Rethinking R&D Tax Documentation: Swanson Reed Appears in The Tax Advisor

The R&D tax credit, worth approximately $7 billion annually in recent years, saw 17,700 corporations claim $6.6 billion in R&D Tax Credits on their tax returns in 2005 alone. Indeed, the many economic benefits of the R&D tax credit are well documented – however, just how well do individual companies need to keep their documents?

New research undertaken by Swanson Reed and published in the July edition of the Tax Advisor magazine explores the debate between the taxpayers and the IRS as to what records and substantiation are sufficient for claiming the R&D Tax Credit. The article examines the qualification rules and the IRS’s approach, and recent court cases to identify best practices in documenting and substantiating research tax credits. In particular, the cases have largely concluded that there was not enough documentation or that the documentation was insufficient as it is not specific enough or is disorganized.

The full extent of the importance of these findings will most significantly impact tax claimants and those operating in the discipline of research and development. Nonetheless, a better understanding of the role of documentation may help businesses plan more successful strategies for substantiating research tax credits.

The full Tax Advisor article can be found here: 

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