This page provides a practical review checklist for business owners considering the R&D tax credit. It is educational and is not individualized advice. For the general framework, see our page on what the R&D tax credit is.
1. Identify Potential Activities
- What activities is the business conducting that may involve developing or improving a product, process, software, technique, formula, or invention?
- Are there activities involving technical uncertainty about capability, method, or design?
- Are there activities involving a process of experimentation — evaluating alternatives?
For more, see our page on qualified research.
2. Analyze Qualified Research
- Do the activities satisfy the four-part test (permitted purpose, technological in nature, elimination of uncertainty, process of experimentation)?
- Are the activities directed at a specific business component?
- Do any exclusions apply (research after commercial production, adaptation, duplication, surveys, internal-use software, foreign research, funded research)?
For more, see our page on the four-part test.
3. Identify Qualified Research Expenses
- What wages may be qualified research expenses (employees performing or directly supporting qualified research)?
- What supplies may be qualified research expenses (tangible property consumed in qualified research, excluding depreciable property)?
- What contract research may be qualified research expenses (65% of amounts paid for qualified research on behalf of the taxpayer)?
For more, see our page on qualified research expenses.
4. Organize Documentation
- Are there contemporaneous records connecting activities, costs, and business components?
- Are there records identifying the technical uncertainty, alternatives, and process of experimentation?
- Are there records connecting wages, supplies, and contract research to specific projects?
For more, see our page on R&D tax credit documentation.
5. Prepare Form 6765
- Has Form 6765 been prepared with the current instructions?
- Has the appropriate computation method (regular or ASC) been selected?
- Has the Section G business-component reporting been prepared, if required?
- Have the applicable elections (Section 280C, payroll tax) been considered?
For more, see our page on Form 6765.
6. Seek Professional Review
- Has a qualified tax professional reviewed the credit claim?
- Have the activities, costs, and documentation been reviewed for compliance?
- Have the elections and computation method been reviewed?
Because the R&D tax credit analysis is fact-specific, professional review is appropriate before claiming the credit.
Key Takeaway
A business owner review checklist for the R&D tax credit covers activities, qualified research analysis, QRE identification, documentation, Form 6765 preparation, and professional review. Because the analysis is fact-specific, professional review is appropriate before claiming the credit.