Swanson Reed’s Six-Eye Review Process and its Role in Strategic Risk Management

The administration of corporate tax incentives, specifically the Research and Development (R&D) Tax Credit under Internal Revenue Code (IRC) Section 41, exists at a volatile intersection of engineering innovation, financial accounting, and regulatory enforcement. While the credit serves as a vital macroeconomic stimulus—rewarding companies for technical risk-taking—the complexity of its substantiation requirements creates a significant compliance burden. In the current regulatory environment, where tax authorities are increasingly leveraging data analytics and specialized audit teams to scrutinize claims, the traditional methods of claim preparation are proving inadequate. The reliance on generalist accounting oversight or automated software solutions, absent rigorous human validation, exposes taxpayers to substantial audit risk, financial penalties, and reputational damage.

This report provides an exhaustive examination of the “Six-Eye Review” process, a proprietary quality assurance methodology employed by the specialist advisory firm Swanson Reed. This framework mandates a synchronous, segregated review of every R&D tax claim by three distinct qualified professionals: a Qualified Engineer, a Scientist, and a Certified Public Accountant (CPA) or Enrolled Agent. This tripartite structure is not merely an administrative redundancy; it is a strategic risk management control designed to mirror the multidisciplinary nature of an IRS audit.

By integrating this human-centric review process with ISO 31000 risk management standards and advanced Artificial Intelligence (AI) tools like TaxTrex, Swanson Reed has established a compliance ecosystem that addresses the root causes of audit failure: technical misclassification, lack of experimentation documentation, and financial inconsistency. This analysis argues that the Six-Eye Review effectively neutralizes the “information asymmetry” inherent in tax audits, transforming the R&D claim from a potential liability into a defensible, high-value asset. Through a detailed deconstruction of the review mechanics, analysis of relevant case law, and comparison with standard industry practices, this report demonstrates that the Six-Eye methodology is an essential component of modern tax risk governance.

1. The Modern Landscape of R&D Tax Compliance

To fully appreciate the necessity and efficacy of the Six-Eye Review process, one must first understand the hostile and complex environment in which R&D tax claims are currently adjudicated. The R&D tax credit is not a static benefit; it is a dynamic incentive governed by evolving statutes, regulations, and judicial interpretations.

1.1 The Statutory Framework and the Compliance Gap

The United States R&D Tax Credit, permanently extended by the PATH Act of 2015, allows companies to claim a credit against tax liabilities for “Qualified Research Expenses” (QREs).¹ However, eligibility is not determined by the job title of the employee or the industry of the taxpayer, but by the specific nature of the activities performed. To qualify, an activity must satisfy a rigorous four-part test:

Section 174 Test: The expenditure must be incurred in connection with the taxpayer’s trade or business and represent a research and development cost in the experimental sense.¹
Technological Information Test: The research must rely on the principles of the physical or biological sciences, engineering, or computer science.¹
Business Component Test: The research must be intended to develop a new or improved business component (product, process, software, technique, formula, or invention).¹
Process of Experimentation Test: The taxpayer must demonstrate that substantially all (80%) of the activities constitute a process of experimentation designed to eliminate uncertainty regarding the capability, method, or design of the component.¹

The “Compliance Gap” arises because the vast majority of taxpayers—and indeed many generalist tax practitioners—view these tests through a purely financial lens. They may identify costs associated with an R&D department and assume eligibility. However, the IRS views these tests through a technical lens. An IRS audit team typically includes an Engineering Specialist whose sole job is to determine if a “Process of Experimentation” actually occurred.² If the taxpayer’s defense is led solely by a CPA who cannot articulate the nuances of the engineering lifecycle, the claim often collapses. The Six-Eye Review process addresses this gap by ensuring that the taxpayer’s defense team mirrors the IRS’s audit team structure before the claim is filed.³

1.2 The Evolution of IRS Enforcement

The Internal Revenue Service has shifted its enforcement strategy significantly over the last decade. Previously, the R&D credit was a “Tier 1” issue, subjecting it to mandatory audit procedures in many cases.⁵ While the formal Tier 1 designation has been retired, it has been replaced by “Campaigns” managed by the Large Business and International (LB&I) division. These campaigns focus on specific areas of high non-compliance, such as “ASC 730” directive compliance or specific industry issues.²

