Top 3 Tips to Prepare for Your R&D Tax Credit Claim
The specialists at Swanson Reed have put together their top tips to prepare for an R&D tax credit claim. These are their suggestions to make the process as simple and stress-free as possible for everyone involved.
Identify the research and development in your operation. Refer to the IRS’ 4-part test:
- Technological in nature : mathematics, engineering, computer science, earth/natural sciences
- Improved functionality : performance (speed), reliability (capacity), quality, cost reduction
- Eliminate uncertainty : capability uncertainty (“Can we do it?”), methodology uncertainty (“How do we do it?”), Product design (“What is the correct formula?”)
- Process of experimentation: evaluating alternatives, trial & error, scaling-models, testing results, analyze and form new hypothesis
When trying to identify your R&D, focus on technology and ask yourself these questions:
- Was there new equipment involved?
- Was there new engineering? Such as re-routing processes to reduce queue time?
- Was there new application of natural sciences, chemicals, formulas, etc.?
- Was a product or process made more efficient or more reliable?
- What testing was conducted?
Showcase Your R&D
Showcasing your R&D on your website is an easy and non-invasive way to illustrate your R&D projects to others. Creating a video of the non-sensitive aspects of your project is great way to prove your R&D. Giving a physical tour of your operation is always an alternative, but is a bit more invasive than the other options.
Documentation is the foundation of the entire reporting process. Appoint people in your operation who will collect information and data for the Swanson Reed team. They must have access to sources.
Make sure the documentation of payroll, supplies and contracted research services is organized, accessible and sorted by year.
If the taxpayer has patents, include them in the claim. Patents are a guaranteed recognition of R&D.