Website Development Tax Deductions & the Start-Up Rules

There are several tax laws that have to be considered to determine when and how costs to develop websites are deductible. These expenses are almost always deductible. These tax laws raise timing questions. It’s a matter of when the expenses are deductible. For those who are developing website businesses as side-hustles, the issue takes on…

Enough is Enough, But An Amended Tax Return is Not

Enough Is Enough, But An Amended Tax Return Is Not

The process for reporting taxes can be more difficult than discerning whether a tax provision applies. This complexity stems from the level of information is required to be reported. The IRS reporting requirements continue increase every year. The IRS’s decision to require partnership tax capital accounts is an example. Why is that information required and…

Research Tax Credit Records Must Be Kept for 40+ Years

Can Defective Deed Defeat Irs Estate Tax Lien?

A frequent question is how long one has to keep records for tax purposes. The United States v. Quebe, No. 3:15-cv-294 (S.D. Ohio 2019) case provides the answer for research tax credits. The answer is that you have to keep records that pre-date the formation of your business by twenty years and then you have…

R&D Credit Made Permanent & Enhanced

R&d Credit Made Permanent & Enhanced

Congress made the research tax credit permanent and enhanced the credit. The changes are retroactive back to January 1, 2015. Temporary Nature of the R&D Credit The permanent research tax credit solves one of the ongoing problems with the credit. As critics of the credit have noted, the credit cannot provide much of an incentive…

Research Was Not Routine, But Compensation Was Excessive

Research Was Not Routine, But Compensation Was Excessive

For the research tax credit, when is research so routine that it does not qualify for the tax credit?  And what if the founder of the company is paid an unreasonably high wage–can the high wage be considered as an expense for computing the credit?  The court addressed these issues in Suder v. Commissioner, T.C. Memo.…

What Gross Receipts are Used in R&D Credit?

What Gross Receipts Are Used In R&d Credit?

For the research tax credit, what gross receipts do you include in computing its tax credit?  Despite the credit being on the books for several decades, this is an open question.  The court addressed this in Hewlett-Packard Co. v. Commissioner, 139 T.C. 8. Facts & Procedural History Hewlett-Packard Co. (“Hewlett-Packard”) is a global technology and service…

Does Work to Validate Prior Research Qualify for the R&D Tax Credit?

Does Work To Validate Prior Research Qualify For The R&d Tax Credit?

For the research tax credit, does work to validate prior research count as a qualified research expense?  The court recently addressed this in United States v. Davenport, No. 3:09-cv-02455-L (N.D. Tex. 2012). Facts & Procedural History Morris and David Davenport (collectively, “Davenports”) were fifty percent owners of Burly Corporation (“Burly”).  Burly manufactures residential metal roofing and…

Wages for Research Were Not Reasonable

Wages For Research Were Not Reasonable

The research tax credit provides a significant incentive to perform research.  The credit is calculated by factoring in wages paid by the business and income from the business subject to self-employment.  Given this, can a business owner pay himself an unreasonably large salary and thereby increase the amount of the credit?  The court recently addressed…

The IRS’s Reach in a Research Tax Credit Audit

What Is A Project For The Research Tax Credit?

The IRS has a track record of taking aggressive stances when auditing research tax credits.  But its position in the Bayer Corp. & Subs v. United States, Civil Action Nos. 08-693, 09-351 (W.D. PA 2010), raises the question whether a taxpayer claiming a research tax credit is signing up to disclose their confidential information.   Facts &…

What is a Project for the Research Tax Credit?

What Is A Project For The Research Tax Credit?

It can be difficult to separate qualified and nonqualified research in computing the research tax credit.  The research tax credit rules are generally applied to the “project,” but the term “project” is not even mentioned in the Code.  The Trinity Industries, Inc. v. United States, 691 F. Supp. 2d 688, (N.D. Tex. 2010), case provides guidance…