How the credit works

The credit, explained.

The federal R&D tax credit has a reputation for being hard to read. These guides take it apart in plain English, then in the words of the statute, so an owner and their advisor can see the same picture. More are on the way.

Guides

Nine guides
What qualifies

New to your firm is enough.

The four-part test in plain English, the new-to-your-company standard, where the work shows up across industries, and what stays out.

Read the guide The four-part test

Four questions decide the credit.

Each requirement in the words of Section 41 and its regulations, then applied to real projects. The exclusions, funded research, and what counts once the test is met.

Read the guide CPA Guide to Form 6765

The credit is computed once.

Form 6765 section by section: regular credit, alternative simplified credit, the Section 280C reduced-credit election, the payroll tax election, and the Section E, F, and G disclosures.

Read the guide CPA Guide to Form 3800

Every credit passes through one form.

Where the research credit goes on Form 3800: Part III line 1c or 4i, the pass-through EIN column, the general business credit limitation, and line 38 to the return.

Read the guide CPA Guide to Form 1120

Schedule J, line 5c.

C corporations: the credit on Schedule J, the 25 percent limitation, the Section 174A deduction, and Form 1120-X for prior years.

Read the guide CPA Guide to Form 1120-S

Box 13, code M.

S corporations: Schedule K line 13g, Schedule K-1 box 13 code M, the entity-level Section 280C election, and what the shareholder does on Form 3800.

Read the guide CPA Guide to Form 1065

Box 15, code M.

Partnerships: Schedule K line 15f, Schedule K-1 box 15 code M, the partner step on Form 3800, and the administrative adjustment request for prior years.

Read the guide CPA Guide to Form 1040

Schedule 3, line 6a.

Individuals and sole proprietors: the K-1 amount or Form 6765 to Form 3800 to Schedule 3, the Schedule C deduction, and Form 1040-X.

Read the guide CPA Guide to Form 1041

Schedule G, line 2b.

Estates and trusts: the beneficiary allocation on Form 6765 line 31, Schedule K-1 box 13 code I, Form 3800, and Schedule G.

Read the guide

Thirty minutes shows whether you qualify.

Book a call and bring the person who knows the work. We will walk the four questions against your projects and tell you plainly whether a study is worth doing.

Book a call Or write to inquiries@thefoundryfirm.com