R&D Tax Credits

Does claiming R&D credits increase audit risk?

No, properly documented R&D credit claims have a strong IRS track record and low audit rates. Strong contemporaneous documentation is the key defense. TaxTaker builds every claim to be audit-ready, and our engagement includes audit support if the IRS ever inquires.

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Trusted by companies that have claimed over $100M in incentives.

Expanded Answer

Will my company be audited if I claim the research and development tax credit?

Claiming R&D credits does carry some audit risk, but it is manageable with proper documentation and a defensible methodology.The IRS does scrutinize R&D credit claims — particularly large claims or those in industries not commonly associated with research. However, legitimate claims backed by thorough records are routinely upheld.Ways to reduce audit risk:

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Maintain contemporaneous documentation (project logs, time records, contractor agreements)Use a consistent, well-documented calculation methodologyWork with qualified tax professionals experienced in R&D credit complianceObtain a comprehensive R&D study that details each qualifying activity and expense.

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The credit is a legal, government-sanctioned incentive — fear of audit should not deter businesses from claiming credits they legitimately earned. IRS reference: https://www.irs.gov/businesses/small-businesses-self-employed/audit-techniques-guides-atgs

What Qualifies

Activities that commonly qualify

Developing new software features or platform capabilities

Improving performance, scalability, reliability, or security

Building internal tools or technical workflows that required experimentation

Testing different technical approaches to solve engineering challenges

What Does Not Qualify

Work that usually does not qualify

Routine bug fixes with no technical uncertainty

Visual-only updates or minor design changes

Marketing, sales, and customer support work

General maintenance that did not require experimentation

Work already solved through an off-the-shelf implementation

Example Case Study

Example of a defensible R&D tax credit claim

A company claims the R&D tax credit after conducting a detailed study of its development activities. It documents each project, tracks employee involvement, and uses a consistent methodology to calculate qualifying expenses.

Because the claim is supported by thorough documentation and aligns with IRS guidelines, the company is well-positioned to defend it if reviewed, reducing the overall audit risk.

Quick takeaway

If your team had to work through technical uncertainty, there is a good chance the work deserves a closer look.

Common Industry Examples

Companies preparing defensible, well-documented claims

Businesses conducting formal R&D studies

Firms working with experienced tax advisors

Organizations maintaining detailed project and cost records

Companies aligning claims with IRS guidance and standards

Curious if you are missing out on credits?

Start with a quick eligibility check. If it looks promising, we move to a light info request and one technical interview.

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