Small Businesses May Be Eligible for Thousands of Dollars in Tax Credits from this Little Known Program

As a savvy small business owner, unlocking potential savings through tax credits is a game-changer. Understanding which credits apply to you and how to leverage them is key. Today, let’s explore the Research and Development tax credit (R&D tax credit) – a valuable opportunity for small businesses to offset their R&D costs.

What is the R&D Tax Credit?

The R&D Tax Credit is a federal dollar-for-dollar tax credit designed to help companies cover the expenses of developing new or improved business elements. This includes processes, products, technologies, and innovations such as new formulas, techniques, or inventions. Any activity enhancing quality, performance, reliability, or functionality may qualify, whether it’s software development, product quality enhancements, or updated manufacturing processes.

Eligibility Criteria

To determine if your business qualifies, the IRS has a four-part qualification test:
1. Purpose of Research:
Develop a new or improved function, performance, reliability, or quality for a business component.
2. Eliminate Uncertainty:
Tackle a problem with a high degree of technical uncertainty using your procedures.
3. Technology:
Engage in technical research, relying on hard sciences like machine learning, physics, chemistry, biology, software, or electrical engineering.
4. Experimentation:
Include simulation, evaluation of alternatives, trial and error, testing, modeling, and refining in your research process.

Qualified Costs
Qualified expenses for R&D tax credit include salary and wages, supplies, and cloud services for software under development, all tied to qualified activities meeting the four-part test.

Ineligible Costs
Certain costs, like research outside the U.S., third-party research without rights or payment, market research, training, troubleshooting, customizing for specific customers, and attorney fees for patent filings, do not qualify.

Claiming the R&D Tax Credit
To claim the credit, maintain meticulous records, including expense details, payroll records, project notes, lab results, and communications related to research. Complete Form 6765 for the federal credit and, for small businesses, file Form 8974 once approved. Start-ups can apply the credit against payroll taxes.

Misconceptions – Dispelling myths:

  • Your company doesn’t need income taxes to claim.
  • Cutting-edge scientific work isn’t a must; meeting criteria and the four-part test is sufficient.
  • No R&D department is needed; meeting criteria and the test is key.
  • Companies subject to AMT may still qualify.

Risks and FAQs
Be aware of IRS audits, penalties, and interest. Frequently asked questions:

  • Yes, you can retroactively claim for up to three years.
  • Profitability is required to utilize the credit, but federal credits can carry over for 20 years.
  • Failure in research and development doesn’t disqualify if other criteria are met.

Federal and State Credits
The R&D tax credit is both federal and available in 37 states, providing a wide opportunity for businesses to benefit.


In conclusion, the R&D Tax Credit is a powerful incentive for innovation. Whether you’re a tech company or not, understanding the criteria and documenting your efforts can lead to significant savings. Reach out to lynnt@herretirement.com if you’re a small business owner interested in the R&D Tax Credit program.


Navigating Financial Challenges: Bankrate Survey Delves Into the State of Emergency Savings in 2023

In a comprehensive exploration of the financial landscape, a recent Bankrate survey, conducted in September with responses from approximately 2,500 U.S. adults, uncovers a disconcerting trend: around four in five households find themselves grappling with the inability to increase their emergency savings in 2023. The overarching issue? Inflation was identified as the primary impediment for 57% of respondents.

Key Findings:

Limited Emergency Savings Growth: A staggering 80% of households surveyed have not managed to increase their emergency savings in 2023. Alarmingly, only 19% report successfully boosting their emergency savings since the year began.

Inflation Takes Center Stage: Greg McBride, Chief Financial Analyst at Bankrate, underscores the impact of inflation on savings growth, stating, “Rising prices and high household expenses have been the predominant impediments to boosting emergency savings.”

Generational Differences: Unpacking the data reveals intriguing generational nuances. Gen X and baby boomers are disproportionately more likely to find themselves with less emergency savings in 2023 compared to the start of the year. On the flip side, millennials and Gen Zers exhibit a slightly higher inclination toward increasing their emergency savings.

Income Influence: Income disparities significantly influence emergency savings trends. Higher-income households earning $100,000 or more exhibit a greater likelihood of increased emergency savings, while lower-income groups face more substantial challenges in amassing savings.

Reasons for Stagnant Savings: The survey delves into the multifaceted reasons behind stagnant emergency savings. Respondents cite factors such as excessive debt, changes in income, rising interest rates, and unexpected large expenses. However, the pervasive impact of inflation stands out, acknowledged by 57% of those surveyed.

Future Outlook: The future outlook appears worrisome, with 60% of Americans expressing a sense of falling behind on emergency savings. Strikingly, 16% believe it will take more than five years to regain financial footing.

