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Frequently Asked Questions

Have questions? We've got answers. From business valuations to tax credits, check out our helpful resources below. 

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Employee Retention Tax Credit (ERTC)

What's the ERTC?

The ERTC was created by the federal government to allow businesses that kept their employees on the payroll during the COVID-19 pandemic to claim credits on qualified wages paid to employees, including health insurance costs. Per quarter, employers could claim up to $5,000 for each employee for 2020 and $7,000 for 2021. 

What's the deadline for filing the ERTC?

Businesses have three years from their tax return’s due date to apply for Employee Retention Tax Credit. This means employers can claim the 2020 ERTC until April 15, 2024 and the 2021 ERTC until April 15, 2025.

How do I file for the ERTC?

To apply, use the amended quarterly payroll tax return, or form 941-X.

During what timeframe can I claim the ERTC for my business?

A majority of organizations can look back through their payroll and identify eligible wages paid between March 12, 2020-October 1, 2021. 

Can I claim the ERTC retroactively?

Yes, businesses can still retroactively claim it by completing an eligibility analysis and filing a retroactive claim.

R&D Tax Credit

What’s the R&D tax credit?

The research and development (R&D) tax credit offers tax credits to U.S.-based companies that are inventing, improving, or optimizing current processes or creating, revising, and improving products.

How does the R&D tax credit work?

The R&D tax credit allows businesses to document certain expenditures associated with innovation or improvements. These activities can qualify for the credit, which lower the company’s tax bill and liabilities.

How far back can I claim R&D tax credits?

R&D tax credits can be applied retroactively. Typically, our clients are able to claim the credit retroactively for 3-4 years. However, in some instances, they can go back even further.

How do I account for R&D tax credits?

To track qualifying expenses and activities, you should implement a documentation system built with best practices. Each expense should be categorized by department, ledger allocation, or other important factors.

Are R&D tax credits refundable?

R&D tax credits are monetized by directly lowering the amount of tax you pay.

The credit reduces corporate tax liabilities, and it also lowers individual tax obligations. Many of our clients find the tax credits much more advantageous than a straight refund.

Is the R&D tax credit considered state aid?

R&D tax credits are not considered state aid. R&D tax credits are granted directly from the revenue agencies.

What expenses qualify for the R&D tax credit?

Many expenses qualify for the R&D tax credit. These tax credits are typically labor-driven. In most instances, what you pay employees and contractors to perform qualifying activities will be your biggest qualifying expenses. Supply costs and speciality tools and equipment may also qualify. 

Are R&D tax credits taxable?

No, R&D tax credits are not taxable as income.

How are R&D tax credits calculated?

Calculating R&D tax credits is a complex process.

We begin the process by examining a company's qualifying activities and the allocated expenses directed at those activities. That expense becomes the pool of those applicable costs. Then, depending on state and federal guidelines, the credit is calculated from that total expense pool. 

Can I claim R&D tax credits?

To see if you qualify, we start by looking at your industry.  

Companies in industries such as manufacturing and technology tend to lean heavily on improvement and innovation processes or activities that will most likely qualify them for the credit. However you may still qualify if your company is not in these industries.

How much is the R&D tax credit?

The amount your company will receive from the R&D tax credit will depend on how much your business spends on research and development-qualifying activities.

Does my project qualify for the R&D tax credit?

A project qualifying for the credit would depend on whether or not the initiative is related to innovation or improvement efforts. That effort doesn’t need to be a major innovation—it just has to be an evolution for the company.

Manufacturing a new product, even if the product has been on the market before through a competitor, may qualify a business for the R&D tax credit. 

What are some research activities in manufacturing that could qualify for the R&D tax credit?

In the manufacturing industry, there are many R&D tax qualifying activities that typically take place during the pre-production phase. Routing, processing, specialty tooling, and other activities associated with determining manufacturing ability and processes are often considered qualifying activities.

What are some research activities in architecture and engineering that could qualify for the R&D tax credit?

Engineering and architecture firms are excellent candidates for the R&D tax credit. Many of their activities will have associated expenses that will qualify.

What are some research activities in software technology that could qualify for the R&D tax credit?

Software and technology firms are the gold standard for research and development tax credits. Activities like programming, strategy, and revamping existing technologies will generally qualify them for the tax credit.

What are some research activities in the medical device industry that could qualify for the R&D tax credit?

The medical device industry typically engages in a lot of R&D-qualifying activities. The conceptualization, design, reproduction, and prototyping processes will result in a high level of expenses for research and development that are eligible for the credit.

What are some research activities in the cannabis cultivation industry that could qualify for the R&D tax credit?

The cannabis cultivation industry is rapidly evolving its technological processes and systems, such as increasing production, improving timelines and product delivery, and more.

These activities qualify cannabis brands for R&D tax credit savings at the state level.

Can the R&D tax credit offset payroll taxes?

In certain cases, R&D tax credits can offset payroll taxes. 

For example, if a startup earns under $5 million in revenue or has been in business for less than five years, that business can elect to offset payroll taxes in lieu of corporate or individual taxes.

Business Valuation

Why do forward-thinking businesses evaluate themselves each quarter?

Progressive, forward-thinking organizations regularly look at different business goals and objectives each quarter. This helps them determine enterprise value, which is used as an important key performance indicator (KPI). 

How long does a business evaluation take?

A standard analysis consists of several hours of in-depth discussion and provides a good baseline for the organization's current state.

Once the business value is determined, we compare that baseline to the market. The difference between the current state and long-term objectives is called the gap. Our experts recommend the steps to close that gap and ultimately increase the company’s value.

What acquisition strategies can help grow my business?

Acquisition strategies are a great way to scale organizations quickly.

One of the major benefits of acquiring a company is its human assets, especially in a skilled labor shortage like today. When one organization acquires another, it integrates new systems and controls, more revenue, a new client base, and a skilled labor force. 

How can KPIs be used to evaluate a business?

Developing a thoughtful set of KPIs can help the organization understand its short-term and long-term objectives. KPIs take different factors into consideration, depending on what’s important to a business.

Is it a good idea to purchase a business if the owner is retiring?

If a business is in the process of being sold, we evaluate the current middle management team and its ability to take on the role of that business owner.

A business owner or ownership group is often involved in many different elements in the business (e.g., finance, sales, payroll, operations, and so on), and the company should have the ability to transfer these responsibilities from the business owner to the next layer of management.

What's the best way to deal with with business sellers who want to leave a legacy?

Many business owners derive a strong sense of purpose from running an organization. Understandably, conversations related to selling their business and legacy can be very emotional.

When engaging in these conversations, we first want to understand how the business owner feels. What do they hope to achieve? What do they need to get out of the business in order to support their quality of life or next business venture? 

What's an exit plan?

How can business owners leave or sell their company? Developing an exit plan is key. An exit plan helps business owners understand where they're going, giving them a well-defined path to get there. 

We'll work with business owners to define their long-term objectives, giving them simple steps to work toward the organization's eventual sale. 

Why do some poorly structured businesses lose up to 30% of their value?

Organizations that haven’t properly prepared are often sold for less than their asking price. This amount can equal up to 1.5x and 2.5x, which is significant.

However, business owners can receive up to a 30% increase in value if their organization has clean financials, good middle management, and the right systems and processes in place.

Have more questions?

We have answers. Schedule a free consultation today.