Research• Fees paid to non-employees, outside consultants / engineers / software developer
Net Benefit is around 6.5% with Regular CreditNet Benefit is around 4% with Simplified Credit
Specialized Tax Credits Within Your Reach
R&D STUDY PROVIDER OVERVIEW
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Other Providers• Study conducted by non-engineers• Technical Sampling• Project by Project Methodology
but stop with wage allocation spreadsheet
Results• Susceptible to substantial shrink
backs
Paradigm Partners• Every employee in production is an IP
Attorney with an engineering background or an engineer
• Comprehensive Project by Project Approach
• Wage allocation spreadsheet supported by detailed documentation by Employee, Hours, Project and Years
• R&D Audit defense included at no cost
Results• R&D Study that is able to withstand the
most intense IRS scrutiny• Retention of most or all credits
Specialized Tax Credits Within Your Reach
PARADIGM’S APPROACH
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• Project by Project Methodology with established nexus (Only method now Recommended by IRS) versus Hybrid or Technical Sampling
• Flexible fee structure to minimize client risk in Phase I• Offer 3:1, 4:1 or 5:1 ROI on the project• Paradigm provides Audit Defense at Federal and State level at NO ADDITIONAL CHARGE• Industry specific engineering team assigned to client
Specialized Tax Credits Within Your Reach
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So what is the next step?Contact Paradigm for Assistance
Bob Stabell Emrick EnseySenior Director Account Manager281.558.7100 ext. 139 281.558.7100 ext. 145979.450.6408 [email protected] [email protected]