Client Profile:
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Industry:
Internet Security Software
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Previous R&D Provider:
None (completed internal)
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Problem:
- No Documentation to Support R&D Tax Credit Claims. Over the years, the company used their internal finance and accounting personnel to claim federal and state R&D tax credits for the tax years 2010 – 2016 and since the company was in a tax loss with millions of dollars of net operating loss (NOL) carryforwards they did not invest a lot of time documenting their research activities and expenses but instead calculated the credits based on estimates and assumptions
- Current IRS Audit. After many years of claiming the R&D tax credit, the IRS opened up an examination into the federal tax returns filed for tax years 2015 and 2016 with particular interest in the R&D tax credit claims.
Solution:
- The company hired CTI to manage all aspects the IRS audit and identify other credit opportunities.
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- CTI handled all IRS correspondence and prepped the company’s software engineers for interviews with the IRS agent.
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- CTI immediately performed an R&D study to fully re-calculate and document all of the company’s R&D tax credits.
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- The IRS audit lasted about 3 months and the IRS agent opened up the examination to include all prior years in which the credits were claimed.
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Results:
With CTI’s R&D services, the company was able to:
- Successfully defend the R&D tax credits previously claimed
- Sustained over $1 million of federal R&D tax credits
- 92% of all federal credits sustained (with only 8% disallowance)
- Accurate calculations and full documentation to support all State R&D tax credits in case the State taxing authorities audit the company
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