On October 15, 2021, the IRS issued a Chief Counsel Memorandum regarding tax filing procedures for companies submitting claims for the research & development tax credit to prove the validity of the refund.

These procedures, which went into effect on January 10, 2022, significantly expand the documentation required to accompany the filing of amended tax returns claiming R&D tax credits.

The procedures will result in high tax preparation costs to businesses, which could deter them from claiming credits.

Recently, the American Bar Association (ABA) sent a letter to the IRS emphasizing the increased burden that the compliance procedures have on taxpayers. The ABA stressed that the procedures will result in high tax preparation costs to businesses, which could deter them from claiming credits. They cite the Paperwork Reduction Act of 1995, which requires the IRS to consider the cost-benefit to the taxpayer when complying with filing procedures.

And since traditional firms can charge up to 30% of the R&D tax credit claimed, any added costs and effort could impede qualified businesses from claiming credits to which they are entitled.

While this memorandum brings new requirements and steps to the tax credit process, technology offers a solution to help you navigate the changes without added expense. By using a cloud-based software where all your information is stored in one place, you can ensure you have all documentation to meet the new standards of the memorandum, as well as staying organized if an audit were to occur in the future.

For companies wanting to file claims for the R&D tax credit, it is crucial to be thorough when documenting qualified research activities and expenses. In order to take advantage of this valuable tax credit, you have a responsibility to make sure your claim is defensible and compliant with IRS guidelines.

Clarus R+D can help you claim R&D tax credits without stress or confusion. Our efficient and user-friendly software platform allows you to organize all required documentation so that you are prepared in the event of an IRS audit. We’ve streamlined the process to save you time and money so that you can get back to running your business.