Start-up Companies Can Now Benefit from the R&D Tax Credit

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Did you know that if you’re a start-up company with annual gross receipts less than $5 million you can reduce your 2017 labor costs by up to 6.2%?

The Federal R&D tax credit is a dollar-for-dollar reduction of federal income tax liability for qualified expenditures incident to the development or improvement of a product, process, software, formula, or invention recently made permanent by The Protecting Americans from Tax Hikes Act of 2015 (PATH Act).

Previously, a company had to actually generate a profit and taxable income to utilize the R&D tax credit. The PATH Act allows start-up companies who haven’t generated federal income tax liabilities to utilize the credit against their payroll taxes.

The new payroll tax offset election allows qualified small businesses to elect to use a portion of their R&D tax credit to offset payroll taxes instead of waiting to use the credit against future income tax liabilities. In tax years beginning after December 31, 2015, companies with less than $5 million in gross receipts and less than five years removed from the first year of revenue have the option to apply up to $250,000 per year to offset payroll taxes.

For a free review and analysis to determine your potential savings, please contact Melissa Tarkett, CPA, at

About Melissa Tarkett

Melissa Tarkett has written 2 post in this blog.

Melissa A. Tarkett, CPA serves as a manager in the tax practice of Aronson’s Technology Industry Services Group, where she specializes in the complex compliance, consulting and advisory needs of technology companies and their entrepreneurial owners. From inception to liquidity, Melissa provides a client-centric partnership approach to understand the needs and goals of her clients in the ever-evolving technology fields. Melissa has deep expertise in a wide range of tax disciplines, including multi-tiered ownership, consolidations, multi-state and international income, and franchise tax compliance for C-corporations, S-corporations, LLCs and partnerships. She provides tax compliance and consulting services to her investor and investee clients related to mergers and acquisitions, due diligence, organization structuring, methods changes, and tax audits and controversies.

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