9 easy steps to getting R&D cash

Are you a:

Software developer,

computer engineer,

 computer science grad

If you have leading edge computer  knowledge, if you're a graduate of a computer science programs, if you have cutting edge skills or knowledge in any area of computer science-- or any other area of science or engineering for that matter--you can parlay that knowledge to collect SERIOUS AMOUNTS OF CASH from the Canadian government's  R&D (Research and Development) subsidy program.

( By the way, if you're looking for information on Canadian Science ( or Technology) Grants, Subsidies or Assistance, (or any combination of same) what you're really looking for is what you'll find here. The R&D subsidy-- or, as it's officially known, the SR&ED credit-- is the most reliable, surest, most generous  and safest way to get cash in your hands from your advanced science or technology work. )

  The report below "9 steps to getting R&D cash” shows you how!

 Most eligible candidates --- because they lack the basic information on how the subsidy system works-- totally miss the boat on the cash that's theirs for the taking.

But you don't have to.

 You just have to have a basic knowledge of how the system works. Then there are 9 simple steps to follow. This is all  described below..

 There’s a pile of cash waiting for you to claim it. You just need to know how to get it.

9  Steps to getting R&D cash

by: B.C. Chastkofsky C.A, Toronto R&D coach and consultant

 Note: If you want: practical insider tips on how to improve your odds in collecting serious R&D cash; links to R&D information; a guide to writing a killer R&D project description; tax cases that shed light on what is eligible and ineligible R&D, --then I strongly urge you to subscribe to my R&D Tipsheet. Just fill in your first name and email address on the form on this page

Disclaimer:: The material here is for informational purposes only, not a substitute  for professional advice.  Also, what you see here is only a brief and simplified overview of what you need to know before you embark on making an R&D claim, if  you intend to do so.  Each person's situation must be considered individually. You should contact  a professional before undertaking even the first step. If you’d like further information, just send me an email at email form saying what information you’d like. If you wish, you can subscribe to my R&D tips letter.

Intro

Who this report is for

 This report is addressed to Canadians who have advanced skills and knowledge and are capable of working on an eligible R&D project, that is a project that leads to a technological or scientific advance.

 Brief overview of how the system works

 Like all other industrialized countries, Canada prizes scientific R&D work and rewards Canadian R&D performers with generous cash subsidies. But, they don't just give you the money. They make you jump through a few hoops before you actually get your hands on the money. In fact, they don't pay the R&D performer directly. Rather, they pay the employer of the R&D performer a subsidy for the R&D wages paid. And, to get the maximum subsidy the employer has to be a corporation.

 (Note: the formal name for this program is SR&ED- Scientific Research and Experimental Development, although I refer to it simply as 'R&D')

 What this translates to is that if you want to get the money, you'll need to incorporate a company and have that company pay you wages, so that the company can claim the R&D subsidy.

 (This may sound complicated, but it's not.  It may also appear strange to you that your own company is paying you wages. But, it's perfectly normal.)

 Does this make sense for everybody?

 No. It works better for some people than others.

Possible scenarios

 Let's consider three scenarios:

 All three scenarios have these elements in common: That you need to incorporate  company, the company pays you wages and the company makes the claim for the cash subsidy.

 Here are the three scenarios:

 a) You're an employee and you do R&D work in your spare time. It probably doesn't pay for you to make a claim . The reason is that although your company would get cash for paying you R&D wages, you'd also  have to pay personal tax on the wages the company pays you. The net cash inflow to you is likely to be small.

b) You're not employed. You could be a graduate student working on a project. This is similar to scenario a) above, but better because you don't pay as much in personal taxes since you're not employed other than by your own company. This might make sense for you, but it's risky. The risk is that you have to pay the tax deductions up front on your personal taxes. The R&D subsidy, if it comes, doesn't come till later, i.e., after your corporate year end is complete and you've filed your claim.

c)You're self employed. You're already providing services to your client and invoicing them. This is the best situation to be in because the R&D wages the company pays you serves both to reduce the company's taxes and to enable you to make a claim for the subsidy.

Summary- the ideal scenario

Scenario c) is the best situation to be in. If you're self employed and more than 50% of your working hours are spent on R&D activities, you could have billings of $150,000 per year and come out with a $10,000 net tax refund each year. That's right. Not only would you pay no tax at all  on your income, you'd even come out of it with a net cash refund of $10,000 per year. All this because of the R&D subsidy.

Nowadays, many Canadians who perform eligible R&D are already in  a situation similar to scenario c, i.e., they're self employed and invoicing their clients. Many of them, with a bit of tweaking, could easily get their hands on the R&D cash that's theirs for the taking.

