Fill Out Your 2016 Rev 545 Form

What is the purpose of the 2016 Rev 545 form?

The 2016 Rev 545 form is used to apply for the Pennsylvania Research and Development (R&D) Tax Credit. This tax credit is available to entities that have incurred qualified R&D expenditures in Pennsylvania, and it aims to encourage innovation and investment in research activities within the state.

Who is eligible to submit the Rev 545 form?

Entities subject to Pennsylvania personal income tax or corporate net income tax can submit the Rev 545 form. This includes corporations, partnerships, limited liability companies, and sole proprietorships. A qualifying entity must demonstrate that it has qualified R&D expenditures both in the current tax year and in at least one prior year.

What information is needed to complete the Rev 545 form?

You will need to provide details such as the entity's name, address, revenue ID or Social Security number (SSN), Federal Employer Identification Number (FEIN), and a summary of R&D expenditures. This includes both current year expenses and any prior year expenses. Additionally, a balance sheet is required for small businesses claiming the credit if total assets are less than $5 million.

How are R&D expenditures calculated on the form?

R&D expenditures are listed on the form as the total qualified expenditures made in Pennsylvania. To determine your credit, you first identify the current year's expenditures and compare them against prior years’ expenditures. The form includes various lines to facilitate this calculation, such as averaging prior year expenditures and determining the tentative credit amount based on total eligible R&D expenses.

What happens after submitting the Rev 545 form?

Once the form is submitted, you will receive an award letter by December 15th if your application is approved. The approved tax credit can then be applied against your Pennsylvania personal income tax or corporate net income tax liability for the assigned tax year. Any unused credit can be carried over for up to 15 succeeding taxable years.

Can the tax credit be transferred or sold?

Yes, the Pennsylvania R&D tax credit can be transferred or sold, but specific conditions must be met. After the credit has been approved, a taxpayer can apply to sell or assign it if they have not filed a claim within one year of the approval date. The buyer can use the credit in the taxable year of the purchase but cannot carry it over, back, or obtain a refund for it.

Filling out the 2016 Rev 545 form correctly is essential for claiming the Pennsylvania Research and Development Tax Credit. Unfortunately, many applicants make mistakes that can hinder their chances of approval. One common error is not using whole dollars when reporting expenditures. This can lead to miscalculations and potential delays in processing.

Another frequent oversight involves failure to annualize R&D expenditures when the reporting period is less than a full year. This mistake can result in inaccuracies that may affect the claimed amount. If a taxpayer has two or more short periods that together cover one full tax year, combining these periods is necessary; otherwise, separate filings may misrepresent the total expenditures.

In addition, applicants sometimes neglect to submit the required federal Form 6765 or its pro forma for each relevant year. This documentation is crucial for verifying the claimed expenditures. Each year with reported R&D expenditures must be accompanied by completed Page 2 of the Rev 545 application, which many applicants overlook.

Another significant error is failing to provide an explanation for changes in R&D expenditures from prior filings. If there are discrepancies, a detailed explanation and supporting documentation must accompany the application. This omission can lead to rejection or requests for further clarification, causing delays in the approval process.

Some individuals incorrectly indicate their entity type without confirming it matches the business structure. Choosing the wrong category may not automatically disqualify the application, but it can lead to complications during the review process. It is crucial to identify the correct entity type, such as an S corporation or LLC, to ensure proper classification.

Additionally, applicants might misunderstand the requirements when claiming status as a small business. For those eligible, providing a balance sheet to demonstrate total assets under $5 million is mandatory. Failing to include this document can swiftly derail an otherwise valid claim.

An incomplete submission is another prevalent mistake. Each part of the application must be filled out completely. Sometimes applicants assume that minor sections can be left blank, but doing so can cause significant processing issues. A thorough review is imperative before submission.

The address verification error also contributes to misunderstandings. The address on Page 1 is used for mailing award letters and other correspondence. If this address is incorrect, communications can be delayed or misdirected.

Lastly, applicants often misread submission instructions, particularly regarding the email process. It is vital that all documents are consolidated into one PDF file to avoid processing delays. Incorrect or multiple attachment formats can lead to immediate rejection.

When applying for the Pennsylvania Research and Development Tax Credit using the 2016 Rev 545 form, there are several other documents and forms that may be necessary or helpful to include. These documents help create a comprehensive application, ensuring all required information is presented clearly. Here’s a summary of some important forms often used alongside the Rev 545.

• Federal Form 6765: This form is essential for claiming the federal Research and Experimentation Tax Credit. It outlines R&D expenses and must be submitted each year to provide context for the state-level claim.
• Pro Forma 6765: If a company does not have the actual federal Form 6765 for some years, it can submit a pro forma version. This serves as an estimate of qualifying expenses and helps support the tax credit application.
• Balance Sheet: Small businesses claiming credit must provide a balance sheet for the year in question. This document ensures the business meets the criteria of having total assets under $5 million.
• Page 2 of REV-545: Every application must include completed sections from this page, detailing R&D expenditures and their locations. This helps clarify the basis for the tax credit calculated.
• Written Explanation of Changes: If a business has revised its R&D expenditures compared to previous applications, a detailed written explanation, along with supporting documentation, should be included to justify the changes.
• Partnership Information: For entities that are partnerships, any relevant details regarding ownership stakes and partners’ shares should be reported to ensure compliance and accuracy.
• Third Party Contact Information: If research was conducted by an outside party, including a third-party contact name, employer, and other relevant details can help validate the claimed R&D activities.