Comfort with Current Savings: A nuanced finding reveals that 17% of those not increasing their savings express contentment with their existing emergency savings, showcasing diverse sentiments about financial preparedness.

Strategies to Boost Emergency Fund: Bankrate’s guidance extends beyond the survey findings, offering practical strategies for readers to fortify their financial resilience. Suggestions include opening high-yield savings accounts, implementing budget cuts, and exploring side hustles.

The Bankrate survey unfolds a poignant narrative of financial challenges in 2023, with inflation and high expenses emerging as formidable foes for American households. Greg McBride’s advice resonates, urging readers to consider tapping into the burgeoning gig economy or taking on additional employment opportunities to make headway on boosting savings. This comprehensive blog post encourages readers to proactively embrace practical strategies and foster financial well-being amidst the ongoing economic uncertainties.

You can read the full report here.

FILE - A Social Security card is displayed on Oct. 12, 2021, in Tigard, Ore. The annual Social Security and Medicare trustees report released Thursday, June 2, 2022, says Social Security’s trust fund will be unable to pay full benefits in 2035, instead of last year's estimate of 2034, and the year before that which estimated an exhaustion date of 2035. (AP Photo/Jenny Kane, File)

Cautious 3.2% Social Security Benefit Increase Expected in 2024 Amid Slowing Inflation

In 2024, Social Security beneficiaries are set to receive a 3.2% increase in their benefits, a stark contrast to this year’s extraordinary hike, indicating a slowdown in consumer price increases.

The cost-of-living adjustment (COLA) translates to an average monthly increase of over $50 for recipients, beginning in January, as reported by the Social Security Administration on Thursday. The AARP estimates this boost at approximately $59 per month.

Kilolo Kijakazi, acting commissioner of Social Security, expressed, “This increase will assist millions in managing their day-to-day expenses.”

Roughly 71 million individuals, spanning retirees, disabled individuals, and children, rely on Social Security benefits.

This announcement follows the notable 8.7% increase in benefits experienced this year, a result of the historically high 40-year inflation rates that drove up the prices of consumer goods. With inflation now stabilizing, the upcoming annual increase is notably more modest.

Martha Shedden, president of the National Association of Registered Social Security Analysts, remarked, “In comparison to last year’s 8.7% hike, this will feel relatively small, and there is a perception that it may not keep pace with the ongoing inflation and the increasing living costs for retirees.”

In addition to this, an expected rise in Medicare premiums for 2024 is likely to offset the Social Security cost-of-living increase. While traditional Medicare has not yet disclosed the extent of the increase, Medicare Advantage plans are anticipated to remain steady.

However, advocates for senior citizens have celebrated the annual Social Security adjustment. AARP CEO Jo Ann Jenkins noted, “Retirees can breathe a bit easier knowing that they will soon receive a boost in their Social Security payments to help them cope with the rising expenses.”

Social Security is funded through payroll taxes collected from both workers and employers. The maximum earnings subject to Social Security payroll taxes will rise to $168,600 for 2024, up from $160,200 in 2023. Retirees who rely solely on Social Security income are exempt from taxes on that income.

Nancy Altman, president of Social Security Works, an advocacy group for the social insurance program, underlined the significance of COLA and urged Congress to pass legislation to safeguard and expand benefits. Nonetheless, the program faces a substantial financial shortfall in the near future.

The annual Social Security and Medicare trustees report, issued in March, revealed that the trust fund for the program will be unable to meet the full benefit obligations from 2033 onwards. If the trust fund is depleted, the government will only manage to pay out 77% of the scheduled benefits, according to the report.

While there have been proposals in Congress to strengthen Social Security, none have advanced past committee hearings. A March poll by The Associated Press-NORC Center for Public Affairs Research found that the majority of U.S. adults oppose measures that would cut Medicare or Social Security benefits, with 79% of respondents opposing reductions in Social Security benefits.

It is important to note that the Social Security Administration is currently without a permanent leader, as President Joe Biden nominated former Maryland Governor Martin O’Malley to head the agency in July.

The COLA is currently determined using the Consumer Price Index (CPI) from the Bureau of Labor Statistics. However, there have been calls to consider an alternative index, the CPI-E, which measures price fluctuations based on the spending habits of the elderly, including healthcare, food, and medication costs. Any alteration in the calculation method would require approval from Congress. Nevertheless, given the historical inactivity surrounding Social Security and the current gridlock in the House, senior citizens and their advocates are skeptical about the prospects of any changes being approved in the near future.

These cost-of-living adjustments will have a substantial impact on individuals like Alfred Mason, an 83-year-old resident of Louisiana. Mason emphasized that “any increase is welcome because it helps us cope with our current situation.” He stressed that, given the persistent high inflation, any addition to his income would be greatly appreciated.