Furthermore, the IRS has implemented stricter requirements for refund claims. A Chief Counsel Memorandum now mandates that taxpayers provide detailed information at the time of filing an amended return, including a list of all business components and the specific research activities performed for each.⁵ This “substantiation requirement” moves the burden of proof upfront. A vague or generalized claim is no longer just an audit risk; it is a processing risk—the IRS may simply reject the claim as “deficient” without even opening an audit. This heightens the need for a review process that ensures narrative specificity and technical accuracy, functions that are central to the Swanson Reed methodology.

1.3 The Cost of Audit Failure

The stakes in an R&D audit are high. The obvious cost is the repayment of the credit and interest. However, the collateral damage is often more severe:

Accuracy-Related Penalties: Under IRC Section 6662, the IRS can impose a 20% penalty on the underpayment of tax attributable to negligence or substantial understatement.
Resource Drain: Defending an audit is a distraction. It pulls key technical personnel (engineers, CTOs) away from their core work to answer questions about projects from three years ago.⁴
Precedent Setting: A poor audit outcome can taint the taxpayer’s relationship with the IRS, leading to continuous scrutiny in future years.

Swanson Reed’s “creditARMOR” program and the underlying Six-Eye Review are explicitly designed to mitigate these existential risks by treating the claim preparation process as a form of “pre-audit” litigation preparation.⁴

2. Theoretical Underpinnings of the Six-Eye Review

The “Six-Eye Review” is not a standard industry term; it is a proprietary adaptation of the “segregation of duties” principle found in high-security environments. To understand its value, we must analyze the theoretical frameworks it draws upon.

2.1 The Principle of Segregation of Duties (The “N-Eyes” Principle)

In banking and data security, critical processes often require the “Two-Person Rule” or the “Four-Eyes Principle.” This dictates that no single individual should have the authority to execute a high-risk transaction from initiation to completion without independent verification.⁷ This prevents fraud (one person diverting funds) and error (one person misreading a data point).

Swanson Reed extends this to a “Six-Eyes” principle.⁷

Eyes 1 & 2: The creator/preparer (often utilizing AI tools like TaxTrex).³
Eyes 3 & 4: The Technical Specialist (Engineer/Scientist).
Eyes 5 & 6: The Regulatory Specialist (CPA/Tax Agent).

This trilateral structure acknowledges that R&D tax claims are interdisciplinary. An error in an R&D claim is rarely a simple addition error. It is usually an error of interpretation. An engineer might interpret “testing” as “quality control” (ineligible), while a scientist might interpret it as “hypothesis validation” (eligible). A CPA might interpret a contract clause as “standard terms,” while a tax attorney sees “funded research.” By forcing the claim through three distinct cognitive filters, the process identifies and resolves these interpretive conflicts before the IRS does.

2.2 Cognitive Bias in Single-Reviewer Systems

Standard accounting firms often employ a “partner review” system where a junior accountant prepares the claim and a senior partner reviews it. While this provides two sets of eyes, both sets belong to accountants. This creates a “Confirmation Bias” or “Professional Deformation.” They are trained to look for the same things: mathematical accuracy, tie-out to the trial balance, and proper form usage. They are not trained to question whether the software architecture diagram supports the claim of a “highly innovative algorithm” or merely “standard database integration.”

The Six-Eye Review introduces “Cognitive Diversity.” The engineer looks at the claim and asks, “Is this technically feasible?” The scientist asks, “Is the methodology sound?” The CPA asks, “Is the calculation compliant?”.³ This diversity disrupts confirmation bias and forces the team to confront weak points in the claim that a homogeneous team would miss.

2.3 The ISO 31000 Risk Management Integration

Swanson Reed frames this review process within the ISO 31000:2009 Risk Management standard.³ This international standard provides principles and guidelines for managing risk. It emphasizes that risk management should be an integral part of all organizational processes, not a separate activity.

In the context of the Six-Eye Review, ISO 31000 provides the framework for decision making when the reviewers disagree.