Collectively, these forms and documents not only support the Rev 545 but also enhance the clarity and completeness of the tax credit application. Submitting a well-organized application can significantly affect the outcome, ensuring that all qualifying expenses are considered favorably.

• Federal Form 6765: Both documents involve the application for claiming research and development tax credits. They require similar financial data and calculations related to R&D expenditures.
• Form 8883: This form is used for claiming a tax credit when acquiring a qualified business. Like the REV-545, it necessitates precise details about expenditures and eligibility requirements for claiming the benefit.
• State Research & Development Tax Credit Applications: Many states offer R&D tax credits with their forms reflecting similar structures. Applicants must provide data on eligible expenses, just as required in the REV-545.
• Tax Credit Transfer Forms: Documents used to transfer or sell tax credits have a parallel in the REV-545. Both require documentation detailing the credit amount and identification of the parties involved.
• Partnership Tax Returns (Form 1065): While primarily for reporting income, these returns also contain information about eligible credits and deductions that mirror the process seen in the REV-545.
• Corporate Tax Returns (Form 1120): Similar to the REV-545, these returns handle a corporation’s revenue and expenses, including tax credits and their calculations.
• Employment Tax Forms: Forms like the IRS Form 941 show eligible expenses and credits available for employment-related costs. Both outlines focus on expense reporting to claim allowances.
• State Incentive Application Forms: Various states have incentive applications for businesses which often include sections on R&D expenditures. These require comparative financial data as seen in the REV-545.

When filling out the 2016 Rev 545 form for the Pennsylvania Research and Development Tax Credit, following some basic guidelines can help ensure your application is complete and accurate. Here are five important dos and don'ts:

• Do carefully read and follow the instructions provided on pages 3 and 4 of the form.
• Do ensure that all required information is completed, including federal Form 6765 or a pro forma version for each year listed.
• Do include a written explanation for any discrepancies in R&D expenditures compared to previous filings.
• Do list the entity type clearly on Page 1 of the form.
• Do double-check the mailing address provided on the form, as it will be used for all future correspondence.

• Don't forget to sign the form; it must be signed by a corporate officer.
• Don't include this application with your RCT-101 corporate net income tax report.
• Don't submit more than one application in a single PDF file, as each must be an individual attachment.
• Don't forget to include a balance sheet if claiming as a small business, showing total assets under $5 million.
• Don't exclude any required pages, as all pages must be completed for a thorough review.

Misconceptions can often cloud understanding of tax forms and their requirements, leading to confusion and frustration. The 2016 Rev 545 form, used for claiming the Pennsylvania Research and Development Tax Credit, is no exception. Here are some common misconceptions:

• The form is only for large businesses. Many people believe that the Rev 545 form is only applicable to large corporations with substantial R&D budgets. In reality, small businesses can benefit as well. The form includes specific provisions for small businesses, especially those with total assets under $5 million.
• R&D expenses must occur in Pennsylvania to qualify. While the intent of the credit is to stimulate in-state research and development, some taxpayers mistakenly think that expenses incurred out-of-state disqualify them entirely. However, it’s essential to report both in-state and non-Pennsylvania R&D expenditures accurately, as they may still impact total credit calculation.
• Previous applications have no bearing on future submissions. A common belief is that each tax year is an isolated event. This isn’t true. If there are changes in R&D expenditures from prior years, an explanation and supporting documentation must be included with each new application to clarify discrepancies.
• Incorporating a Keystone Opportunity Zone (KOZ) region eliminates all credits. Some assume that conducting research in a KOZ disqualifies an entity from receiving any R&D credits. While it is true that expenses incurred directly in a KOZ may not benefit from the R&D credit, taxpayers can still qualify for credits based on prior expenses, provided they meet the overall requirements.
• The application doesn’t need to be signed by a corporate officer. Many entrepreneurs think that it’s enough to fill out the form, but the Rev 545 application explicitly requires a corporate officer's signature. This added verification requirement is essential for ensuring the accuracy and completeness of the information submitted.

Understanding these misconceptions can help streamline the application process and enable businesses, both large and small, to take full advantage of the tax credits available to them.

• Ensure all sections of the 2016 Rev 545 form are filled out completely and accurately. This includes Pages 1 and 2.

• Provide a signed application to avoid delays in processing. This is required for all submissions.

• Include federal Form 6765 or a pro forma version for each year listed with R&D expenditures. This applies not only to the current year but also to prior years.

• Small businesses claiming the credit must submit a balance sheet demonstrating total assets of less than $5 million.

• Prior year Pennsylvania R&D expenditures must be reported. They should be from the four taxable years immediately before the current taxable year.

• Document any changes in R&D expenditures between the current and previous filings. Include a detailed explanation and relevant supporting documents.

• When emailing your application, consolidate all documents into one PDF. This will help ensure timely processing.

• Double-check your entity information on Page 1 to ensure the accuracy of the address and type of entity.

• Use whole dollar amounts for all expenditures. Make sure calculations are accurate and clear.

• Understand that unused credits can be carried forward for up to 15 succeeding taxable years, but cannot be carried back.