Receiving your R&D tax credit varies based on several factors, including if you utilize a PEO, a payroll provider, or Gusto.
- PEO: The overpayment from Q3 (6.2% paid by the employer during Q3) is credited back to the PEO. Then the PEO applies the credit to subsequent invoices to the client claiming the R&D tax credit. The credit will be a line item on the monthly or quarterly invoices.
- Payroll Provider: Once the credit is claimed and the IRS processes payment, the credit is mailed to the client in the form of a check. Processing times vary depending if the credit is claimed on an original 941 or an amended 941. Amended 941s take longer.
- Gusto: If Gusto applies the credit in real-time, the client's payroll expenses will be reduced each payroll run for the payroll taxes to which the credit applies. If Gusto does not apply the credit in real-time, a refund is issued by the IRS similar to the Payroll Provider process above.
The processes above are continued in the following quarters until the credit is fully utilized. You have 20 years to utilize the credit claimed.