I just listened to a gentleman from the Tax Institute in Lincoln explain that anybody who wants to start a company can get a $5000 tax credit for 'research.' It's ALSO possible to get tax credits for 'organizational expenses' to create a new company.
This doesn't seem to be common knowledge. Does everyone else know about this?
I just wonder how many "hoops" a person would have to jump through to get the tax credit?
hi gmcdowell - Like all tax credits, you will need to work with your accountant to make sure you follow the rules. There are a lot of rules for documentation of employee wages, and other developmental expenses. Meeting with the accountant prior to starting your research will help in the long run. The tax credit can be applied toward research on new products, enhanced processes, redesigned facilities, etc.
On irs.gov (http://www.irs.gov/businesses/article/0,,id=156352,00.html) the research tax credit is claimed on IRS Form 6765. Form 6765 requires the taxpayer to allocate QREs among wages, supplies, and contract research expenses.
One online attorney firm indicated that this tax credit is one that has high IRS scrutiny and the greatest compliance risk. So again, work with your accountant.
Hope that helps.
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