Qualified Research Activities Credit: Fill & Download for Free

First there is no business research credit, you may be referring to the Research and Development Tax Credit.The R&D tax credit applies to business activities related to the design, development or optimization of products, processes and techniques. Research related to scientific formulas, software programs and business services also qualify. Benefits are calculated based on increases in research activities and expenses, so its intended to reward innovation and investments.The research must be undertaken for the purpose of discovering information that is technological in nature;Substantially all of the research activities must constitute a process of experimentation; andThe experimentation must relate to a permitted purpose.This definition is relatively broad and encompasses such activities as:Developing new or improved products, processes or formulas;Developing prototypes or models;Developing or applying for patents;Certification testing;Developing new technology;Environmental testing;Developing or improving software technologies;Building or improving manufacturing facilities; andStreamlining internal processes.Qualified Research Expenses (QREs) are defined in section 174 of the Internal Revenue Code (IRC). Eligible expenses are limited to internal wages and supplies that are attributed to qualified research, which may include costs of computer use. The tax credit also covers up to 65 percent of contractual research expenses conducted by foreign vendors. You pretty much have to design your accounting processes specifically to track the reporting requirements for the credit.You claim the credit by filing Form 6765, Credit for Increasing Research Activities

Assuming "works" refers to "increases your performance at various life and cognitive tasks through real and lasting improvements in cognitive ability", i think the current scientific consensus is "we don't know".Generally, this is a controversial subject. On the one hand, there's lots of anecdotal evidence (certainly customer reviews on places like Lumosity need to be taken with at least a grain of salt); but the on the other hand, serious empirical investigations that try to rule out things like exposure, general activity, and placebo effects often come up short of full-on supporting the kinds of benefits that Lumosity can claim to provide.Here are a few good Quora threads on this general issue that shed some light on the controversy:What is the most effective way to enhance working memory? (see especially Bradley Voytek's answer for pointers to good reviews of the literature on this).Can the mind be strengthened just like a muscle? In what ways does this metaphor work and in what ways does it not?Cognitive Enhancement: Does modern science support the claim that one can increase their intelligence by using their mind more frequently to solve puzzles, problems, etc?To their credit, Lumosity is opening up the data to qualified researchers as part of the Human Cognition Project, so I'm guessing we'll likely converge on a firmer stance in the not-so-distant future. But at the moment, I'd say the jury is still out.My own take is that it *might* in principle work, but will probably take a lot more effort than the average person would be willing/able to put in. I've seen first hand (participated and looked at data) studies in my department with intense (~1 hr or more a day, for weeks), focused (specifically designed to train domain-general working memory, e.g., N-Back Task), and adaptive (difficulty adjusts to your performance) working memory training failing to show transfer to reasoning or reading tasks. I'm guessing the typical Lumosity use case is a fair bit less intense than this. So I'm skeptical that most people get the value they expect out of services like Lumosity beyond a placebo effect.

Startup R&D tax credits are about to change dramatically. Traditionally, these tax credits were calculated and saved up against a Corporation’s annual tax forms. For startups that aren’t yet profitable, that meant that they would only benefit from these tax credits once they became profitable in future years.The PATH (Protecting Americans from Tax Hikes) Act of 2015 has changed all of that. Regulators acknowledged that the old R&D tax credits weren’t appetizing to founders if it only promised a potential future benefit that may never be realized. And so the R&D tax credit has been revised to give more instant gratification: R&D tax credits generated in 2016 can be used to offset payroll taxes come mid-2017.In prior years I’ve sometimes told my clients that the cost of performing an R&D tax credit study would outweigh the benefit. Now that you can claim these credits almost immediately and against your payroll taxes, I highly recommend that every eligible startup engage in an R&D Tax Credit payroll offset.Why should I have my startup file for the R&D tax credit payroll offset?***IT SAVES YOU DIRECT $$$ NOW!!!***Up to $250,000 per year for up to 5 years!Am I eligible? Can any startup apply for the R&D tax credit payroll offset? What defines Research & Development?Unfortunately, not every company is eligible. You must be creating something new, and by new I mean pass the IRS’ 4 Part Test. Your R&D must be:Specific: no mindless tinkering allowed. The project must be defined.Eliminate Uncertainty: must be contributing real scientific advancement, not just proving existing knowledge.Experimental: either have a scientific method or trial and error process.Technical: the work must be grounded in the hard sciences like biology or engineering.Are there any R&D activities that don’t qualify?Research after commercial productionAdaptation of existing business componentsDuplication of existing business componentReverse EngineeringSurveys & studiesComputer software for internal useForeign researchResearch in the Social Sciences, Arts, Humanities, etc.Funded researchIs my startup eligible for the R&D tax credit payroll offset?The startup must have qualifying R&D expenses (see definition below).The startup must be new; only startups that have generated revenue for 5 years or less can claim the new tax credit. If you had receipts prior to 2012, then you’re ineligible.The startup must have less than $5 million in revenue in 2016 and each subsequent year that you claim the payroll offset.What qualifies as a R&D Expense? What goes into the calculation?Wages: but only for those people who engage in R&D activities.Subcontractors engaged in R&D: ‘nuff said.Supplies: only include direct supplies that were related to the R&D project and weren’t classified as an asset.Computer Leases/Rentals: we rarely see this…How do I claim the R&D tax credit payroll offset?First file the R&D tax credit on Form 6765 (Credit for Increasing Research Activities) which is a part of your 2016 annual corporate form 1120 (US Corporation Income Tax Return). Then claim your R&D tax credit on payroll tax form 941 (Employer’s Quarterly Federal Tax Return); you’ll need to work with your payroll processor to make this happen. We love working with Gusto, but just about every major payroll processor should be able to help.When should I file the R&D tax credit payroll offset?In early 2017, after you’ve closed out your 2016 books. Work with your CPA on an R&D tax credit study: once you’ve determined what your tax credit will be, add it to your 2016 annual corporate form 1120 and file the return. In the quarter following your 1120 filing, you can start applying those tax credits to your payroll taxes. For example, if you file your Form 1120 by March 15th, the first payroll tax offset you would receive is for Q2 2017.How much will my startup really save by implementing the startup R&D tax credit payroll offset?~10% of eligible R&D costs, up to $250,000 per year, for 5 years.Caveat: this article is intended as general guidance for startups and it doesn’t substitute the need to work with a professional. It’s also a high level overview and is in no way complete. Your company is unique; talk to your CPA.