R&D Credit Study Checklist & Items for Consideration

White label Internal Process for CPAs

Phase 1 – Feasibility

Gain an understanding of the client’s business including potentially qualifying activities
- Are potentially qualifying activities performed in the U.S. (including Puerto Rico and territories)?
- Contractual relationships with clients – are the activities funded by a third party?
Utilization – was the taxpayer in losses or subject to AMT?
Has the client performed an R&D study for any prior year?
Estimate QREs and provide client with a conservative estimate of the available credit
For pass-through businesses, will the partners/shareholders/members be able to utilize the credit?

Phase 2 – Planning and Analysis

Was an estimate communicated to the client?
What other information do we have from the introductory conversation/sales process?
When is the client filing?
What state opportunities exist?
Are we pursuing open years?
- What is the statute of limitations for amending prior years?
Does Client prefer to claim the payroll credit or traditional R&D tax credit? Which credit makes more sense?
Controlled group implications?
- Will we (the firm) be running all Client information through the platform or on-boarding them to upload their information to the application?
Confirm the above and get confirmation of filing deadlines from our team and client
- Courtesy call/email after kick off to Client to make them aware of software credentials being sent
Identify any major areas of concern
- Payroll – are gross receipts for the claim year greater than $5,000,000 (thus ineligible for payroll tax credit)?
- Audit – was the client currently under audit when the study came in house (assuming a study was performed in a prior year)?

Phase 3 – Qualification, Quantification, Calculation

Project list development – what does the company do?
- What type of project list or documentation will we use or communicate to client to get the appropriate project lists?
  - WIP reports, travelers, schedule of contracts, bug reports
Employee interview – how many technical employees does the company have? Who from client’s business will “champion” the process and provide qualifying project details?
Have the activities of upper-management been included in QRE? If so, check the qualifying percentages for reasonableness and pay special attention to documenting the qualified activities performed by these employees.
Are qualifying percentages for individual employees in the claim year similar to the corresponding qualifying percentages in the base years (if applicable)? If not, what are the reasons for the change? Was this a mistake or did their role/activities change?
Project Interview – how many projects make sense for interviewing and documenting?
- At least one case study for every 50,000 in credits (not a hard and fast rule)
Project documentation – have items of contemporaneous documentation illustrating nexus between qualifying expenses and activities/projects been identified and collected?
Follow up phone call if client is slow in providing information
Follow up phone call to client once credits are released to explain implications
Keep whole team including partners/sales in the loop prior to release of credit findings

Phase 4 – Reporting and Substantiation