A frequent concern surrounding R&D credits is the perception that the process is too intrusive. But rest assured - here are four tips to help minimize the burden of an R&D tax credit study:

1. Leverage data

A wealth of information can be extracted and analyzed from time tracking and general ledger data. This information can be leveraged to refine the scope of interviews needed and help guide those interviews, resulting in less impact on technical and tax personnel later in the process. 

2. Share the wealth (figuratively)

The research and developmentD tax credit provides significant tax savings to many taxpayers and has the advantage of being easily quantifiable. However, when technical personnel are asked to take time for interviews and data collection, it can seem like a thankless administrative task. 

This perception can be reversed if they know how much value they are creating for the company. Sharing the credit study's past (or anticipated future) benefits with technical personnel and their leadership can help grease the wheel for more enthusiastic cooperation. In addition, the numbers can easily be broken out by department, product line, etc., to illustrate the benefits of the study.

3. Focus on the future

The first year of a study is a learning curve for everyone. To collect the detail necessary to substantiate the R&D tax credit, technical personnel must be educated about the credit requirements and R&D specialists will need to learn about the company. If no R&D credits have been claimed in the past, an inquiry into prior years may be required. And even the data provided by the tax department can have a learning curve. 

In subsequent years, this will pay off. Technical personnel will show up for interviews knowing what will be asked and with examples ready to go. This scenario will be similar for your R&D team and lastly, data pulls from the prior year will be duplicated.

4. Reduce the scope of data collection with statistical sampling

The IRS allows taxpayers to use statistical sampling to limit data collection. You can gather data for a random, limited sample and apply the results to a larger population if you qualify. We can help identify whether this approach would be appropriate and walk you through the technical requirements for the IRS to accept the random sample.   

There are many points in an R&D tax credit study where steps can be taken to minimize the intrusion. An experienced team can help make the process more pleasant and alleviate the concerns of both tax and technical personnel about impacts from the study.

If you've had a less than pleasant experience claiming R&D in the past or have never had a study performed because of the concern of committing resources and information,  contact an A&M Taxand R&D specialist to understand our approach better.