Tax Incentives: Software & Technology Companies
Software & Technology Industries
Many software and technology development businesses are often unaware of whether they qualify for certain government tax incentive programs, or they may believe that such programs do not apply to their companies. Even those that are aware often fail to capture the full extent of tax credits to which they are entitled.
For example, many taxpayers mistakenly believe only specially trained engineers designing innovative and/or uniquely revolutionary patented products or processes are qualified research activities to claim the R&D tax credit under the U.S. tax code. Although patent applications and approval are highly persuasive support for qualified activities for the R&D tax credit, it is not a required prerequisite for qualification. Moreover, other collaborative employees and expenses outside of traditional engineering and development employees may also qualify for the R&D tax credit.
Below outlines various federal tax incentives which may be applicable to your business as a cash saving benefit and/or refund opportunity. If any of these credits appear relevant to your business, let AndreTaxCo help you claim the credits that you deserve!
Research and Development Credits
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Research Credit (Form 6765) under IRC § 41(a)
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See also State R&D Credits additional benefit opportunities.
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Software & Technology Services – Qualifying Research Activities Examples
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Hiring Credits & Incentives
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Work Opportunity Credit (Form 5884) under IRC § 51(a)
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Differential Wage Payment Credit (Form 8932) determined under IRC § 45P(a)
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Indian Employment Credit (Form 8845) as determined under IRC § 45A(a)
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Empowerment Zone Employment Credit (Form 8844) determined under IRC § 1396(a)
Low-Income / Targeted Geographical Zone Credits
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Low-Income Housing Credit (Form 8586) under IRC § 42(a)
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New Markets Tax Credit (Form 8874) determined under IRC § 45D(a)
Business Benefit Plan Credits
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Small Employer Health Insurance Credit (Form 8941) determined under IRC § 45R – available for tax years beginning after 2009. For tax years beginning after 2013, the credit is only available for a 2-consecutive-tax-year credit period.
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Paid Family and Medical Leave Credit (Form 8994) determined under IRC § 45S(a) in the case of an eligible employer (as defined in IRC § 45S(c))
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Credit for Small Employer Pension Plan Startup Costs (Form 8881) determined under IRC § 45E(a) in the case of an eligible employer (as defined in IRC § 45E(c)) – up to $5,000 per year for up to three years ($15,000 cap)
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Credit for Employer-Provided Childcare Facilities and Services (Form 8882) determined under IRC § 45F(a)
Note, many of these listed federal credit incentives have comparable state tax incentives that are often substantially similar to calculate or claim, subject to state specific procedural rules and regulations.