Check Your R&D Credit Sanity
“The hardest thing in the world to understand is the income tax.” - Albert Einstein
“The R&D credit is one of the most complex provisions in the tax code.” - US Tax Court Judge Vasquez
If you’re not 100% certain you have the best R&D credit possible, you’re not alone. Most R&D credit experts don’t know all the tricks for maximizing the credit. It may be time for an R&D credit sanity check if you compute the R&D credit in house, or have used the same provider for several years.
Here's a tip from SPRX, have a R&D tax credit sanity check. This will help ensure you are maximizing your credit and preparing a strong case for the eventual IRS exam.
Causes of insanity
The SPRX team has a long history of reviewing R&D credit computations. Here are some of the most common causes for insane R&D credits:
Following SALY into a ditch
Accountants love to follow SALY (Same As Last Year). SALY is a term that accountants and auditors use when they want to maintain consistency and use the same accounting method or treatment for a particular item or account as was used in the previous year.
That may work for stable computations, but the R&D credit is certainly not stable. If your team is following the same process and capturing the same costs year after year, your credit may be significantly incorrect.
Pilot model costs
The rules defining pilot models have been changing over the past 9 years. New regulations were issued in 2014 but the effects of those regulations were uncertain until cases worked their way through the courts. If you have not re-evaluated your pilot model supply costs in the past few years you may be missing substantial credits.
Simple lack of experience
Many R&D credit providers are simply inexperienced. Even when you hire an R&D credit firm the tax decisions are being made by young staff persons.
Credit reviews often focus on the calculation mechanics not on the underlying tax interpretations. Regardless of who performs your R&D credit computation, a sanity check can find new opportunities.
Check the bigger picture
A sanity check is asking someone else to confirm that you are not insane and that what seems to make sense to you also makes sense to them. Sometimes you get too close to a process that you forget to step back and see the bigger picture.
Looking at the bigger picture is essential for making better decisions, achieving long-term goals, reducing stress, and fostering growth. A different perspective occasionally helps to make sure you are not completely insane.
The complexity of the R&D credit and the constant change in laws, regulations, and administrative pronouncements can make any of us a little insane. These five items are particularly good to check.
- Qualified wage costs relative to others in your industry
- Qualified supply costs relative to others in your industry
- Persuasiveness of support documentation
- Application of the exclusion rules (over or under applying the exclusions)
- Application of recent rule changes
Checking these items can bring added sanity as you step back to see the bigger picture.
Experience is our gift to you
Experience is a testament to a company's ability to deliver. SPRX experience is our gift to you. We will provide a sanity check review of your R&D credit at no cost.
Relying on our technology we can compare your wage and supply QREs to others in your industry. With our A.I. tools we can test and score your research documentation relative to how persuasive each document may be during an IRS exam. Our R&D credit experts will review your credit for compliance with the most recent rule changes.
Contact our team and schedule a free sanity check.
At SPRX we build the tools that save you time…and money.
