Fondo Core Workflow B: R&D Tax Credits
Overview
Claim R&D tax credits through Fondo. Startups with US W-2 employees doing qualifying R&D can offset up to $500,000/year in payroll taxes (FICA). Fondo's CPA team prepares the Form 6765 study.
R&D Credit Calculation
Qualifying R&D Expenses:
W-2 wages for R&D employees: $480,000
Contractor payments (65%): $78,000
Cloud compute (AWS/GCP): $36,000
Software tools for R&D: $12,000
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Total Qualified Research Expenses: $606,000
Credit Rate (Alternative Simplified): ~6-8%
Estimated R&D Credit: ~$42,000
Qualifying Activities
| Qualifies |
Does NOT Qualify |
| Developing new software features |
Routine maintenance/bug fixes |
| Improving existing algorithms |
Marketing or sales activities |
| Building internal tools |
Purchasing off-the-shelf software |
| API integrations requiring experimentation |
Simple data entry or configuration |
| Machine learning model development |
General management |
| Infrastructure automation |
Accounting or legal work |
Timeline
| Month |
Activity |
| Jan-Feb |
Fondo collects prior year R&D data from payroll and expenses |
| Mar |
CPA team interviews founders about qualifying activities |
| Apr |
R&D credit study prepared, Form 6765 drafted |
| Apr 15 |
Filed with corporate tax return (or extension) |
| May-Jun |
IRS processes credit, payroll tax offset begins |
Payroll Tax Offset (Startups)
Eligibility for payroll tax offset (Section 41(h)):
✓ Less than $5M gross receipts in current year
✓ No gross receipts in any year before the 5-year period ending in current year
✓ Filed as election on Form 6765
Offset: Up to $250,000 per year against employer FICA (6.2%)
Up to $250,000 per year against Medicare (1.45%)
Total: Up to $500,000/year in payroll tax savings
Error Handling
| Issue |
Solution |
| Credit lower than expected |
Review qualifying activity classifications with CPA |
| Missing contractor data |
Upload 1099 forms to Fondo dashboard |
| Late filing |
File extension (Form 7004) before April 15 |
| IRS audit of R&D claim |
Fondo provides audit defense documentation |
Resources
Next Steps
For troubleshooting, see fondo-common-errors.
