Filing taxes is a complex and time consuming process with bottom-line repercussions — and this year’s process is no different. As the March 17 deadline for filing corporate tax forms swiftly approaches, CFOs should be strategizing, planning and preparing. From multi-national tax compliance and transfer pricing concerns, to the expiration of the Research & Development (R&D) tax credit, CFOs should be acutely focused on getting their taxes right. Here are three distinct chapters of this tax season’s story.
Chapter 1: The R&D Saga
According to the BDO 2014 Technology Outlook Survey, 19 percent of 100 CFOs at leading U.S. technology companies are most apprehensive about the expiration of tax incentives. This is a significant increase from last year, when only 9 percent of such finance chiefs reported it as a leading concern. The worries are likely related to the failure of Congress to pass an extenders bill before the expiration of such tax incentives at the end of 2013, such as the R&D tax credit.
The federal R&D tax credit is available for expenses paid or incurred during 2013. But it’s not currently available for expenses incurred during 2014.
From a cost perceptive, the credit is equal to up to 7 percent of qualified spending. A company must be in the pursuit of developing or improving a business’ products, manufacturing processes, software or other business components in order to qualify.
So, how will the December 31, 2013 expiration affect companies filing this year?
For the 2013 calendar year, it will be business as usual:
- Include 12 months of the credit benefit for both the 2013 tax return and financial statements.
- For fiscal-year taxpayers, unless and until the credit is extended, the credit benefit for estimated tax payments and financial statement recognition purposes can include expenses paid or incurred only through December 31, 2013.
- No credit benefit can be included for 2014 estimated tax payments and financial statement recognition, unless and until the credit is extended to include expenses paid or incurred during 2014.
If you claim the credit, be ready to claim it again for 2014 expenses: all indications from Washington are that both parties will vote to extend the credit retroactively, as they did on January 2, 2013 for 2012 expenses. And keep your fingers crossed: there are nine bills under consideration to make the credit permanent, increase its rate and make other enhancements — such as making it more beneficial for start-up companies, for example.