Bruce and Cedar have been involved with IRS and state audits on R&D tax credits (on both sides of the table) for over 15 years, and we have provided audit assistance to help clients navigate through the exam process even where we didn’t do the original study. Finding the right corporate tax consultants to help your company sustain your R&D benefits is more important than ever under the IRS Tier I program, and the choice of a service provider should depend not only on who can do the study, but more importantly, who can represent you in defending and sustaining the results of an R&D study. As part of the Large and Mid-size Business Division of the IRS (the LMSB), the R&D tax credit is one of the 15 Tier I issues identified by the IRS as of March 2007 which means a new environment for handling R&D issues within the IRS.
What does the Tier I Status Mean for my R&D Tax Audit?
The Tier I status with respect to the R&D credit is intended to apply just to claims for refund, not for R&D credits on originally filed returns. There are mandatory procedures agents will follow under Tier I, such as a mandatory (and extensive) initial IDR (Information Document Request) to determine whether the R&D claim is valid and whether the claim can be audited. There are also national technical advisors who provide guidance on Tier I issues, including hot topic issues such as identifying the business component, use of estimates, base period and other issues common in IRS exams. Even on originally filed returns claiming R&D credits, and even with smaller taxpayers outside of the LMSB program, we have commonly found agents utilizing the mandatory IDRs and other Tier I processes in examining smaller R&D credits, including credits on originally filed returns.
Our Tax Audit Expertise
Prior to the R&D Tier I program, the IRS had a Research Credit ISP program for many years to administer the R&D credit and assist IRS agents across the country with R&D issues; Bruce Warner was a tax attorney on the IRS team as co-counsel to the Research Credit ISP in the 1990s and has seen the issues from the ‘other side of the table’ and understands the processes, procedures and even pressures that agents face in trying to review and resolve R&D credit issues. Bruce authored several IRS issue papers that are still in use by the IRS including procedures around the use of statistical sampling in R&D cases as a means of more efficiently resolving large R&D exams. Similarly, Cedar Robinson has over 15 years of experience in helping clients with R&D audits of all sizes. Cedar’s experience includes over 100 IRS audits, plus many IRS appeals and litigation support projects. Cedar has spoken on R&D credit matters and recently worked with the IRS National Appeals office to review and coordinate a response to their R&D credit position paper. Both Cedar and Bruce have also worked on numerous state audits which (depending on the state) can be even more involved than a federal audit.
Contact us today to find out how we can help you sustain the maximum tax benefits you”re entitled to.