Filing an Extension for the R&D Tax Credit

As tax deadlines approach, many businesses find themselves rushing to file their returns. If you’ve only just discovered the federal Research and Development (R&D) tax credit, don’t panic: you may still have options to claim it by filing an extension or amending a prior return.

Understanding Your Options for the R&D Tax Credit

To take advantage of the federal R&D tax credit against your payroll tax liability, it’s ideal to claim it on your original income tax return. This is why extensions can be particularly useful for startups. However, if you’ve missed that opportunity, you might still be able to apply the credit toward your income tax liability by amending your return. Additionally, a ‘lookback’ review allows businesses to claim up to three years of previously unclaimed R&D tax credits. Even if your tax deadline has come and gone, there are still ways to benefit from this incentive.

When and How to File a Tax Extension

If you need extra time, your tax extension must be filed by your original deadline. Depending on your business structure, this is typically in mid-March or mid-April.

If you’ve already submitted your return but the deadline hasn’t passed yet, you may have the option to file a superseding return. This essentially replaces or “undoes” your initial filing, giving you a second chance to include the necessary documentation for the R&D tax credit.

If the deadline has passed, your next best option is filing an amended return, which may require additional paperwork to support your claim.

The Process of Filing an Extension

Filing for an extension is a standard practice that many businesses utilize. Speak with your CPA or tax advisor to determine if it’s the right move for you. If you decide to proceed, the process is straightforward:

• Most businesses file IRS Form 7004 to request an extension for their income tax return.
• For flow-through entities, individual shareholders or partners may also need to extend their personal returns.

Why the R&D Tax Credit Is Worth Pursuing

The R&D tax credit can be a valuable financial boost, so don’t let tax deadlines stop you from securing the credits your business deserves.Working with TriNet Clarus R+D can make the process easier, ensuring that you claim the maximum benefit available to your company.