Risk Identification: The Engineer identifies that a project lacks contemporaneous documentation of failure.¹⁰
Risk Analysis: The CPA analyzes the impact—if this project is audited, it has a 90% chance of being disallowed.
Risk Evaluation: The team compares this risk against the firm’s risk appetite (which Swanson Reed describes as “conservative” ¹¹).
Risk Treatment: The project is removed from the claim, or the client is advised to reconstruct the documentation immediately.

This structured approach transforms the review from a subjective “opinion” into an objective “risk assessment,” aligning the claim strategy with the client’s tolerance for audit exposure.

3. The First Set of Eyes: The Qualified Engineer

The first layer of specialized review in the Swanson Reed model is the Qualified Engineer. This role is the bridge between the client’s innovation and the tax code’s requirements.

3.1 Translating Innovation to “Technical Uncertainty”

Engineers do not naturally think in terms of “tax credit eligibility.” They think in terms of “solving problems.” The Qualified Engineer’s primary responsibility is to translate the client’s technical reality into the specific language of IRC Section 41.

The Uncertainty Test: The engineer must verify that the project faced “uncertainty” regarding the capability, method, or appropriate design of the business component.¹
The Mechanism of Review: The engineer reviews technical documentation such as architecture diagrams, Git commits, CAD drawings, and testing logs.¹⁰ They interview the client’s technical staff—not just the CFO—to uncover the “why” behind the work.
Risk Reduction: A common audit failure occurs when the taxpayer claims they faced uncertainty, but their documentation shows a straight path to a solution. The engineer identifies this discrepancy. If the “uncertainty” was easily resolved by standard practice, the engineer flags the project as “Routine Engineering” and excludes it, preventing a likely audit adjustment.¹⁰

3.2 The “Routine Engineering” Trap

The exclusion for “Routine Engineering” is one of the most effective weapons in the IRS’s arsenal. The IRS argues that just because a project was difficult, it doesn’t mean it was “experimental” in the tax sense.

The Engineer’s Defense: The Swanson Reed engineer is trained to distinguish between “evolutionary” development (routine) and “revolutionary” development (qualified). They look for the iterations—the failures, the redesigns, the dead ends.
Snippet Insight: As noted in the discussion of “failed development work” ¹⁰, unsuccessful projects are often the strongest proof of uncertainty. The engineer ensures that these “failures” are not buried but highlighted as evidence of the R&D process.

3.3 Documentation of the Development Lifecycle

The engineer also assesses the quality of the technical documentation. The IRS demands “contemporaneous” documentation—records created at the time the work was done, not recreated years later for the audit.²

The “TaxTrex” Connection: The engineer works with the data collected by the TaxTrex AI system.¹² TaxTrex time-stamps data and collects it in real-time. The engineer validates that this data is sufficient to reconstruct the project timeline for an IRS agent.
Implication: If an engineer sees that a project has no testing logs or version history, they will flag it as high-risk, regardless of how innovative the final product is. This prevents the “documentation gap” that sinks so many claims.

4. The Second Set of Eyes: The Scientist

While the roles of Engineer and Scientist often overlap in general parlance, within the rigorous framework of the Six-Eye Review, they perform distinct functions. The Scientist focuses on the methodology—specifically, the “Process of Experimentation.”

4.1 The Scientific Method as a Compliance Framework

The “Process of Experimentation” test requires that the taxpayer engage in a process designed to evaluate one or more alternatives to achieve a result where the capability or the method is uncertain at the outset.¹ This is essentially the Scientific Method: Hypothesis -> Test -> Analyze -> Refine.

The Scientist’s Role: The scientist reviews the claim to ensure the narrative structure adheres to this method. They check if the documentation shows a systematic progression. Did the client identify a variable? Did they isolate it? Did they test it?
Contrast with Engineering: An engineer might look at a bridge and see a “design.” A scientist looks at the bridge and sees a “testing protocol” for tensile strength. The scientist ensures the testing protocol is what is documented and claimed.

4.2 Hypothesis Testing and Failure Analysis

The scientist is particularly attuned to the value of negative results. In the scientific community, a failed experiment provides data. In the tax community, a failed experiment provides eligibility.

