Performing an R&D Study: What Documentation is Needed?

An R&D study is vital for properly calculating and documenting the R&D Tax Credit. If the R&D Tax Credit you claim on a tax return ever falls under examination by the IRS or state authority, one of the first questions asked is “did you have an R&D study performed prior to taking the R&D Tax Credit on your tax return?” If the answer to that question is “yes,” the odds are better that you will retain your claimed R&D Tax Credit. If the answer is “no,” your company may face the possibility a reduced or eliminated credit, plus penalties and interest.

What is an R&D Study?

During an R&D study, Adams Consulting works with you and your company to identify all qualifying R&D activities and the costs associated with them. We then use that information to calculate your company’s R&D Tax Credit. We also take an in-depth look at your company’s qualifying activities and properly document everything required to support the R&D Tax Credit claim.

What documentation is needed?

The documentation required for an R&D study includes the following:

  • Financial information (i.e., wage, supply, leased computing, and contractor costs)

  • Specific project information (which projects logged qualifying R&D time versus which did not, as well as an in-depth analysis of the qualifying projects)

  • Interview testimony from individuals heavily involved in R&D activities (engineers, supervisors, etc.)

  • Contemporaneous documentation (drawings, meeting notes, project reports, test results, etc.).

At first glance, the list is overwhelming, but Adams Consulting works hand-in-hand with your company to gather the information, making the process as smooth as possible. At the end of the day, we’re committed to preventing the R&D Study from disrupting your normal business activities.

How much time does it take?

R&D study timelines can vary from a couple of weeks to a couple of months, depending on your company’s size and the scope of your R&D activities. Smaller tax credit claims  require less detail and documentation, while larger tax credit claims may require more documentation and a longer timeline to properly document/support the credit claim.

Regardless of the time required to document your R&D Tax Credit claim, Adams Consulting maintains communication with your company throughout the process to keep you up-to-date.

What’s the bottom line?

Facing your first R&D study may feel daunting, but we make the process as easy for you, your staff, and your business as possible. We have over a decade of combined experience preparing R&D studies for companies of all sizes, from all industries. We can answer questions you have throughout the process. While first-year studies can be time-consuming, the result is always worth the effort, and future years become much easier as a process is developed for your company’s specific R&D study.

To learn more, contact us today. We’re happy to help.