How to Prepare for an R&D Tax Credit Audit

New rules and regulations have made it easier for all types of businesses to profit from the R&D Tax Credit, but there is always a possibility that the credit will provoke an IRS audit. Even hearing the word audit can make someone’s head spin, so it’s best to be as prepared as possible to help ease your mind. Here are a few tips that will help one prepare for an R&D tax credit audit.

Collect and Organize your Documentation

Documentation is the basis of the R&D Tax Credit, so having your records organized and readily available is essential. Appoint a staff member who has access to the documents to collect the data throughout the R&D project. That way one person will be responsible for having everything in once place in case an audit occurs. Read up on what documents are needed to claim.

Get Familiar with the Audit Techniques Guides

The Audit Techniques Guides are published by the IRS to train IRS employees, but are available to the public to help provide a better understanding of the audit process. There is a large assortment of guides, each one tailored to a specific audit concern. There are four different ones for the R&D Tax Credit alone that can be found on the Research Credit page of the IRS website. Be aware that some guides are industry specific so make sure to choose the one tailored to your business. Even skimming one will help prepare you for what to expect.

Consult a Specialist

Getting advice from your tax preparer is always a good thing, but the R&D Tax Credit may be outside of their normal practice. If you do claim the credit it will be beneficial to consult with an R&D Tax Credit specialist. They will help determine your eligibility, properly prepare your claim up to IRS standards and provide guidance in the case of an audit.


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