How can an R&D Tax Credit Offset Payroll Taxes?

In certain cases, the R&D credit can be used to offset payroll taxes. As of 2016, via the Protection Against Tax Hikes (PATH) Act, entities that are under $5 million in sales and within their first five years of revenue generation can generate R&D credits to offset their payroll taxes. This facet of the tax code is designed to aid “start-up” entities that are not yet paying income tax in benefitting from R&D credits. If your company is paying a development team and incurring payroll taxes, then it is likely that you can generate a Research & Development tax credit to offset your payroll tax liability.