R&D Tax Credits Recovered for Software Development Firm
How identifying qualifying research activities and filing amended returns recovered $89,000 in overlooked credits.
Executive Summary
A software development company had been conducting qualifying research and development activities for years without realizing they were eligible for R&D tax credits. After a comprehensive review, we identified qualifying activities, documented the research process, and filed amended returns to recover credits for the prior three tax years.
[Detailed executive summary to be provided by client]
The Challenge
The client, a growing software company, faced several misconceptions about R&D credits:
- Believed R&D credits were only for "laboratory research"
- Thought software development didn't qualify as "research"
- Lacked documentation of their development process
- [Additional challenges to be provided]
[Detailed challenge description to be provided by client]
Our Approach
We conducted a thorough R&D tax credit study following IRS guidelines and the four-part test:
Phase 1: Activity Identification
Interviewed development team members to identify all potentially qualifying activities including new product development, improvements to existing software, and infrastructure innovations.
Phase 2: Four-Part Test Analysis
Evaluated each activity against the IRS four-part test: Permitted Purpose, Technological Uncertainty, Process of Experimentation, and Technological in Nature.
Phase 3: Documentation & Calculation
Created contemporaneous documentation and calculated qualified research expenses (QREs) using both the regular and alternative simplified credit methods.
Phase 4: Amended Return Filing
Prepared and filed amended returns for the three open tax years to claim previously uncaptured credits.
[Detailed approach to be provided by client]
The Results
[Detailed results to be provided by client]
Key Takeaways
Many software development activities qualify for R&D credits—not just "laboratory research."
Amended returns can recover credits from prior years (generally 3 years back).
Proper documentation is essential—establishing a process now creates ongoing credits.
Quick Facts
- Industry
- Technology / Software
- Company Size
- [To be provided]
- Credits Recovered
- $89,000
- Strategy Used
- R&D Tax Credits + Amended Returns
- Timeline
- [To be provided]
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