The IRS recently announced that taxpayers are now allowed to amend returns to claim the Alternative, Simplified Research and Development credit. Historically, this was only reserved for timely, originally filed returns and no extension of time was available to make the election to use the alternative simplified credit. This is expected to help small to medium-sized businesses, the lifeblood of our economy, claim and benefit from the credit.The R&D credit may be claimed if a company incurs certain research expenditures for a new, improved, or upgraded product or process. Typically manufacturing, technology, medical device, pharmaceuticals, engineering, and certain agriculture businesses have benefitted from the credit.
Prior to this change, business owners often chose to utilize the R&D credit prospectively, because the cost of amending three years of tax returns using the Standard R&D credit could easily minimize, or even eliminate, any benefits. The standard research credit, which historically was required to be used on amended returns, is an often complex calculation and requires the use of historical data that may not be available or will require tremendous effort to produce. The alternative simplified credit is much simpler to compute and does not require the use of historical data. To claim the alternative simplified credit on an amended return, you must not have claimed a credit on the originally filed return and the return must be for a year prior to June 3, 2014. There are also various provisions regarding certain affiliated companies and other exceptions that may apply. Please contact HLB Gross Collins, P.C. to learn more about this new announcement and discuss in more detail the opportunities for your business.