For early-stage businesses investing in innovation, few programs are as valuable as the R&D Tax Credit. Designed to reward companies developing new technologies, software, or products, this credit lets you claim a percentage of your research and development expenses back — even if your business isn’t yet profitable.
In simple terms, the R&D Tax Credit allows qualifying startups to offset up to $500,000 per year of their payroll taxes, putting real money back into your business to fund future growth.
This guide breaks down how it works, who qualifies, and how to claim it through your payroll provider — plus how Haven can help you capture every eligible dollar without the complexity.
What Is the R&D Tax Credit?
The Research and Development (R&D) Tax Credit allows qualified U.S. businesses to claim roughly 10% of their domestic R&D expenses back as a tax credit, up to $500,000 per year.
Each payroll cycle, employers are required to pay FICA payroll taxes on behalf of their employees. The R&D Tax Credit reimburses a portion of those payments.
Here’s how it works in practice:
Each quarter, your payroll platform files Form 8974, which details the FICA taxes you’ve paid.
The IRS reviews and processes that information.
You’ll then receive a reimbursement check or offset for the FICA taxes paid.
This process continues each quarter until your available R&D credit is fully used.
In other words, instead of waiting until profitability to benefit from innovation-based tax incentives, startups can access this cash flow advantage immediately.
Who Qualifies for the R&D Tax Credit?
The payroll R&D tax credit is tailored for startups and young companies actively developing products, technologies, or systems.
To qualify, your business must meet two key IRS requirements:
Gross Receipts Test
Have less than $5 million in gross receipts in the current tax year; and
Not have earned revenue in any tax year more than five years prior to the current year.
These criteria make the R&D credit ideal for early-stage startups investing in development but not yet generating consistent profit.
Qualified Research Activities
Your company must be engaged in R&D that meets the IRS’s Four-Part Test, which ensures the work is technical in nature and designed to solve real challenges.
The IRS Four-Part Test for Qualified R&D
Not all research qualifies — but the threshold is often lower than founders expect. To be eligible, your work must meet the following criteria:
Permitted Purpose
Your goal is to create or improve a product, process, software, or system — making it faster, more efficient, reliable, or functional.Technological in Nature
The work relies on the principles of engineering, computer science, physics, biology, or other hard sciences.Elimination of Uncertainty
You faced technical uncertainty — such as not knowing whether a specific outcome could be achieved or what approach would work best.Process of Experimentation
You used a structured, trial-and-error process to evaluate potential solutions. This can include prototyping, simulation, testing, or iteration.
Examples of Qualified Research Expenses
Qualified expenses are the costs directly tied to research and experimentation. Some common examples include:
Employee wages for those directly performing, supervising, or supporting R&D
Contractor costs for U.S.-based vendors performing qualified research work
Supplies and materials consumed during experimentation or prototyping
Even if your business isn’t building physical products, software development and process improvement projects often qualify.
If your engineers, data scientists, or developers are solving technical challenges — there’s a strong chance those efforts qualify for the R&D credit.
How to Claim the Payroll R&D Tax Credit
Claiming the R&D Tax Credit involves coordination between your CPA and your payroll provider. Here’s what the process looks like step by step:
1. Calculate the Credit
Work with your CPA or R&D tax credit specialist to determine your total Qualified Research Expenses (QREs). These are used to calculate your credit amount using IRS Form 6765.
2. File Form 6765 with Your Federal Income Tax Return
Be sure to elect the payroll tax offset on the form. This election allows the credit to apply to your payroll taxes instead of your income tax (which most startups can’t yet offset).
3. Enable the Credit with Your Payroll Provider
Once your tax return is filed, your payroll provider (such as Gusto, Rippling, or Justworks) will help apply the credit. They’ll file Form 8974 each quarter alongside your standard payroll filing (Form 941).
4. Start Receiving the Benefit
The credit typically takes effect in the first full quarter after your tax return is filed.
For example, if your return is filed in April, you’ll begin seeing payroll tax reductions starting in Q3.
Claiming the Credit with Payroll Providers
Your payroll platform plays a key role in enabling the R&D tax credit. Below are the steps for the most common providers:
Gusto
Accountant logs into their Gusto Accountant Dashboard.
Locate your company and click the three dots next to your name.
Select “Redeem third-party R&D tax credits.”
Fill in the required information and click “Save & Continue.”
Review the details and click “Submit.”
Rippling
Go to the Payroll tab, then click Settings.
Select “Federal R&D Tax Credit.”
Click “Add New.”
Enter your credit details and click “Save credits and authorize Rippling.”
Justworks
In the left sidebar, select “R&D Tax Credit” under Payments.
Choose “Get Started” for the relevant tax year.
Enter your details, upload required documents, and click Submit.
Warp
Email support@joinwarp.com with your completed Form 6765 and the following details:
Credit amount claimed
Credits used previously (often zero)
Type and date of tax return filed (usually Form 1120)
End date of tax income period
Each platform’s process is straightforward, but ensuring accuracy upfront with your accountant prevents delays or rejections from the IRS.
How Haven Helps Startups Maximize the R&D Tax Credit
At Haven, we specialize in helping startups and small businesses unlock the full value of the R&D Tax Credit — without the confusion or paperwork headaches.
Here’s how we make it simple:
Integrated Bookkeeping and R&D Tracking
Because our accounting systems already categorize your payroll and expense data, we can identify eligible R&D costs automatically. That means you won’t miss qualifying wages or expenses buried in your books.
Seamless Collaboration with Your Payroll Provider
Our team coordinates directly with your provider (Gusto, Rippling, Justworks, or others) to ensure Form 8974 is filed correctly and the credit is applied on time — quarter after quarter.
Expert Review and IRS Compliance
We review your claims with CPA oversight to ensure every dollar aligns with IRS definitions. This gives you audit-ready documentation and peace of mind.
Real Cash Flow Impact
Instead of waiting for profitability, Haven helps you convert your innovation expenses into quarterly cash reimbursements — so you can keep building without slowing down for funding cycles.
Why the R&D Tax Credit Matters for Founders
Innovation isn’t just about ideas — it’s about staying funded long enough to bring them to market.
The R&D Tax Credit is one of the most effective tools available to early-stage founders:
It directly improves cash flow without adding debt or equity dilution.
It encourages reinvestment in product development and engineering talent.
It can extend your runway by months, giving your team more breathing room.
And when combined with smart bookkeeping and tax planning, this credit becomes a cornerstone of sustainable financial strategy for any growing startup.
Get Started with Haven
Haven combines modern bookkeeping, tax compliance, and R&D credit services into one streamlined system. You get:
AI-assisted bookkeeping with CPA review
Proactive R&D tracking and quarterly filings
Slack-first support with real human accountants
Transparent reporting and tax-ready documentation
Join 400+ startups who’ve saved millions in tax credits and reduced the time spent on financial admin.
Book a free strategy call to see how Haven can help you recover payroll taxes, stay compliant, and build stronger financial systems for growth.