Filing a Tax Extension for R&D Tax Credits

If you have only just learned about the R&D tax credit and don’t have time to complete your study by the filing deadline, no need to worry. You can still claim it by filing an extension or by amending.

To use the R&D tax credit against payroll taxes, you must claim it with your original return — which is why extending is so important for startups. On the other hand, companies that take the R&D tax credit against income taxes have the option of amending their return – and can even consider performing a ‘look back’ to capture up to three years of unclaimed tax credits.

When to file a tax extension

Your tax extension needs to be filed by the original tax due date. Depending on your type of business entity, your tax filing date is either mid-March or mid-April.

If the deadline has not yet passed when you discover the missing credit, instead of extending you can file what’s called a superseding return. This essentially undoes the filing of your original return, allowing you to include the necessary documentation for the R&D tax credit.

If the deadline has already passed, filing an amended return is your only option. When amending, the R&D credit can only be used against income taxes.

Filing a tax extension

Some businesses are hesitant to file a tax extension. But, it is very common. Talk with your CPA to ensure it’s the best decision for your business. Once you decide to file an extension, it’s simple for your CPA to complete the paperwork.

For most businesses, your CPA would file IRS Form 7004 to extend the return. For flow-through businesses extending their tax returns, shareholders or partners may also need to extend their individual tax returns.

Is the R&D tax credit worth it?

If you’re nearing the deadline and unsure what the R&D tax credit could be worth to your business, consider extending so you don’t miss it entirely. Then schedule a free consultation with Clarus R+D to discuss your eligibility and get a customized estimate of your tax benefit.