Short answer
What this page answers
An R&D tax credit diagnostic is a structured pre-filing review of a proposed research credit claim: project fit under the four-part test, documentation, expensing coordination, Form 6765 readiness, and whether to file at all this year.
Who this serves
- CPA firms asked to sign a return that includes an outside provider’s credit study.
- RIAs and family office teams whose client was pitched a percentage-of-payroll credit.
- Founders, controllers, and CFOs weighing a first claim or an amended refund claim.
- Advisor teams inheriting prior-year claims with unclear support.
What the R&D credit rewards
The federal research credit is a dollar-for-dollar credit built from qualified research expenses: wages for employees who perform, directly supervise, or directly support qualified research; supplies consumed in the work; and generally 65 percent of qualified contract research. It rewards technological uncertainty resolved through systematic experimentation, not routine development or spending relabeled at year-end. A claim is a documented tax position, not a percentage of payroll.
Four-part test overview
Qualification is decided per business component: a product, process, software, technique, formula, or invention. Each component must clear all four gates.
- Permitted purpose. A new or improved function, performance, reliability, or quality, not style or cosmetics.
- Technological in nature. The work relies on engineering, computer science, or the physical or biological sciences.
- Technological uncertainty. Capability, method, or appropriate design was genuinely unknown at the outset. Cost, schedule, and market uncertainty do not count.
- Process of experimentation. Alternatives were systematically evaluated through modeling, prototyping, testing, or documented trial and error.
Failing one gate disqualifies the component, though a narrower subset may still qualify under the shrink-back rule.
What the diagnostic reviews
Five lanes, each ending in a written call. Contract and funding terms are read in every lane, because funded research is excluded however technical the work.
Four-part test by project
Each project gets a qualified, partial, or excluded call. Post-launch fixes, routine quality control, and customer adaptation are screened out first.
Documentation inventory
What exists versus what would need reconstruction: time records, technical artifacts, test histories, and the gaps that decide supportability.
Section 174A and 280C
Domestic research costs are generally deductible currently for tax years beginning after 2024; foreign research amortizes over fifteen years. The credit workpaper, the expensing pool, and the reduced-credit election must reconcile.
Form 6765 Section G readiness
Form 6765 now calls for business-component-level disclosure. The diagnostic tests whether the claim can populate Section G credibly, because the schedule is built to surface thin support.
Startup payroll offset screen
Gross-receipts history is tested against the qualified small business rules, which can allow up to $500,000 per year of credit against employer payroll taxes.
Documents and facts worth reviewing
- Project lists with technical narratives, problem statements, and rejected approaches
- Time tracking, sprint tickets, and version-control history tied to projects
- Test plans, prototypes, design reviews, and records of failed attempts
- Payroll registers and an employee role map behind qualified-time percentages
- Supply and computing-cost ledgers for amounts consumed in research
- Contractor agreements showing pricing, failure risk, and rights to results
- Prior Forms 6765, elections, amended or pending claims, and gross-receipts history
Risk flags worth resolving before filing
Some findings argue for narrowing a claim; others argue for not filing this year. Commonly examined weak points include:
- Documentation that would be reconstructed from interviews and job titles.
- Uncertainty that is commercial (cost, schedule, market) rather than technological.
- Customer-funded work where the client kept neither failure risk nor substantial rights.
- Wages swept in by title, including executives far from the technical work.
- Amended refund claims, which draw heightened review and extra support requirements.
- Internal-use software or foreign research claimed without the extra screens that apply to each.
- Percentage-of-credit pricing with no project-level proof behind it.
When flags stack up, the stronger position is often patience: keep deducting eligible domestic research costs, build documentation, and claim in a year the file can carry. A smaller documented claim outlasts a larger reconstructed one.
Co-advisory workflow: who owns what
Most engagements run alongside the incumbent CPA, not around one. Client authorization and written scope come first.
| Seat | What that seat owns |
|---|---|
| Incumbent CPA firm | Return positions, Form 6765 preparation, elections, filings, and the client relationship. The diagnostic supports, never displaces, the preparer. |
| MMVFO | Fact organization, the documentation inventory, the issue map, and coordination among the CPA, any study provider, counsel, and company teams. |
| Study provider (where engaged) | The credit study, computation workpapers, and audit-defense support under its own engagement. |
| Tax counsel (where engaged) | Privilege, controversy posture, and opinions where the risk profile calls for them. |
| Company engineering and finance | Technical narratives, time records, payroll tie-outs, and contract files. |
Legal advice, investment advisory services, financial planning, securities-related services, insurance implementation, and other regulated services remain with properly licensed or registered professionals. See R&D co-advisory for the ongoing arrangement, part of the broader tax-led virtual family office model.
What the advisor receives
- A business-component register with a qualified, partial, or excluded call per project.
- A documentation inventory: what exists, what is missing, what to start capturing now.
- An expense outline connecting payroll and ledger records to the proposed claim.
- A contract and funding matrix flagging funded-research exposure.
- A Form 6765 Section G readiness read.
- A file, narrow, or wait recommendation with the reasons in writing.
- A routing plan naming next steps for CPA, study provider, or counsel.
Advisor teams start through the partner intake. Business owners without an advisor team can request a private tax strategy diagnostic instead.
Scope and professional boundaries
MMVFO coordinates tax-led diagnostics, planning context, documentation, advisor alignment, and implementation routing. Insurance implementation, investment advisory services, financial planning, securities-related services, legal services, and other regulated services are provided only by properly licensed or registered affiliates, unaffiliated professionals, or a client’s existing advisors under written scope and applicable disclosures. Public website content is educational and does not create client-specific tax, legal, investment, insurance, accounting, fiduciary, or other professional advice. Advisor matters also require client authorization where required, confidentiality review, professional responsibility review, and referral or compensation disclosures where applicable.