In 2009, the IRS disallowed R&D Credit claims with statements like these:
“It is not enough to engage in qualified research activities to be entitled to the research credit. Taxpayers claiming the credit must maintain sufficient records detailing and substantiating the expenditures claimed as eligible for the credit.”
and:
“The Taxpayer, under its own admission, is unable to provide any records showing how many hours each employee worked on any given project during the credit year. Nor are they able to provide any records showing how many hours any employee’s work involved activities that might have constituted qualified research.”
THE SOLUTION: Daily Project Cost Tracking.
Today, taxpayers need to document their Research activities more than ever before. New IRS Audit Techniques (published in May 2008) provide clarity to the documentation requirements. The bottom line is:
DAILY COST TRACKING IS THE MOST ACCURATE AND DEFENSIBLE APPROACH TO CAPTURING THE R&D CREDIT.
THE CHALLENGE: Motivating Clients to Document Consistently.
You know your clients need to improve their documentation. However, effecting a change in their procedures is difficult. As engineers, we understand why this is a challenge:
- Key employees are already extremely busy.
- Engineering/Operations folks resist any perceived “make-work” effort.
- It’s human nature to resist new technology and procedure changes.
- Your relationship is with the Senior Management and Finance Departments, not the Engineering and Production Groups.
THE APPROACH: Introduce Armor as a Potential Solution.
Armor is not the solution for everyone. Some of your clients have good systems in place, but just need a little education on how to improve their documentation. However, many businesses keep poor (if any) project accounting records, and trying to reconstruct the data at the end of the year is disruptive, costly, and difficult to defend.
In either case, consider utilizing Armor as a FREE tool to educate your clients on the current R&D Credit requirements. You can do this quickly and easily as follows:
- Establish your own personal “CPA Referral Code”. Call us for details.
- Email your Referral Code and a link to this website to your R&D clients for a quick introduction.
- Encourage them to enter your Referral Code and take advantage of the Free 30-day Trial.
- The Referral Code provides you web-based visibility to your client’s Armor data.
- Within 30 days, we’ll help you and your client assess Armor’s value in helping them meet the current IRS documentation requirements.
- If you’re interested, contact Titan to discuss branding the Armor application and incorporating it into your existing R&D practice.
