Turning Innovation into Cash-Flow Savings
For innovative start-ups, the R&D Payroll Tax Credit can be a game-changer, providing immediate cash-flow relief by offsetting up to $500,000 in employer payroll taxes per year. This credit allows early-stage companies to reinvest more resources directly into growth and innovation, even when there is little or no income tax liability.
Who Qualifies?
To be considered a “qualified small business” for payroll tax offset
purposes, a company must generally:
- Have less than $5 million in current-year gross receipts, and
- Have no gross receipts prior to the five taxable years ending with
the current year (i.e., still within the start-up window).
How PSTS Helps
Our team manages the entire process from start to finish:
- Eligibility review – confirm your business meets the IRS definition
of a qualified small business. - Credit calculation – apply the four-part test and capture all
qualified research expenses (wages, supplies, contract research,
cloud computing) to determine your benefit. - Tax Form preparation – prepare Form 6765 (Credit for Increasing
Research Activities), including the payroll tax offset election. - Payroll application – coordinate with your payroll provider to
apply the credit against Form 941 (Employer’s Quarterly Federal
Tax Return) and future payroll deposits. - Ongoing support – ensure elections are properly filed and provide
audit-ready documentation in case of IRS inquiry.
By combining technical expertise with hands-on guidance, PSTS ensures start-ups maximize their benefit while avoiding compliance pitfalls.