But, too many of these people are missing the boat and not collecting the money they're entitled to- simply because they just don't know how to. They don't know how much cash  they would be entitled to. They don't know the steps involved and they don't know where to find information about the R&D subsidy program.

That's why I wrote this report. So that if you indeed are an eligible candidate to collect this money-- that you don't let the opportunity slip by. If, after reading this report, you believe you may be entitled to some of this money, then take the first step immediately. Call an R&D consultant and find out how the system can work for you.

The 9 basic steps to take

Preliminary comments

Let me first caution you that there is always a degree of risk in undertaking each of the steps. Therefore, you should never even take the first step till you consult with an experienced R&D coach or consultant as  to whether it makes sense for you to go through the steps and make a claim.

Secondly, you should know that all the steps are easy. The only step that presents a challenge is doing the R&D project which requires you to have cutting edge skills in at least one area of science and technology and also requires you to actually do some work that leads to a scientific or technological advance. But, this report being addressed to people with advanced tech skills, I assume the reader is capable of pulling off an eligible R&D project.

 But, all the other steps are easy. They’re nagging, annoying and time consuming, but with a bit of consulting help, you should have no problem with them.

 In fact, I can say that, in all probability, if the two ingredients are present, i.e., a) you can do (and are willing to do) an R&D project and b) you’re in a situation such as, or similar to scenario c (that is you’re self employed and invoicing clients), then you should have a relatively easy time and a reasonably high chance of success in pursuing an R&D claim.

 When you’re ready to get started

 Step 1

 The first step is get a qualified consultant-- someone who is experienced, is reasonably priced and whose clients have had success with their R&D claims. You'll need a consultant to : a) discuss with you whether it makes sense for you to make a claim, b) explain how the system works, c) estimate the total maximum payoff, as well as the risks involved d) guide you through the process and be available to you on an ongoing basis

 I urge you to get a fee quote from the consultant at the very beginning. You don't want to give him too much . (Sort of defeats the purpose. Doesn't it?) Also, let me urge you to avoid consultants who take a fee on a contingency basis. You're doing the work. Why should the consultant get the money?

 Step 2

You incorporate a company.  It can be a simple structure with only one is shareholder, yourself. Here you'll definitely need a consult with a professional.

 Step 3

Your company hires you as an employee to perform eligible research and development work.  The company pays you wages. How much wages to pay and how much of it to send in a monthly tax deduction remittances (see below) should be discussed with you consultant.

 Step 4

 You perform eligible research and development work. You document on a daily basis the work you do. (Note: what constitutes eligible R&D is a subject that would fill dozens of pages. Please send me an email at email form with the subject line "R&D links" and I'll direct you to where you can download detailed information on what makes an eligible R&D project).

 Step 5

You pay the  Canada Revenue Agency source deductions every month for taxes the company has withheld from your wages.

Step 6

After the end of the year-- in January of February-- you file T4 returns that reports the wages the company pays you

 Step 7

After the Company's fiscal year end, the company files  its corporate tax returns and financial statements. Included in the corporate tax returns is the   claim for the R&D subsidy.

 Step 8

 You include in the claim a project description of the work done. (Note: if you want some killer tips on what to include in the project description, just send me an email at email form with subject line 'R&D project description)

 Step 9

  You talk with the Canada revenue auditors.  Depending on what and how much you claim, either zero, one or two auditors will call or visit you. One auditor is the technical auditor who may be curious as to details of your claim -- just to make sure you actually did do they work and are not a shyster who's trying to palm off a phony project. Also, he may wish to make sure that the project qualifies as a bona fide R&D project and is not 'standard engineering'. He also may want to look at your documentation-- just to make sure you actually did the work and what work was involved.

 The second type of auditor is the financial guy. Mainly, he wants to check the books for  the wages paid, the T4's  and the time records.

 If you're lucky, you'll just collect the cheque without getting a call or visit from any auditor. I've had this happen a few times with clients. Their claim had been presented so persuasively that the auditors had no need to question anything.

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 Summary

 This has been just a basic and necessarily sketchy overview of  what's involved in making an R&D claim. There's a ton of information out there that you should read as well-- and which I'll be happy to direct you to, if you'll just send an email my way.

What I hoped to convey to you is that if you think you have what it takes to collect the money being put on the table for R&D candidates, then by all means take the first step and call a qualified R&D consultant to find out if you might be in the money.

 If you'd like tips and further info on how the system can work for you,  please subscribe to my R&D tip sheet near the top of this page.

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B.C. Chastkofsky C.A. provides R&D coaching and consulting services at a very  reasonable fee. He is also the owner of a professional C.A. public accounting practice in Central Toronto . He can be reached at 416-782-8956 or by email at email form.

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Copyright © 2006 B.C. Chastkofsky C.A.

Last modified: October 31, 2006