Snippet Insight: The research material highlights that “unsuccessful projects… often contain the most robust evidence of qualifying research activities”.¹⁰ The scientist ensures that the client’s narrative doesn’t just focus on the success (“We built a great widget”) but on the scientific struggle (“We failed three times to find the right chemical compound”).
Risk Mitigation: By emphasizing the scientific process over the commercial result, the scientist insulates the claim from the “Commercial Production” exclusion, where the IRS argues the work was just normal production rather than R&D.

4.3 Specific Relevance to Process Industries

In industries like biotechnology, pharmaceuticals, and chemical manufacturing, the Scientist’s role is paramount.¹³

Formula vs. Process: A scientist can differentiate between developing a new flavor (often excluded as “style/taste”) and developing a new preservation technique to achieve that flavor (potentially eligible).¹
Regulatory Knowledge: The scientist understands the difference between FDA compliance testing (routine) and clinical trial testing for efficacy (qualified). This nuance is often lost on a generalist CPA.

5. The Third Set of Eyes: The CPA / Enrolled Agent

The final layer of the review is the financial and regulatory gatekeeper. The CPA or Enrolled Agent (EA) ensures that the technical reality identified by the Engineer and Scientist is accurately reflected in the financial calculations and complies with the letter of the tax law.

5.1 The Financial Nexus: QREs vs. General Ledger

A claim can be technically perfect but financially fraudulent if the costs don’t align. The CPA is responsible for establishing the “nexus” between the Qualified Research Activities (QRAs) and the Qualified Research Expenses (QREs).²

Nexus Tracking: The CPA verifies that the wages claimed belong to the people the Engineer interviewed. If the Engineer validated the software team, but the payroll report includes the sales team, the CPA catches this disconnect.
Supply vs. Asset: As seen in the TG Missouri case (discussed in Section 8), misclassifying a mold as an asset rather than a supply can invalidate the credit.¹⁴ The CPA reviews the “nature” of the expense in the General Ledger to ensure correct tax accounting principles are applied.

5.2 Regulatory Exclusions and “Funded Research”

The CPA/EA is the expert on statutory exclusions that are purely legal/financial in nature.

Funded Research: IRC Section 41(d)(4)(H) excludes research to the extent it is funded by another person or governmental entity. This turns on who retains the “financial risk” and “substantial rights”.¹⁵
The Review Mechanism: The CPA reviews client contracts. An engineer might see a challenging project and approve it. The CPA reads the contract and sees a “Time and Materials” clause or a “Work for Hire” clause that shifts the risk or rights to the customer. The CPA then disqualifies the project, saving the client from a “Funded Research” audit adjustment. This was the critical failure in the Perficient case.¹⁵

5.3 Base Period Calculations and Consistency

The R&D credit calculation is comparative. It rewards incremental R&D spending. This requires calculating a “Base Period.”

Consistency Rule: The definition of QREs in the current year must be consistent with the definition used in the base years.² If a taxpayer claims “cloud computing” costs this year but didn’t include them in the base year (if applicable), the calculation is skewed.
Audit Trigger: Inconsistencies between the R&D credit form (Form 6765) and the main deduction line (Section 174 expenses) are a primary audit trigger.¹⁶ The CPA performs a reconciliation to ensure these figures harmonize, reducing the “red flags” visible to IRS algorithms.

6. Technological Integration: AI and Human Oversight

Swanson Reed leverages a proprietary AI platform, TaxTrex, to streamline the claim preparation process. However, the firm’s methodology explicitly positions AI as a tool subordinate to the Six-Eye Review, not a replacement for it.

6.1 TaxTrex: The 90-Minute Claim and the AI Engine

TaxTrex is described as an “advanced AI language model” trained on R&D tax credits.³ It utilizes Natural Language Processing (NLP) to analyze user surveys and technical descriptions.

