R&D Tax Services Firm Tri-Merit Advises Businesses on IRS Warning

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Tri-Merit, one of the country’s leading R&D tax credit services, has provided guidance for business tax filers in response to a warning from the IRS. In their list of 2016 top tax scams, the IRS called out inaccurate and unsubstantiated R&D tax credit claims as items that they will be monitoring this tax filing season.

“The IRS article noted that they observe a great deal of misuse around R&D credits,” said Crabtree. “It is for that reason that many leading CPA firms use specialty tax providers like Tri-Merit to properly substantiate claims.”

Tri-Merit, one of the country’s leading R&D tax credit services, has provided guidance for business tax filers in response to a warning from the IRS. In their list of 2016 top tax scams, the IRS called out inaccurate and unsubstantiated R&D tax credit claims as items that they will be monitoring this tax filing season. Randy Crabtree, a partner at Tri-Merit notes that taxpayers who follow IRS prescribed guidelines should find themselves in good standing.

“What the IRS has identified are tax filings that claim ineligible activities or expenses, or claims that are not fully substantiated,” said Crabtree. “An R&D claim must meet standard criteria and be supported by a study prepared by a team with appropriate technical experience. The IRS requires complete and valid substantiation of any claim.”

In their annual announcement, the IRS identified failures to execute or substantiate qualified research activities, and failures to meet requirements associated with qualified research expenses as areas that will be watched.

“The IRS article noted that they observe a great deal of misuse around R&D credits,” said Crabtree. “It is for that reason that many leading CPA firms use specialty tax providers like Tri-Merit to properly substantiate claims.”

Crabtree points out that having the analysis performed by technical experts is a critical component of a successful claim: “At Tri-Merit our field personnel have experience in manufacturing, engineering, software and product development among other allied fields. This allows firms like ours to understand the nature of the work and validate that it adheres to the IRS guidelines.”

At the minimum, an R&D credit claim must meet a 4-part test:

1. The project must be intended to be useful in the development of a new or improved business component for the taxpayer, such as a product, process, technique, formula, invention, or software.
2. The project must be undertaken for the purpose of discovering information that is technical in nature. Thus, the activity must rely on the principles of physical sciences, such as engineering, biology, or computer science.
3. The project must be intended to eliminate uncertainty related to the development or improvement of a business component. Uncertainty can include the capability, development method, or optimal design of the business component.
4. The project must evaluate one or more alternative solutions through the development, refinement, and testing of different options. Further, technical risk must be present, which means that there is a chance the project will not be successful.

“The R&D tax credit was instituted to spur innovation, growth and job creation,” said Crabtree. “It provides a key opportunity for businesses to re-invest in their future. It is available across dozens of industries from engineering and aeronautics to craft brewing and video game developers. We encourage all companies to reach out to their CPA firms and ask if they may be eligible for this potentially significant tax credit, but when pursuing a claim, adhere fully to the IRS requirements.”

For more information on the R&D tax credit services provided by Tri-Merit, visit http://www.tri-merit.net.

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Danny Anderson
Tri-Merit, LLC
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