R&D TAX CREDIT DOCUMENTATION STRATEGIES

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1 R&D TAX CREDIT DOCUMENTATION STRATEGIES Guidance for Support of an R&D Credit Claim Herbert Hanselmann Senior Managing Consultant Ashley Thompson Director 1

TO RECEIVE CPE CREDIT Participate in entire webinar Answer polls when they are provided If you are viewing this webinar in a group Complete group attendance form All group attendance sheets must be

2 TO RECEIVE CPE CREDIT Participate in entire webinar Answer polls when they are provided If you are viewing this webinar in a group Complete group attendance form All group attendance sheets must be submitted to training@bkd.com within 24 hours of live webinar Answer polls when they are provided If all eligibility requirements are met, participants will be ed their CPE certificate within 15 business days of live webinar PRINCIPLE LEARNING OBJECTIVES What to document? What do you have now? Document for whom? How to document? Why document? Who to document? 2

3 WHAT TO DOCUMENT? Qualified Expenses Qualified labor Qualified supplies Qualified contract research Qualified Activities Projects Jobs/positions Process WHAT DO YOU HAVE NOW? Qualified Expenses Labor expense Tax forms Labor tracking reports Project labor plans/estimates Project schedules Supply expense GL R&D account GL testing account GL development account GL project/job account AP vendor account 3

4 WHAT DO YOU HAVE NOW? Qualified Expenses Contract research GL professional services account GL project/job account AP vendor account Vendor PO/contract Vendor proposal/quote Vendor report WHAT DO YOU HAVE NOW? Qualified Activities Projects Proposal Charter Contract Narrative Drawings Job/project files Jobs/positions Job description Job posting Organization chart Accountability/role chart 4

5 WHAT DO YOU HAVE NOW? Qualified Activities Process Schedule/plan Narrative Progress report Change notices Test procedures Bug fix log Source code change file Agile sprint history Jira history Test log DOCUMENT FOR WHOM? IRS Examiner Accountant Documents for all criteria General knowledge Multiple businesses & tax issues 5

business Primary judge of your qualification Relies much on documents HOW TO

Program Identify what you have & need Develop & implement routine method of

6 DOCUMENT FOR WHOM? IRS Technical Rep Different technical experience Doesn t know your product or business Primary judge of your qualification Relies much on documents HOW TO DOCUMENT? Program Identify what you have & need Develop & implement routine method of saving documents & data for later use Review samples of data collected quarterly Identify & improve for gaps Assemble at year-end for use in preparing annual research credit claim Improve following development of claim 6

7 HOW TO DOCUMENT? Issues in Reviews Qualified Expenses Some job titles or project names don t connote technical activity or research Job descriptions that don t include development Amounts of qualified time too high for job Industry or product doesn t seem high-tech Credibility/reasonableness of estimates Prototype or production expenses HOW TO DOCUMENT? Issues in Reviews Qualified Activities Lack of contemporaneous documents Unclear how or what document supports General statements sound canned/generic Incomplete/inadequate description of how criteria is met for reviewer understanding/bias Document of individual involvement/role 7

8 WHY DOCUMENT? 5. Documents & data exist 4. For ease & speed of preparing credit claim 3. For better support if questioned by tax preparer regarding FIN 48 reserve 2. In event of an IRS audit, easier & faster response to IRS document requests 1. Increase the value of credit claim allowed WHO & WHEN TO DOCUMENT? YES As you go Routinely part of best practice of people doing it Selected data & documents NO Only once per year Only for research credit Only by one person 8

9 CONCLUSIONS Research credit has significant value for many companies Quality of a credit claim should be similar to that of other efforts of your company Less time will be wasted if data & documents are collected simply & routinely There can be less stress & uncertainty in preparing & supporting research credit claims Thoughtful deliberate documentation strategy is of key importance for all of the above Anonymous No one wants to spend more time with the IRS than they have to And corollary to it: No one wants to spend more time working on taxes than they have to BUT YOU HAVE TO! 9

10 QUESTIONS? CPE CREDIT CPE credit may be awarded upon verification of participant attendance For questions, concerns or comments regarding CPE credit, please the BKD Learning & Development Department at 10

11 CONTINUING PROFESSIONAL EDUCATION (CPE) CREDITS BKD, LLP is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: The information in BKD seminars is presented by BKD professionals for informational purposes only. Applying specific information to your situation requires careful consideration of facts & circumstances. Consult your BKD advisor before acting on any matters covered herein or in these seminars. THANK YOU! FOR MORE INFORMATION Herbert Hanselmann hhanselmann@bkd.com Ashley Thompson athompson@bkd.com 11

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To Receive CPE Credit

Management Reporter 2012 What's New April 25, 2013 Charles Allen Managing Consultant BKD Technologies callen@bkd.com To Receive CPE Credit Participate in entire webinar Answer polls when they are provided