Superseding vs. Amended Returns and Why it Matters for the Payroll Tax Credit

Today is the extended tax deadline for many corporations (with calendar year ends) to file their federal tax returns.

However, on October 7th, 2019, the IRS graciously gave victims of Tropical Storm Imelda until January 31st, 2020 to file their individual and business tax returns (including C-Corps whose extended deadline is today, October 15th, 2019 and S-Corps and partnerships whose extended deadline fell on September 17th, 2019). This relief is being offered to taxpayers in multiple Texas counties including Harris, Jefferson, Montgomery, and Orange. You can read more about the IRS’ extension here and here.

Given the extension of the extension, what does this mean for a corporation claiming the R&D tax credit?

By and large, most companies that claim the R&D tax credit use it to offset their income tax, dollar for dollar. However, qualified small businesses (< $5 million in revenue and no gross receipts for any taxable year preceding the five-taxable-year period ending with the current taxable year) that intend to elect the payroll tax credit (using their R&D tax credit to offset future payroll taxes) need to take note.  Currently, the tax code only allows qualified small businesses to elect the payroll tax credit on a timely filed return (including extensions).

If my company is a qualified small business affected by Hurricane Imelda and we filed our taxes already, can we still claim the payroll tax credit?

The short answer is yes, by filing a superseding return.

A superseding return is a return filed subsequent to (after) the originally-filed return and filed within the filing period (including extensions). Contrast this with the more familiar amended return which is a return filed subsequent to (after) the originally-filed or superseding return and filed after the expiration of the filing period (including extensions).

What this means is that if you already filed your tax return before your deadline (or extended deadline), and need to make changes, you would file a superseding return instead of an amended return.

Superseding returns count as timely filed as they are before the tax deadline. To be clear, you cannot claim the payroll tax credit on an amended return. You can, however, still claim the R&D tax credit on amended returns and use those credits to offset income tax (or carryback the credits for 1 year / carryforward for 20 years).

Don’t forget, superseding returns must indicate the return is such by selecting the Superseded Return checkbox in the software or the return will get rejected by the IRS as a duplicate filing.

Consult with your accountant or CPA about your tax situation and as always, feel free to contact us for a no cost assessment.