Withholding Tax Filers: Third-Party Payroll Providers

General Information

Using a Payroll Service Provider (PSP) does not affect eligibility for the Research and Development (R&D) Tax Credit, unless the PSP is considered the employer under federal standards. In that case, the business is not an employer and therefore is not eligible to claim the credit.
The PSP cannot submit the R&D Credit Application on behalf of an eligible Withholding Tax filer. The eligible business must submit its own credit application.
PSPs are not required to (but may) offset the credit on behalf of the eligible business.
PSPs can claim the R&D Tax Credit on the behalf of an eligible business when filing the annual return if they have a authority to file returns on behalf of the eligible business and a valid Authorized Representative Declaration (Power of Attorney) on file with Treasury.

How to Claim

If the PSP is claiming the R&D Tax Credit: The PSP will follow the steps to claim the credit.
If the PSP is not claiming the R&D Tax Credit: The eligible business will follow the steps to claim the credit, but should not report any Withholding Tax liability that the PSP has already reported or will report on periodic or annual returns.
- If the Sales, Use and Withholding Taxes Annual Return has already been filed without claiming the R&D Tax Credit, the eligible business may file an amended return to claim the credit. Ensure that the amended return reports all applicable tax liabilities.