SR&ED preparation can be time-consuming and confusing for those who are new to the process.
But there are things that you can do year-round to help you stay on top of things so that tax time is much less stressful.
Here’s a guide to making sure your SR&ED preparation is done right and submitted on time.
If you are new to claiming SR&ED tax credits, contact an SR&ED consultant to help ensure that you receive the maximum refund.
Make Sure You Qualify for the SR&ED Tax Credit
First-time claimants who first learn about the SR&ED tax credit should know whether or not their organization, business, and/or project(s) are eligible.
There are various eligibility requirements, but most businesses involved in experimental development, basic research, applied research, scientific investigation, and/or technological innovation should qualify.
What you must show the CRA is that your work:
- Furthered scientific or technical knowledge
- Addressed technological uncertainty
- Has some element of technical content
- Follows a scientific process
Innovation is a touch-and-go process involving some element of risk and thus failure.
Organizations working on SR&ED preparation should be prepared to prove the process, including any challenges or roadblocks they met along the way.
Review the CRA guidelines or contact SREDSmart for more eligibility information.
Teach Your Team Members How to Stay Organized
SR&ED tax claim preparation doesn’t start a few months before the deadline; one of the best things you can do is stay organized all year.
One way to do this is to make sure everyone on your team is aware that you are working towards receiving this important source of financing. Therefore, ongoing training and organizational practice are essential.
This will not only help you and your organization, but it’s also great training for anyone working in your field, especially younger personnel and those just entering the field like graduate students. They will also benefit from learning about SR&ED tax credits and how to stay on top of documentation to make the claims process go smoothly.
Consider hiring dedicated support staff to help you stay on top of the paperwork, as you can also claim this expense at the end of the tax year.
When the team is educated and organized, they’ll be better able to support you the whole year through, and preparing for tax season should go smoothly.
Track Documents Carefully
You already know you need to keep receipts to claim expenses, but do you have a system for keeping everything central and organized?
Today there are many project management systems and apps that help with your SR&ED preparation. But even a simple shared Google folder and tracking sheet is a good place to start if you’re not ready to go through the learning curve (or train your staff) to use new software.
No matter what type of system you have, make sure you are:
- Documenting everything at the time the work is done (not later)
- Storing original documents in a safe, central place
- Working with at least one key staff member who is in charge of organizational processes
- Dating all of your documentation clearly
- Including detailed technical reports in centralized files
- Documenting and tracking all aspects of experimental innovation, including failures and challenges.
Hire a team of experts who know what they’re doing to help you make sure your SR&ED preparation is done right. They will guide you on organization and timing to ensure that you meet your submission claim deadlines.
Be Clear About Your Organizational Process and Systems at the Start of Each Project
Designing a process and procedure to keep everyone accountable, and keep all of your documents in place, will help you train staff and stay on top of your documents. Designating a key project leader to be in charge of this can help.
You will need to review reports with your technical lead as well, so be sure to leave plenty of time for these discussions, and schedule them in advance.
Don’t wait until the last minute to learn about and prepare your SR&ED claim. Start early and check that the process is going smoothly often.
Consult with an SR&ED Expert
Not having your SR&ED claim done properly may get you slated for a CRA review — and while this isn’t the end of the world, doing your SR&ED preparation properly will help you reduce the risk of a delay or review.
Staying on top of all the details, especially for new claimants, isn’t an easy task. We suggest hiring professionals to make sure everything is calculated accurately and walk you through the process.
This way, you’ll be better prepared to make your claim in subsequent years.
We aim to help small businesses in Canada not just meet but exceed their R&D goals. Contact us for a consultation, and we’ll be happy to help you move forward with your claim.