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Filing an amended return to claim the federal research tax credit is now a little simpler. Specifically (and effective immediately), taxpayers who seek to use the Alternative Simplified Credit (ASC) method for calculating the credit can now make the election on an amended return. This change should be beneficial to all companies, but particularly to small and mid-size companies. The regulations allow for two calculation alternatives: one is the “regular credit” and the other is an “ASC election.” Just days ago (June 2, 2014), the Treasury Department and the IRS issued temporary regulations to remove a provision in the existing final regulations that prohibited a taxpayer from making an ASC election on an amended return. Though the ASC election was always a simpler alternative to the regular credit because it does not require a base period calculation, previously it could only be made on timely filed returns (including extensions). Why is allowing ASC on amended returns such a benefit to medium and small companies? In short, it is often costly to analyze and support a one year benefit. With amended returns, the math changes. Multiple years can be reviewed with only incrementally more effort and cost. For example, a software company which could only benefit from a $25,000 current year ASC, may now claim, assuming a consistent credit for open years, $100,000. Learn about the new simplified method of claiming research tax credits for companies - O'Connor Davies LLP - New York CPA Firm.
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