Innovating the R&D Credit

May 19, 2023

At a glance

  • The main takeaway: New platforms, solutions and better data availability make it possible to maximize your company’s R&D credit claim while minimizing your involvement.
  • Impact on your business: Reducing time spent gathering the qualitative and quantitative data for your R&D credit calculation means more time and money to reinvest in your company’s research initiatives.
  • Next steps: Schedule a consultation with Aprio’s R&D Tax Credit specialists to start making your credit claim more efficient.

The full story:

If you’re claiming the R&D Tax Credit, then your company likely prioritizes innovation and ingenuity. As R&D credit providers, we often see these clients become frustrated when faced with the tired, traditional accounting practices that are often applied in the calculation of the credit, which leads to meeting after meeting and much disturbance to the technical teams. As a result, R&D tax credit preparers are exploring ways to incorporate more forward-thinking tactics and improve the “user experience” for those involved in the process of qualifying and quantifying a company’s R&D credit.

Innovators value efficiency, creativity, and modernization – so why shouldn’t your R&D credit calculation emulate those values, too?

Calculating the R&D Credit can be tedious – but it doesn’t have to be

The R&D credit is unique in that it requires direct participation by the innovators themselves – the engineers, developers, testers, etc. – in addition to the finance teams, to uncover qualifying activities and costs. Preparers have traditionally relied on these individuals to provide all of the information used to calculate the credit (including payroll data and contemporaneous documentation); however, this dynamic can result in burdening clients with the tasks of digging up data and collecting documents. Furthermore, this dynamic can even lead to limiting the ultimate credit value if any information is overlooked. In short, the more information preparers have about the business’s activities, the more opportunities can be uncovered to grow your credit.

This begs the question: is it possible to modernize the R&D tax credit with more inventive solutions that can maximize the value of the credit while minimizing eligible companies’ time and involvement? It’s time to consider a new approach that is less dependent on client-gathered and client-provided information. If tax preparers had a direct line into companies’ systems, they could explore more thoroughly and potentially identify even more qualifying activities and costs.

Exploring a new approach

The continuing evolution of the technologies used to run a business makes this new approach possible. Companies have learned the value of Big Data, and now prioritize the digitization and tracking of data more than ever before. The availability of this data is precisely what will revolutionize the calculation of the R&D credit. Many of the systems and technologies used to aggregate this data have the capability to share access with an outside tax preparer. In doing so, you can permit your provider to explore the information without monopolizing your time.

Aprio has trialed this for our clients with exceptional results. By collaborating with our clients and, in some cases, their PEO or payroll providers, we’ve been able to coordinate direct access to all of the data we need to complete the credit calculations. In many of these studies, we’ve realized 50% efficiency gains, largely benefiting the client by reducing time spent compiling and sharing data with our staff.

Through gaining secure access to our clients’ portals and systems, we can remove the burden of gathering data while also ensuring we are not leaving any qualifying costs on the table, thus maximizing the ultimate credit value. This process can even extend to improving the efficiency of documenting your claim, which is a critical component to ensuring audit defensibility. When our staff has access to error logs and systems like JIRA, we can search for the best types of documentation to help bolster your claims.

The bottom line

Doing what’s right for our clients, being relentless about improvement, and working smarter are engrained in the foundation of Aprio’s business. We want to match our client’s ingenuity by delivering a service with unmatched quality and efficiency.

If you’ve been experiencing pain points with the calculation of your R&D credit, we’re listening, and we want to solve them. Bring us your ideas and your troubles, and we’ll bring you a solution.

Schedule a consultation with Aprio’s R&D Tax Credit team and learn more about how you can secure a valuable R&D credit while barely lifting a finger.

Related Resources/Assets/ articles/pages

Manufacturers: Maximize your R&D Credit

R&D Road Trip: Exploring the 37 State R&D Credits

When are US Government Contractors Eligible for the R&D Credit

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About the Author

Meredith Kowal

Meredith is a partner in Aprio’s Tax practice, specializing in R&D Tax Credits. She has over 12 years of experience serving clients in a variety of industries, including technology, manufacturing, retail, hospitality and aerospace.