The top 5 misconceptions about R&D tax credits
Phil Williams
by Phil Williams
With the US federal government’s research and development (R&D) tax credit offering significant financial benefits, you might assume that every eligible company is taking full advantage of it. Yet, many businesses miss out on these valuable incentives due to persistent misconceptions, leaving thousands, or even hundreds of thousands, of dollars unclaimed.
At Tri-Merit, we specialise in helping businesses maximise their tax incentives while simplifying the process. Let’s debunk the top misconceptions preventing companies from leveraging this powerful tax credit.
“Our project failed, so we won't qualify.”
This is one of the most common myths, and one of the most costly. The truth is the R&D tax credit rewards the pursuit of innovation, not just successful outcomes. Whether a project succeeds or fails has no impact on eligibility.
What actually matters:
The qualified research expenses (QREs) incurred during the project;
A systematic approach to experimentation; and
Efforts to eliminate technical uncertainty.
Even unsuccessful projects can demonstrate the experimental nature of your work, a key qualification factor for the credit. If your company attempted to develop or improve a product, process, or software – regardless of the outcome, you may be eligible.
“We don't qualify because we have no federal tax liability.”
Many businesses, particularly startups and small companies, mistakenly believe they can’t benefit from the R&D tax credit if they aren’t profitable or have no federal income tax liability. However, recent tax code changes have made these credits more accessible than ever.
Here’s what you need to know:
Startups and small businesses can apply their R&D credits against payroll taxes, not just income tax.
Credits can be carried forward for up to 20 years, allowing companies to benefit in future profitable years.
Qualified small businesses can offset up to USD 250,000 of their payroll taxes annually with R&D credits.
If your company is developing new or improved products, processes, or technologies, these credits may provide significant financial relief even if you're not yet turning a profit.
“We're not engineers, drug researchers, or software developers.”
One of the biggest misconceptions about the R&D tax credit is that it’s only for high-tech industries. In reality, a broad range of businesses across various industries qualify.
If your company is investing in process improvements, product enhancements, or new formulations, you may be eligible, regardless of your industry.
Qualifying industries include:
Manufacturing
Construction
Food and beverage
Agriculture
Tool and die
Metal fabrication
And more
The bottom line? If your company engages in problem-solving, testing, or iterative improvements, it’s worth exploring your eligibility.
“We don't maintain detailed R&D documentation.”
While proper documentation is important, many businesses already have the records needed to support an R&D credit claim – they just don’t realise it. There’s no requirement for a dedicated tracking system or extensive logbooks.
Common documentation sources include:
Test reports and prototypes
Drawings, blueprints, and computer-aided design (CAD) files
Value stream maps and process flowcharts
Project review presentations
Payroll and financial records related to R&D activities
Vendor invoices for materials used in research and development
Even if your documentation isn't perfect, Tri-Merit can help identify and organise the necessary records to support your claim.
“The process is too complex and time-consuming.”
Many companies assume that claiming R&D tax credits is a daunting process, but with the right expertise, it doesn’t have to be.
At Tri-Merit, we specialise in simplifying the R&D tax credit process. Our team:
Handles the heavy lifting of identifying qualifying activities;
Helps gather and organise existing documentation;
Ensures compliance with IRS requirements;
Maximises your eligible credit amount; and
Provides audit support if needed.
We make it easy for businesses to secure the tax savings they deserve, without disrupting day-to-day operations.
Don't leave money on the table
If your business invests in innovation, process improvements, or new product development, you may qualify for R&D tax credits. Don’t let these common misconceptions hold you back from securing thousands (or even hundreds of thousands) of dollars in valuable tax incentives.
Ready to explore your eligibility?
Contact Tri-Merit's R&D tax credit specialists today. We’ll help you navigate the process with confidence, so you can maximise your tax savings while focusing on what you do best.
Phil Williams is a partner at Tri-Merit, specialising in R&D tax credits, audit defense, and engineering leadership. With a background in law and mechanical engineering, he has experience in both manufacturing and tax law. He serves on the board of Techtrades, Inc. and enjoys golf, MSU sports, and coaching his sons’ teams.
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