Functionality: It automates the collection of data, issuing surveys at regular intervals to capture contemporaneous information.¹⁸ This addresses the “after-the-fact” documentation weakness of many claims.
Audit Heuristics: The system applies “audit-risk heuristics” to flag potential non-compliance (e.g., flagging keywords like “maintenance” or “bug fix” which might suggest non-qualified work).³

6.2 The Risks of Automated Compliance (The “Hallucination” Problem)

While AI is powerful, it carries inherent risks in a legal context.

Hallucinations: Large Language Models (LLMs) can generate plausible but factually incorrect narratives. An AI might describe a project as “developing a novel algorithm” when the underlying data only supports “database migration.”
Lack of Commercial Context: AI struggles with “intent.” It cannot easily discern if a software project was intended for internal administrative use (excluded) or for commercial sale (included).

6.3 The Six-Eye Review as the “Human-in-the-Loop” Governor

The Six-Eye Review functions as the mandatory “Human-in-the-Loop” (HITL) safeguard.¹⁸

Validation: Once TaxTrex compiles the claim, the Six-Eye team reviews it. The Engineer verifies that the AI’s technical description matches reality. The Scientist verifies the methodology. The CPA verifies the numbers.
Defensibility: The report notes that this review is “complimentary” and ensures the “DIY claim is defensible”.¹⁸ This implies that Swanson Reed views the AI output as a draft, and the Six-Eye validated output as the final product.
Synergy: This hybrid model combines the efficiency of AI (speed, data handling) with the judgment of experts (risk assessment, nuance). It allows for the processing of large volumes of data without sacrificing the “nuanced understanding” required to pass an audit.

7. Institutionalizing Risk: The ISO Frameworks

A defining characteristic of the Swanson Reed approach is the institutionalization of risk management through international certifications. This moves the quality control process from subjective “best practices” to objective “auditable standards.”

7.1 ISO 31000:2009 – Risk Management Architecture

Swanson Reed is certified to the ISO 31000:2009 Risk Management standard.³ This is rare in the tax advisory world.

The Framework: ISO 31000 provides a generic framework for managing any type of risk. Swanson Reed applies this to tax risk.
Application: Every claim undergoes a “Five Stage Risk Management Process”.⁹ This likely involves:
1. Establish Context: Understanding the client’s industry and audit history.
2. Risk Identification: Using the Six-Eye team to spot weaknesses.
3. Risk Analysis: Quantifying the potential tax exposure.
4. Risk Evaluation: Deciding whether to claim a project based on the “Conservative” philosophy.¹¹
5. Risk Treatment: documenting the defense strategy or removing the project.
Objective Validation: This certification provides “objective, third-party validation” of the firm’s commitment to risk mitigation.³ It signals to clients (and potentially tax authorities) that the firm operates under a governed, repeatable process.

7.2 ISO 27001 – Information Security and IP Protection

R&D tax claims require the disclosure of a company’s “Crown Jewels”—its most valuable trade secrets.

The Threat: In a standard audit, sensitive data is transferred via email or flash drives, creating a massive security risk.
The Control: ISO 27001 certification ³ ensures that Swanson Reed maintains a secure Information Security Management System (ISMS).
Implication for Six-Eye Review: The Six-Eye process involves sharing data between three different professionals. The ISO 27001 framework ensures that this internal sharing is secure, encrypted, and logged. It protects the client not just from the IRS, but from corporate espionage or data breaches during the compliance process.

7.3 The “Conservative” Claim Philosophy

Swanson Reed explicitly markets itself as “conservative,” prioritizing defensibility over maximizing claim value.¹¹

Alignment with Six-Eye: The Six-Eye review is the enforcement mechanism for this philosophy. It is designed to reject marginal claims. A single reviewer might be tempted to “let it slide” to please a client. Three reviewers create a system of checks and balances where it is harder for a weak claim to pass through all three gates.
Fee Structure: The firm’s preference for fixed/hourly fees over contingency fees ¹¹ supports this. In a contingency model, the firm makes more money if they claim more risk. In a fixed fee model, the firm’s incentive is to minimize audit work (cost), which aligns with submitting a clean, conservative, low-risk claim.

8. Case Law Analysis: The Cost of Control Failures

The value of the Six-Eye Review is best illustrated by examining case law where taxpayers failed to sustain their claims. In each of these cases, a specific failure in control—which the Six-Eye process is designed to catch—led to the loss of credits.

