Research & Development Study

The Research and Development (R&D) Tax Credit allows businesses to receive cash back for a portion of qualifying expenditures. The R&D Tax Credit is now permanent, allowing business owners to incorporate this tool into their long-term tax minimization strategies. Even better, the credit does not discriminate based on industry, size or revenue. We help identify qualified activities, and the corresponding Qualified Research Expenditures, maximizing your research and development credit.

In a nutshell, an R&D credit study is a detailed analysis of a business’s activities by an independent third party (us) to determine qualifying activities and projects and their associated expenditures. A business can then claim a tax credit equal to a percentage of these expenditures.

Step 1: Identify qualifying activities

To claim the credit, a business must perform activities that meet four tests:

Permitted purpose
The activity must be intended to develop or improve the functionality, performance, reliability, and/or quality of a  product or process.

Technological in nature
The activity must fundamentally rely on principles of engineering or biological, computer or physical science.

Elimination of uncertainty
The activity must be intended to discover information to eliminate technical uncertainty concerning the capability or method for developing or improving a product or process, or the appropriateness of the product design.

Process of experimentation
Substantially all of the activities must be elements of a process of experimentation.

Step 2: Identify QREs

Once activities meet the qualifications of the four-part test, we can identify the Qualified Research Expenditures (QRE) for each activity. The value of the credit for each QRE ranges from 5.0% to 6.5% of salaries and wages, supply costs, and contractor costs associated with the qualifying activity.

Step 3: Perform the engagement

We will perform the complete required analysis in order to substantiate the R&D credit for the applicable tax years. During the course of this engagement, we will:

1. Confirm the most appropriate methodology for identifying, accumulating and documenting the R&D credit activities.
2. Identify potential projects and departments where Qualified Research Activities were conducted during the years of the study, analyzing whether they qualify under the tests in §41.
3. Collect detailed information about projects and departments that conduct or support research activities. Interviews and written questionnaires may be used.
4. Review contemporaneous documentation to corroborate credit qualification of expenses, and finalize the Qualified Research Expenditures and base period.
5. Calculate the R&D tax credits and prepare a tax credit summary of technical services, including recommendations for internal documentation and cost accumulation improvements.
6. Provide audit support through the appeals process, if applicable

Can you claim the R&D credit without performing a study? Absolutely. Will it hold up under audit? Maybe. Is it a gamble worth taking? No.

Taking the time to perform the study before you calculate and claim the credit offers the peace of mind that your bases are covered.