Tips to Streamline Time Needed for an R&D Tax Credit Study

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Posted by Randy Eickhoff on Dec 13, 2019 10:52:30 AM

It’s not surprising that, when faced with the prospect of an R&D tax credit study, most business owners ask, “How much will the process cost my organization?” However, beyond bottom-line dollars, many entrepreneurs also want to know about the time needed to complete the process—or more specifically, “Will the time dedicated to a research and development tax study prove rewarding enough to justify the time, resources, and attention needed for completion?”

Our general response? Possibly.

Year-End Requirements

A deeper dive into what’s expected throughout the process can help you move forward with a study. Many organizations wait until the end of the year to begin gathering the information and documentation required to claim the R&D tax credit benefit. Unfortunately, the fourth quarter (and December in particular) is typically chaotic for businesses of every size and in virtually every industry. Preparing for year-end planning adds a new layer to the busyness of the season, as taxpayers begin gathering a multitude of resources, such as:

  • Financial statements
  • W-2s
  • 1099s
  • Loan statements
  • Investment statements

Fortunately, many of the documents needed for a research and development tax credit study mirror those required when filing basic returns. In addition, there are a few additional documents specific to research and development, including:

  • List of qualifying projects
  • Total number of people and hours dedicated to qualifying projects
  • Supply expenses on each initiative
  • Time spent with key personnel to qualify each initiative

Business acquisitions, major corporate changes, or significant internal events should also be discussed with an R&D tax credit specialist to ensure they are treated properly when claiming the benefit.

Minimizing Year-End Stress With the R&D Tax Credit

Of course, nothing says business owners have to wait until the end of the year to begin tracking research and development projects, gathering documentation, and logging relevant time. In fact, at Acena Consulting, we recommend to our clients that they don’t put off some of the R&D tax credit legwork until December. Here are a few time-tested ways to streamline the process throughout the year that can help reduce year-end stress:

Quarterly Reviews
Acena Consulting’s team of R&D tax credit specialists often work with our partners on a quarterly basis to qualify operations and aggregate data on project details and hours logged. This simple practice can significantly eliminate the dreaded year-end crunch.

Digital Management
Manually tracking project details increases the chance of mistakes and missed information. Fortunately, there are a multitude of online platforms that offer an online, automated framework for R&D project tracking. Implementing a digital tracking system may incur some initial costs but can actually help a business save significantly in overall lost time and resources.

Time Tracking
Many business owners approximate hours at the conclusion of a year-end development project. However, at Acena Consulting, we suggest daily and weekly time tracking throughout qualifying initiatives to eliminate the guesswork.

Established Development Protocol
Some of our partners have a well-defined development system, while others do not. Determining a streamlined development protocol not only reduces the cost of innovation but can also support the research and development credit process as well. 

Yes, it’s year-end, but it’s not too late to optimize the R&D tax credit for your business. Contact Acena Consulting today to hear more.

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Randy Eickhoff

Randy Eickhoff

Acena Consulting President Randy Eickhoff, licensed CPA, has partnered with more than 200 companies during more than 20 years of experience securing tax credits and other government incentives. His corporate partners range from multinational technology firms to smaller, privately held manufacturing, sports, and technology enterprises.