I have to share a couple of comments.
1—“I never had the time to do the R&D tax credit but I decided I will never have more time than right now!”. I was really surprised to learn that your partner Mike has a process that makes gathering all the data very organized and much easier than I envisioned. That is why I “never had the time” and now I am kicking myself. The other great news is that we can capture 2019 and FOUR previous years by using your partner firms (most firms can only look back three years). I owe you at least two beers for your insight. Reminds me that we will schedule a happy hour as soon as we are allowed to collapse the social distancing 6 foot rule!
2-Another CFO reported, after reading your update, I thought of using ADP to do the R&D credit since they advertise that they do R&D Credits since they have all of our payroll info. When I looked into using them, after reading your blast last week, I realized all they do is take payroll and use parameters that are acceptable to the IRS to “not trigger and audit” and that all documentation, submission and audit liability would be mine. I would be crazy to use ADP and not a best in class partner. Thanks for the introduction. He added “ I guess I could do my own root canals since I could look them up on You Tube but I wouldn’t do that myself so why should I do an IRS version of a root canal by myself!” (Nice to find a CFO who is smart and has a sense of humor) –but he should have done this credit a few years ago but better now than never doing it!
3-On cost seg, we just did an estimate for a guy with a little building-bought a small office building last year for one million dollars. “don’t think it is worth it but give me an estimate-he was stunned that his first year (2019) benefit is over 100k and that we can do the analysis within 4 or 5 weeks so his CPA can file the 2019 without a payment due to the credit. When we told him the cost, he was stunned,KPMG charged him 4 times more! That was why he didn’t think it was worth it. Now he wants us to look at his commercial businesses and review the work that KPMG did.
4-A major local employer, with a great CFO and a great Tax department does their own R&D credit work. They asked us to take a quick look at it and we discovered they missed 50% of the qualifying expenses. They don’t want to amend their previous work but going forward they now know what qualifies. They paid a small consulting fee to double their R&D tax credit. Frankly, not sure if the tax guy keeps his job! He was doing the right thing BUT doing it poorly!
5-Finally, another R&D credit quip. A client who does the R&D credit updated 2019 but didn’t want to bother the CEO and staff to update their time spent on qualifying work so he told us to eliminate the exec portion. We showed him that they would lose 25% of their credit and he made a few phone calls, decided to keep the allocation the same as 2018-which was a bit conservative but a hell of a lot better than ZERO. Their credit increased over 2018 and all it took was a phone call with Mike and with me to figure out a reasonable path forward to get the 2019 credit done.
Just thought I would share these comments. IF you are sitting at home and wondering how to pay taxes and still conserve your taxes, these tax best practices are NOT intimidating if you use a best in class partner! Mike D’Alessandro has been a frequent speaker to our group and his firm are experts in this so reach out to him (on the cc line above).
Same for cost reductions and a lot of other improvements. You have the time, we have the best practices and partners who can make you look like a genius!