8.1 TG Missouri Corporation v. Commissioner: The Asset vs. Supply Trap

In this case, the taxpayer (TG Missouri) purchased production molds. The issue was whether these were depreciable assets (ineligible) or supplies consumed in R&D (eligible).¹⁴

The Failure: The taxpayer treated the costs inconsistently, depreciating them in some years and claiming them as R&D supplies in others. The court ruled based on the economic nature of the molds.
Six-Eye Prevention: A CPA in the Six-Eye review would have flagged the inconsistency in the General Ledger (depreciation vs. expense). An Engineer would have analyzed the function of the mold—was it a prototype or a production tool? The collaboration between the two would have enforced a consistent classification before the return was filed, avoiding the litigation entirely.

8.2 Perficient Inc. & Grigsby: The Funded Research Failure

In Perficient Inc., a technology services company claimed credits for work done for clients. The IRS disallowed the claims because the contracts were deemed “Funded Research”.¹⁵

The Failure: The taxpayer argued they had “financial risk” because the client could reject the work. The court disagreed, noting that the contracts were essentially “Time and Materials” or lacked explicit provisions tying payment to success of the research.
Six-Eye Prevention: This is a classic failure of legal review. An engineer might have confirmed the work was innovative. But the CPA/EA in the Six-Eye process is tasked with reviewing the contracts against the specific criteria of Section 41(d)(4)(H). They would have identified that the “payment terms” did not create the requisite “financial risk” and disqualified the projects immediately.

8.3 Sudderth & Shami: The “Substantially All” Failure

In these cases, the taxpayers failed because they couldn’t prove that “substantially all” (80%) of the activities constituted a process of experimentation.

The Failure: The taxpayers provided high-level estimates and oral testimony but lacked contemporaneous documentation of the process (hypotheses, failures, iterations).¹
Six-Eye Prevention: The Scientist role is specifically designed to prevent this. The scientist requires evidence of the “Systematic, Investigative, and Experimental” study.¹³ If the documentation only shows the “result,” the Scientist in the Six-Eye review would reject the claim or force the client to dig for the iterative data (lab notes, failed prototypes) required to meet the 80% test.

Table 1: Mapping Case Law Failures to Six-Eye Controls

Case Law	Primary Cause of Failure	Responsible “Eye” for Prevention	Prevention Mechanism
TG Missouri	Misclassification (Asset vs. Supply)	CPA + Engineer	Reconcile GL treatment with technical function of the item.
Perficient Inc.	Funded Research Exclusion	CPA / Enrolled Agent	Detailed contract review for “Financial Risk” and “Substantial Rights” clauses.
Shami / Sudderth	Lack of Process of Experimentation	Scientist	Enforce the “Scientific Method” in narrative documentation; reject “result-only” claims.
Little Sandy Coal	Failure to substantiate “Elements of Process”	Engineer + Scientist	Validate that each element of the experimentation process is documented for each business component.

9. The Audit Defense Ecosystem (creditARMOR)

Swanson Reed integrates the Six-Eye Review into a broader audit defense ecosystem branded as creditARMOR. This program operationalizes the risk reduction achieved by the review process.

9.1 Financial Risk Transfer via Insurance

creditARMOR includes an audit insurance component that covers the costs of defending the claim, including fees for CPAs, tax attorneys, and consultants.⁴

Strategic Alignment: This creates a feedback loop. The insurer (or the firm backing the guarantee) will not take on the risk of a poorly prepared claim. Therefore, the Six-Eye Review acts as the underwriting process for this insurance.
Barrier to Entry: Only claims that pass the rigorous Six-Eye standard are eligible for creditARMOR. This aligns the client’s interest (getting the credit) with the firm’s interest (not paying for defense) and the insurer’s interest (low risk).

9.2 The Feedback Loop: Pre-Audit Review

Before issuing coverage, creditARMOR conducts a “pre-audit review”.⁴ This is effectively a “dry run” of an IRS audit.

