4 Mistakes You Might Be Making on Your R&D Tax Credit Claim

R&D Tax Credit

small business

Enterprise

By
Rachel Bishop, CPA
on
February 13, 2024

Are you making the most of your R&D tax credit claim? Here are four common mistakes that businesses often make when it comes to claiming their R&D tax credits.

1. Documentation Deficit: Leaving Money on the Table

Robust documentation is the backbone of a successful claim. Keep detailed records of your project objectives, methodologies, challenges encountered, and results achieved. Think meeting notes, technical reports, prototypes, and even emails discussing the innovative aspects. Without solid proof, your claim risks crumbling under scrutiny.

2. Casting a Wide Net: Not All Costs are Created Equal

While your entire R&D project might seem worthy of a reward, the R&D tax credit isn't a blanket solution. It specifically targets the innovative aspects, not routine business activities. Common mistakes include claiming marketing costs, routine tasks like quality control, or expenses incurred outside the eligible claim period. Scrutinize your project expenses and isolate the specific portions related to genuine R&D activities. Only those qualify for the credit.

3. Underestimating the "R" in R&D

Not all projects with a science twist automatically qualify for R&D tax credits. Remember, the "R" stands for research, not routine development. Your project should involve overcoming technological or scientific uncertainties, leading to advancements in your field. Simply improving an existing product or process might not be enough. Be prepared to demonstrate the innovative elements and technical challenges tackled within your project.  

4. Going Solo When the Stakes are High

Navigating the R&D tax credit landscape can be complex, especially for intricate projects or businesses unfamiliar with the process. While venturing solo might seem tempting, seeking professional advice can be invaluable. Experienced R&D tax advisors can maximize your claim by identifying all eligible expenses, ensuring compliance, and minimizing the risk of errors or rejections. Their expertise can translate into significant financial gains and peace of mind.

R&D Tax Credits with GOAT.tax

Claiming R&D tax credits can be a game-changer for your business, fueling further innovation and boosting your bottom line. By avoiding these common pitfalls and seeking expert guidance when needed, you can ensure your claim journey is smooth sailing.

At GOAT.tax, we can help assess your company’s federal R&D tax credit opportunity and determine any state R&D tax credit availability.  Our team of experienced CPAs, attorneys, engineers, and technology experts helps companies save money and create cash flow with R&D tax credits that can then help drive overall growth.

continue reading

Section 174 Explained

Section 174 of the Internal Revenue Code now defines the treatment of Specified Research or Experimental (SRE) expenditures. Learn more!

read on

Common Misconceptions About R&D Tax Credits For Startups

Each year, numerous qualifying businesses miss out on the advantages of R&D tax credits. Discover the common misconceptions.

read on

Understanding the Alternative Simplified Credit Calculation for R&D

The ASC method offers a simple alternative, particularly for companies with a limited R&D history. Is it the right method for you?

read on