R&D Credits for Startups

A healthcare technology startup claimed the R&D Tax Credit to offset payroll taxes. They received a $498,142 dollar-for-dollar offset against taxes paid, resulting in an 805% return on their investment.

Client Profile

Location: Raleigh, NC
Industry: Healthcare Technology
Size: 50 employees
Revenue: $1.5M annually

How Cherry Bekaert Made a Difference

A startup technology company based in Raleigh, North Carolina, approached Cherry Bekaert Credits & Accounting Methods Team
(“C/AM Team”) about maximizing their R&D credit.

The company is focused on developing new smart technologies specifically tailored to serve and empower older adults and
individuals living with disabilities, and, since beginning operations in 2013, the startup has developed several custom software
solutions as well as an integrated operational management platform.

Although the startup has yet to see a lot of taxable income, they have incurred significant costs, including payroll taxes. The
Federal R&D credit can be used to offset the employer’s portion of payroll taxes, giving a substantial cash benefit to innovative
start-up companies. Up to $250,000 of payroll taxes can be offset each year.

In early 2019, C/AM offered the startup a complimentary scope for the 2017-2018 tax years. The scope estimated that the startup
was entitled to an impressive $318,428 credit.

Once the project began, the C/AM team went on site and discovered even more qualified costs, such as wages & cloud computing,
expanding the tax benefits 57% beyond that of the scope to a staggering $498,142 (805% ROI). At the conclusion of the study, a
team from C/AM went to the client site to review the deliverable and explain the benefits further.

Ron Wainwright, Jr., CPA, MST
Tax Partner and National Leader,
Credits & Accounting Methods