Earlier this month, the IRS included the Research and Development Tax Credit “Credit” as an area of potential abuse by unscrupulous taxpayers and providers. In a recent article published on irs.gov, the IRS stated, “(u)nsupported claims for the research credit may subject taxpayers to penalties. Taxpayers should carefully review reports or studies prepared by third parties to ensure they accurately reflect the taxpayer’s activities. Third parties who are involved in the preparation of improper claims or research credit studies also may be subject to penalties.” See https://www.irs.gov/uac/Newsroom/Excessive-Claims-for-Business-Credits-is-on-IRS-Dirty-Dozen-List-of-Tax-Scams-for-the-2016-Filing-Season.
The above article shows that the IRS has identified the Credit as an area of abuse, raising the stakes for each taxpayer claiming the Credit. While the IRS is appropriately focusing on “bad actors” among the taxpayers and third party providers who prepare research credit claims, it is critical that anyone claiming or preparing and R&D tax credit claim be precise and thorough in support of the claim.
Not to worry, however. If an experienced and credible provider prepared an R&D tax study for you, you should have the right documents to begin answering the questions that the taxing authorities will pose. If you calculated your credit in-house or did not prepare a study in support of your credit claim, it’s not too late. Begin by consulting a knowledgeable practitioner like TRCG Advisors to review and identify the documents responsive to the taxiing authorities’ requests.
You may also be able to increase your company’s R&D tax credit during the audit process if qualified expenditures were left out of the original claim. TRCG Advisors has done just that for a number of clients.
Bottom line: the IRS is paying close attention to the R&D tax credit. TRCG Advisors can help you maximize your company’s credits while minimizing the risk on audit. Contact us for a no-cost consultation today.