You would think that the process of having a study completed to document your research and development tax credit activities and credits would be roughly the same from provider to provider; not exactly.
Having been in a number of competitive situations against other firms to secure annual R&D tax credit studies, the approach, features and price can vary greatly. I thought providing information to help you understand the landscape might be appropriate (by the way, I have provided much more detail on our website under the Pricing Info tab).
Let’s take a look.
Comparing R&D Tax Credit Experts Can Be Confusing
There are a number of firms in the US specializing in providing expertise around the R&D tax credit. This group includes CPA firms that provide services both to their client base and specialty tax providers (such as Acena Consulting) that focus on tax incentives. While each consultant has their own methodology that may have been successful under either IRS or state audit, process and approach are important factors that separate each group.
When evaluating various providers, consideration should be given to experience, approach, technical capability, audit defense, references, market perception, pricing strategy and timing. As an example, you might want to gather intelligence on the following questions:
Does this firm advocate strong project level documentation?
What is this firm’s reputation with the IRS or state auditors?
Is there a history of legal action either against this firm or by this firm as it relates to their clients?
Do they complete their work in the US or is any of it completed off-shore?
Is audit defense included in the pricing and if so, how much are you paying for it?
What is their pricing strategy? Fixed Fee? Hourly Rate? Percentage of Savings?
Does your CPA firm have any feedback or experience that might impact your evaluation?
Can you reference their work through friends, industry associates or other 3rd parties?
Who performs the actual study? Is it the individual that sold you the work or someone else?
Do they come to you or complete the study over the phone?
Do you feel they are a vendor or a strategic partner that is part of your success?
While it seems as though there is a lot of information and questions to be asked, they are important in terms of how the study will be priced and executed.
Some firms charge a significant fee and include audit defense. I suppose paying for audit defense up front can be beneficial but if you approach it as an insurance policy, why would you pay the full price of defense and not just a small percentage? At the same time, the consultant should stand behind their work and should support you in the event of an audit.
Partner or Vendor
Does the consultant partner with you and your CPA firm? You have placed your trust in your CPA to help you understand tax issues and guide you appropriately, are they comfortable with the consultant or can they reference the consultant through their network of other CPAs.
Selecting the Provider
Once you have selected a firm to help you gather and calculate your R&D credit, who does the work? Is it the person you met during the sales process? Or have they now turned over your study to someone you haven’t met. Will they be coming to your office to meet with you or complete the work over the phone? I have been in companies that take both approaches and we have found we learn more, gather more information and provide a better quality service when we meet face-to-face with our clients.
Do you know what you don’t know?
We have provided additional information and more detail on many of the variables listed above on our website. Half the battle is knowing what questions to ask and understanding the problems or issues that might surround their firm in terms of market perception and approach.
What has been your experience with R&D consultants?
Have other suggestions for companies looking at R&D tax credits?
What would you do differently in terms of investigation?
Randy Eickhoff, CPA is President of Acena Consulting. With more than 20 years of tax and consulting experience, Randy focused on helping companies successfully document and secure tax incentives throughout the US. He has been a long-time speaker nationally as well as conducted numerous training sessions on R&D tax credits and other US tax incentives.