by Tracy Lustyan, alliantgroup Managing Director
Varnex Insider Issue 71
Technology is advancing rapidly, and nowhere is this more evident than in the IT sector. From the Internet of Things to an increased reliance on automation and cloud-based solutions, technology is changing the way we do business.
This is obviously great news for the IT sector—and not just because their services will be in heavy demand for the foreseeable future. Due to the advancement of technology, there is a growing demand for the services of IT resellers, IT solution providers and other consultants within this industry, which has made many of these companies eligible for a valuable opportunity—and it is all thanks to one lucrative tax credit.
The R&D Tax Credit: Keeping Innovation and Jobs in the U.S.
The Research and Development (R&D) Tax Credit has been a part of the tax code since the 1980s, but never has the credit been so widely available for the benefit of U.S. businesses. As a result of new legislation and other regulatory changes, the R&D Tax Credit has evolved into a premier anti-outsourcing incentive. In addition to traditional research, today the credit is designed to reward companies for enhancing their products and processes and for keeping high-paying technical jobs in the United States.
As you might imagine, this expansion has played to the advantage of the IT sector, with many companies qualifying due to the technical nature of their services and employees. For technical projects related to the development, enhancement or integration of IT systems and solutions, these businesses can receive potentially hundreds of thousands of dollars in tax savings.
To illustrate the real-world value this credit can provide, let’s take the case of an IT reseller that received over $337,340 in federal and state R&D tax credits for projects spanning a four-year period. Among this company’s many qualifying activities included the design and integration of enhancements to a client’s existing business system to reduce manual labor as well as improve overall efficiency and accuracy.
For a better understanding of the R&D Tax Credit and its application to the industry, here are a few projects that have traditionally qualified IT companies in the past:
- New or improved infrastructure design
- Designing and integrating with extant systems
- New or enhanced network security design
- Conducting integration and performance testing
- Developing data center and cloud-based solutions maximizing your growth potential
Clearly, the R&D Tax Credit is a worthwhile proposition for IT companies—and one that can offer serious financial rewards for everyday projects and services. During my time at alliantgroup, I have worked with my CEO Dhaval Jadav to ensure IT companies are claiming every dollar to which they are entitled. I have seen first-hand the immense value this credit can provide for the IT sector.
If your company performs any of the aforementioned activities, I would strongly advise that you look into this opportunity. It could be the easiest money that you ever make for your business.
Tracy Lustyan is an expert on the Research and Development (R&D) Tax Credit and how it applies to innovative businesses. As a Managing Director at alliantgroup, Tracy has partnered with more than 225 CPA firms to uncover more than $380 million in government-sponsored tax savings for more than 900 companies operating in diverse industries, including manufacturing, systems integration, engineering and software.
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