Mechanism: The reviewers look for the specific triggers mentioned in the research material: inconsistent claims, large spikes in credit value, and high-risk industry profiles.¹⁶
Correction: If the pre-audit review finds weaknesses (e.g., a “Tier 1” issue like lack of nexus), the claim is sent back to the Six-Eye team for remediation before filing.

9.3 Reducing the Operational Burden

By combining the Six-Eye Review with creditARMOR, Swanson Reed addresses the “fear” of auditing.⁴

Operational Risk: The fear that an audit will consume the company’s management time.
Mitigation: Because the claim is fully documented and structured by the Six-Eye team upfront, and the defense is paid for by creditARMOR, the operational impact on the client is minimized. The firm handles the defense using the documentation already prepared and vetted.

10. Comparative Market Analysis

To fully understand the value proposition of the Six-Eye Review, it is useful to compare it against the prevailing models in the R&D tax advisory market.

10.1 Specialist vs. Generalist Firms

Generalist Firms (CPA Only): typically rely on a “Two-Eye” review (Preparer + Partner). Both are accountants. They often lack the engineering expertise to challenge a client’s technical assertions or the scientific expertise to structure the “process of experimentation” narrative. This leads to claims that are mathematically correct but technically hollow.
Swanson Reed (Specialist): The Six-Eye model introduces the Engineer and Scientist as equal partners in the compliance process. This results in claims that are technically robust. As noted in the snippets, Swanson Reed prepares 1,500+ claims per year exclusively in this domain ²⁰, creating a depth of experience that generalists cannot match.

10.2 Hourly/Fixed Fee vs. Contingency Models

Contingency Model: The advisor takes a percentage of the credit (e.g., 25%). This creates an incentive to maximize the credit, often by including high-risk or marginal projects. This aggressive approach increases audit risk.¹¹
Swanson Reed Model: The preference for Fixed/Hourly Fees ¹¹ decouples the firm’s revenue from the size of the credit. This empowers the Six-Eye reviewers to be truly independent gatekeepers. They can reject a risky project without cutting their own pay. This structural independence is a key factor in risk management.

Table 2: Comparative Risk Profiles

Feature	Standard “Contingency” Model	Swanson Reed “Six-Eye” Model	Risk Implication
Review Team	Accountant + Accountant	Engineer + Scientist + CPA	Generalists miss technical nuance; Six-Eye captures it.
Incentive Structure	Maximize Credit (Aggressive)	Fixed Fee (Conservative)	Contingency incentivizes risk-taking; Fixed fees incentivize accuracy.
Documentation	often “Post-Project” estimates	“Contemporaneous” via TaxTrex	Estimates are a Tier 1 audit trigger; Contemporaneous data is the gold standard.
Audit Defense	Hourly billing or separate fee	Included/Insured (creditARMOR)	“Pay-to-defend” discourages thorough defense; Insured defense ensures rigorous protection.

11. Conclusion

The “Six-Eye Review” process employed by Swanson Reed represents a sophisticated evolution in R&D tax credit compliance. It moves beyond the traditional, linear model of tax preparation—where a CPA simply aggregates numbers provided by a client—to a multidisciplinary, synchronous risk management framework.

By integrating the distinct perspectives of the Engineer (Technical Eligibility), the Scientist (Experimental Methodology), and the CPA (Financial & Legal Compliance), the process effectively neutralizes the information asymmetries that typically plague taxpayers in an audit. It mirrors the government’s own audit structure, identifying and resolving weaknesses before they become liabilities.

Furthermore, the embedding of this human-centric review within the ISO 31000 Risk Management framework and supporting it with AI-driven data collection (TaxTrex) and audit insurance (creditARMOR) creates a comprehensive “defense ecosystem.” This ecosystem does not just aim to win audits; it aims to prevent them by submitting claims of such high quality and consistency that they do not trigger automated audit selection algorithms.

In a regulatory environment characterized by increasing complexity, aggressive enforcement, and high penalties for non-compliance, the Six-Eye Review is not merely a value-added feature. It is a structural necessity for any organization seeking to claim R&D tax incentives responsibly, sustainably, and defensibly. It transforms the R&D tax credit from a gamble into a governed financial asset.