02 May For Small Business Startups, IRS Explains New Option
For Small Business Startups, IRS Explains New Option for Claiming Research Credit; Option Still Available for Those That Already Filed
The Internal Revenue Service issued interim guidance explaining how eligible small businesses can take advantage of a new option enabling them to apply part or all of their research credit against their payroll tax liability, instead of their income tax liability. Before 2016, taxpayers could only take the research credit against their income tax liability.
Notice 2017-23, posted on IRS.gov on March 30, 2017, provides guidance on a new provision included in the Protecting Americans From Tax Hikes (PATH) Act enacted in December 2015. This new option will be available for the first time to any eligible small business filing its 2016 federal income tax return this tax season. Those who already filed still have time to choose this option.
The option to elect the new payroll tax credit may especially benefit any eligible startup that has little or no income tax liability. To qualify for the new option for the current tax-year, a business must have gross receipts of less than $5 million and could not have had gross receipts prior to 2012.
An eligible small business with qualifying research expenses can choose to apply up to $250,000 of its research credit against its payroll tax liability. Under a special rule for tax-year 2016, a small business that failed to choose this option and still wishes to do so, can still make the election by filing an amended return by Dec. 31, 2017.
If you think your company might qualify for the new credit, call Palm Beach Tax Service, our company will help you navigate the complex tax codes to your advantage.