Your Guide to Retroactive R&D Tax Credit Claims (2024)

• July 25, 2023

Many businesses focus their R&D tax credit claims solely on current projects. But did you know you can also claim credits for your R&D activities going back several years?

Why You Should Consider Retroactive Claims

Claiming R&D tax credits retroactively allows you to get more value from your past innovations, even unsuccessful ones. According to IRS data, the average credit amount is around $25,000 per year. Just imagine what you could do with an extra $100k if you claim credits from the previous four years! Retroactive claims provide funds to help grow your business now through new hires, equipment or expanded operations.

How Far Back Can You Claim?

The IRS allows you to claim credits for the current tax year plus amended returns for the previous three years. For example, in 2023 you could claim credits for 2023, 2022, 2021 and 2020. This opens up significant possibilities to recover funds from years when you may not have realized you qualified for R&D tax relief.

What Activities Qualify?

The key requirement is that the R&D activity was aimed at developing or improving a product, process, software, technique or formula. Work with an expert to identify projects in your archives that may qualify. Maintain detailed documentation to back up your claims.

Failed Projects Count Too

Here's a point many businesses overlook: even your failed projects can qualify for R&D tax credits. That's right, the IRS recognizes that not all R&D activities will result in success, and these activities are still a part of your innovation journey. So, if you've shelved a project because it didn't pan out as expected, don't forget to include it in your claim.

How to Claim

1. Identify Qualifying Activities: Review your projects from the past four years and identify which ones meet the criteria for R&D tax credits.
2. Gather Documentation: Collect all relevant financial records, project reports and other documentation that proves your claim.
3. Consult an Expert: Given the complexity of tax laws, it's advisable to consult with tax professionals who specialize in R&D credits, like us at ETS.
4. File the Claim: Submit the necessary forms to the IRS, either as an amendment to past returns or with your current year's tax return.

Claim Your Credit Today

Revisiting your R&D activities from the past several years could unlock substantial tax savings to invest back into your business now. Our team of experts can help review your records and ensure you get the maximum tax credit refund possible. Contact us for a free consultation and see how much you may qualify to claim retroactively.