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Demystifying R&D Tax Credits for Startups: Key Takeaways from Our Latest Podcast

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In this blog, we’ll discuss the R&D tax credits for startups and how they can benefit from them. We invited Kate Johnson, Managing Director of Operations, Corporate Tax Incentives (CTI), and Frances (Kim) W., Director of Sales, Corporate Tax Incentives (CTI), to our Startup Pulse Podcast on Founder Spotlight segment.

Anshuman Sinha, Co-founder and CEO of Startup Talent, and the Co-founder of Startup Steroid, moderated the show as the key speaker and host.

Kate Johnson is the managing director of R&D Operations of CTI since 2023. With a strong background as a licensed attorney and a decade of experience in the R&D sector, Kate expertly manages a diverse team of engineers, attorneys, and CPAs focused on implementing R&D tax credit studies.

Frances (Kim) W.’s 15-year tenure at CTI underscored the company’s commitment to detail and customer-centric service, key factors that have solidified her expertise.

A Brief History of CTI

The company was founded in 2001 by three distinguished professionals—two CPAs and former tax auditors, and a Chief Technology Officer (CTO) who has significantly contributed to the in-house development of proprietary software, further underpinning CTI’s unique service offerings.

CTI specializes in helping businesses take full advantage of the tax credits and incentives they’re entitled to receive. In addition, CTI offers the highest level of expertise by employing professionals with experience from Big 4 Accounting firms, state taxing agencies, and government economic departments. Furthermore, CTI has been instrumental in writing Success Stories in R&D Tax Credits for its clients.

CTI offers the following services:

  • Business Tax Credits and Incentives
  • State Income/Franchise Tax
  • Sales and Use Tax
  • Unemployment Insurance Cost Containment
  • Research and Development Credits & Other Services.

Watch the Full Episode

 

Why Is the R&D Tax Credit Essential?

Research and Development (R&D) are the backbone of innovation within startups, driving progress across industries from technology to healthcare. However, the financial undertaking involved in pushing the boundaries of innovation can be substantial.

Enter R&D tax credits, a lifeline for startups navigating the choppy waters of development costs.

Our latest episode of “Startup Pulse” sheds light on these invaluable incentives, with insights from CTI, a tax consultancy firm specialized in securing such benefits for businesses.

Founded in 2001, CTI has carved a niche in helping businesses harness tax incentives, delivering billions in financial savings.

This podcast episode featured Kate Johnson, the Managing Director of R&D Operations, and Frances (Kim) W., the Director of Client Relations at CTI, who unpacked the intricacies of R&D tax credits in the ensuing segments of the show.

CTI’s foundation rests on the expertise of a team blending engineers, attorneys, CPAs, and technology innovators. This diversity is pivotal in crafting tailored R&D tax credit studies for clients across sectors.

It has generated hundreds of millions of dollars in savings for thousands of companies and startups, earning a reputation as a top provider of credit optimization and unsurpassed customer service. Its clients include companies of all sizes and varying industries throughout the United States.

The Breadth of R&D Tax Credits

Enacted in 1981 and made permanent by the PATH Act in 2016, the R&D tax credit in the US is designed to bolster innovation and retain technical jobs in the U.S.

It provides a dollar-for-dollar offset against tax liabilities for companies investing in developing or improving products, processes, software, or technologies.

Contrary to common belief, R&D tax credits extend beyond groundbreaking inventions, covering incremental improvements and custom solutions. Notably, the credit can also offset payroll taxes for startups and companies in their nascent stages, with recent enhancements doubling this incentive.

Kate Johnson highlighted the necessity of customizing the approach to R&D tax credits, considering the unique challenges and opportunities in various sectors. Whether it’s software development, medtech, or construction, CTI leverages its proprietary software alongside specialized knowledge to match each client’s specific requirements.

What’s The Eligibility Criteria?

The eligibility for R&D tax credits stretches broadly but with a critical caveat—activities and expenses must be incurred within the U.S. or its territories. This poses a challenge in today’s globalized economy, where outsourcing R&D activities is expected. Nonetheless, specific expenses, including prototyping and cloud computing, remain claimable under U.S. leadership, albeit with some limitations for overseas development.

Navigating the maze of R&D tax credits demands specialized knowledge, not just for identifying eligible activities and expenses but also for the intricate documentation required by the IRS.

CTI emphasizes the value of professional consultancy in maximizing benefits and providing audit support, ensuring startups’ peace of mind.

In Conclusion

Startups stand to gain significantly from engaging with an expert financial consultant like CTI in their journey. The firm’s success-based fee structure and comprehensive suite of services, from feasibility analysis to audit support, make it an ideal partner for startups leveraging R&D tax credits.

As we wrapped up the insightful conversation on “Startup Pulse,” it became evident that R&D tax credits represent a critical mechanism for supporting innovation and growth within startups.

Startup founders are encouraged to view R&D tax credits as a financial benefit and a strategic asset for fostering innovation and securing a competitive edge in the rapidly evolving business landscape. Remember that you are not alone in this startup journey. Join our online Startup meetups and participate in the Startup Pulse Podcast to gain insights into entrepreneurship while ensuring your long-term success.

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