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Taking your R&D Credit: Offsetting Payroll Tax

 |   |  Category: Business Tips, Tax Law, Tax Tips  | 

The Research and Development Tax credit has taken a lot of criticism for being un-impactful. One reason is the business generating the credit had to have income to use the credit.

Since the PATH act, small businesses in their first 5 years with less than $5 million of gross revenue can use what once was only a federal income tax credit as a payroll tax credit. See my previous blog about the details and how to maximize the credit.

Since my article, the IRS has issue new guidance, Notice 2017-23, 2017-16 IRB. The biggest news is that if you fail to make the election to convert your income tax credit into a payroll tax credit (elected on your business return) you have until the end of the year to amend your return and make the switch.

Start up companies getting the credit who were considering keeping their workers as independent contracts or who are using an employee leasing company (which files the payroll tax return under a separate EIN) need to consider putting these people on company payroll and claiming their cash.


Josh Rowley is the Managing Partner at Hawkins. Josh started the Hawkins R&D service group in 2012. He has served as an Executive Member of the UACPA ProNet Council, as the President of the UACPA Southern Chapter, and was a member of the UACPA Emerging CPAs Committee. He is currently a member of the Woodbury School of Business National Advisory Council. Josh is the proud father of five children.

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