Maximizing the efficiency of your client’s tax-paying dollar is the most important job of every accounting firm.
Making the most out of every available tax credit is a proven game plan to reach the goal of not paying more than you owe. The problem? Your client may have a situation where they are unaware that certain credits exist and do not communicate them with their tax advising team.
Maybe you’ve not had many offerings to claim certain credits for your clients — or do not have the capacity now.
These situations are prevalent when it comes to R&D tax credits.
What is an R&D Tax Credit?
The research and development tax credit is an excellent opportunity for many firms that work with medium to large companies across various industries.
It is a great incentive that many businesses do not know about, and for your firm, it can expand the range of services you offer.
Due to how effective the credit is at reducing their tax bill, many businesses are happy to include the extra work needed to document all the necessary expenses to have the backup to request the R&D tax credit. Due to its complexity, it makes an excellent place for your firm to increase its offerings with clients.
Top Industries Applying for R&D Tax Credits
The R&D tax credit does not limit what industries can apply it. The type of activities that count as R&D can work for almost any industry and size of business.
For this reason, it helps to have a guide on what activities count, on a per-industry basis, that you can use to look for opportunities. If you work with clients in the following industries, you are likely to find R&D tax credit opportunities.
This credit is commonly claimed as one of the questions on our recently released benchmark study related to the top industries.
Manufacturing
Manufacturing is one of the most common industries where the R&D tax credit can be applied. Since building prototypes and developing new models can be expected in this industry, you will find many opportunities and easy documentation to support applying for this credit.
Software Development
As of 2020, the software development industry was valued at $389 billion and rapidly growing. Due to the size and overall dynamics of the industry, it is easy to see that many opportunities may show up to apply the R&D development.
New processes and innovative technology development is a key area to target to find R&D tax credits, so make sure your clients can communicate their development strategies and timelines with you. This will help you be on the lookout for new ways to maximize this credit.
Engineering
Within the field of engineering, this tax credit is often taken advantage of. But that does not mean that there are no new opportunities to find where to apply for the R&D tax credit. In this scenario, you can ensure that it is being used to its maximum capacity and go over all the documentation required to back it up correctly.
Less Obvious Industries Applying
There are many industries where the research and development tax credit is less common.
For this reason, it makes them a prime area of focus for developing your firm’s offerings. One of the reasons many businesses in these industries do not consider themselves eligible is because they are not familiar with the definition of what qualifies as research and development.
Architecture
The field of architecture is ripe with innovation and development opportunities. A big area for this field is environmental and certification testing. These two areas can help you get a starting point on how to help your architecture clients find credit opportunities.
Food & Beverage
According to analysts, the food and beverage industry will continue growing rapidly. One of the main drivers of growth is that new product categories are being developed and receive a hefty investment.
For example, the functional beverage category will grow from $184 billion in 2020 to $275 billion by 2025. This implies that countless product development cycles can be used as the foundation to find R&D tax credit opportunities.
In conclusion
Helping your clients take their R&D tax credits opens entire avenues of opportunities for your firm. Even if most of your clients are not in the most prominent field for the credit, you can still explore it with other industries.
And partnering to offer these services is often a worthwhile venture.
If you want to learn more about implementing R&D tax credit services into your firm’s offerings, click here to schedule a free discovery call.