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Research and Development Tax Credit:

What Qualifies as R&D? Many taxpayers tend to regard "R&D" as an activity associated solely with high-tech, biotech and pharmaceutical type companies. We have found many of our clients tend to regard their own efforts to make new, lighter, stronger, less expensive, more reliable products, or to make more precise, more economical and more versatile processes as "just doing my job", when in fact they have been performing R&D qualifying activities all along.



If your Company is involved in any of the following activities, you may be able to claim the R&D tax credit:


- Manufacture products

- Developing new, improved, or more reliable products / processes / formulas

- Developing prototypes or models (including computer generated models)

- Designing tools, jigs, molds, and dies

- Developing or apply for patents

- Certification testing

- Applying for patents

- Testing new concepts

- Development of new technology

- Trying new materials

- Adding new equipment

- Environmental testing

- Developing or improving production / manufacturing processes

- Developing, implementing or upgrading systems and / or software

- Developing production control software

- Improving or building new manufacturing facilities

- Automate internal processes

- Paying outside consultants / contractors to do any of the above stated activities



- A hidden and immediate source of cash for many small and mid-size companies;

- A significant reduction to current and future year's federal and state tax liabilities;

- Over $5 Billion in federal R&D tax credit benefits are given out annually;

- Approximately 80% of the $5 Billion goes to a few of the nation's largest companies;

- Every successful company is potentially eligible for an R&D tax credit of some amount many companies are unaware  their day-to-day operations can qualify for the R&D Credit;

- The 20% research tax credit is not a deduction. It is an actual dollar-for-dollar credit against taxes owed or taxes paid. - Plus the taxpayer may be able to expense all such costs in the year incurred;

- A business can take the credit for all open tax years - generally the last three, or four years plus the current year;

- Additional years may be available if taxpayer is in a net operating loss or alternative minimum tax position;

- Tax credits may carry forward 20 years;


We utilize a comprehensive approach in both quantifying and qualifying credit amounts, which is the recommended approach by IRS (Project by Project approach). Thus, for example, instead of identifying and documenting only 3-5 of the biggest projects conducted by a client in prior year, we identify EVERY qualifying activity and ties it too every employee, time and wages and the corresponding sections of the code and appropriate legal documentation that substantiates the credit.


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