R&D Credits
Defensible credit file
R&D credit work is visualized as a file, not a claim: eligibility, QRE support, Form 6765, and examination readiness.
Who this serves
Companies, founders, CFOs, engineers, product teams, manufacturers, software businesses, and CPA firms evaluating whether activities may support an R&D credit claim.
Common risks
Claims are weakened when the file lists projects without tying activities to technical uncertainty, experimentation, permitted purpose, technological principles, and cost support.
MMVFO process
MMVFO maps business components, interviews technical teams, organizes project evidence, reviews cost categories, and coordinates professional analysis of the four-part test.
Business component focus
Activities should be tied to products, processes, software, techniques, formulas, or inventions rather than broad department-level descriptions.
Documentation standard
The file should support what uncertainty existed, what alternatives were evaluated, who performed the work, what costs were claimed, and how the activity connects to the return.
Four-part test facts to document
What was improved?
The business component should be tied to a new or improved function, performance, reliability, quality, or similar permitted purpose rather than a general business goal.
What was unknown?
The file should identify the technical uncertainty at the start of the work and why the answer was not already available through standard practice or existing knowledge.
What was tested?
A defensible narrative explains alternatives, modeling, simulation, prototyping, trial runs, test criteria, failures, iterations, and results.
Who performed or supported the work?
Employee and contractor support should connect direct performance, direct supervision, or direct support to specific qualified activities and cost categories.
Four-part test evidence map
The four-part test should be documented at the business-component level, not just at the company or department level.
| Test | What the file should show | Evidence examples |
|---|---|---|
| Business component and permitted purpose | The product, process, software, technique, formula, or invention and the intended improvement in function, performance, reliability, or quality. | Component list, product briefs, technical specs, release notes, process maps. |
| Technological information | The work relied on engineering, computer science, biological science, physical science, or another technological discipline. | Design reviews, architecture memos, lab records, modeling notes, technical analyses. |
| Technical uncertainty | The uncertainty existed at the outset and related to capability, method, or appropriate design. | Issue logs, design alternatives, feasibility notes, failed tests, escalation memos. |
| Process of experimentation | Substantially all activities involved evaluating alternatives through modeling, simulation, prototyping, trial runs, or other testing. | Test plans, prototype comparisons, simulations, QA results, sprint artifacts, failure analyses. |
Documentation checklist
Use this checklist to organize records before filing, amendment, diligence, or controversy review. Detailed files should be shared only through a secure portal after written scope.
- Legal entity chart and controlled-group analysis.
- Tax-year business component list with unique identifiers.
- Project descriptions, status, and claim-year activity by component.
- Four-part-test narratives, technical uncertainty statements, and hypotheses tested.
- Experimentation evidence, including alternatives, iterations, simulations, prototypes, test cycles, and results.
- Employee roster with titles, departments, qualified-services rationale, payroll registers, wage detail, and allocation methodology.
- Supply invoices, usage notes, and exclusion of capital items, depreciable property, overhead, and indirect costs.
- Contracts, statements of work, invoices, rights terms, and financial-risk terms for contract research.
- General-ledger extracts and QRE tie-outs to the return position.
- Software classification support for internal-use, dual-function, or non-internal-use software where relevant.
- Section 280C election support and research-expense coordination workpapers.
- Form 6765 drafts, attachments, review memo, and current-instruction checklist.
- For amended claims, business components, activities for each component, and total qualified wage, supply, and contract research expenses for the claim year.
Common R&D credit audit and claim risks
These are the gaps MMVFO screens before a claim is filed, amended, relied on in diligence, or defended in examination.
- Using broad department-level narratives instead of business-component analysis.
- Treating all engineering, product, software, or process-improvement work as qualified without exclusion screening.
- Claiming work after commercial production began.
- Including customer-specific adaptation, duplication, surveys, foreign research, funded research, or unsupported internal-use software work.
- Unsupported wage allocations or interviews that do not match payroll, org charts, repositories, tickets, or project records.
- Supply claims that include depreciable property, prototypes without support, general overhead, or indirect costs.
- Contract research claims without adequate contracts, risk-of-loss terms, rights terms, or vendor detail.
- Controlled-group errors, missing attachments, inconsistent methods, or incomplete Section 280C and research-expense coordination.
- Amended claims that omit required business components, research activities, QRE totals, or signed declaration support.
Diagnostic questions
- What was the specific business component being developed or improved?
- What technical uncertainty existed at the start of the work?
- Why could the answer not be determined from existing knowledge, standard practice, or ordinary implementation?
- What alternatives were considered, modeled, simulated, prototyped, or tested?
- What technical criteria were used to evaluate success or failure?
- What changed between early and later versions, and what evidence shows the iteration?
- When did commercial production begin, and what work occurred after that point?
- Was any work performed to adapt an existing product or process for one customer?
- Was any part of the work duplicated from an existing product, process, design, or code base?
- Was any research performed outside the United States or U.S. territory?
- Was any work funded by a customer, grantor, or other third party?
- Which employees directly performed, directly supervised, or directly supported the qualified work?
- What records were created during the project, and where are they retained?
- For software, was the software internal-use, dual-function, or non-internal-use, and what support exists for that classification?
Official source notes
Scope and professional boundaries
This page is educational and does not determine credit eligibility, calculate a credit, or provide tax, legal, accounting, investment, insurance, or other professional advice. Credit work requires written scope, qualified professional review, and coordination with affiliates or outside specialists when the matter requires specialized technical support.
MMVFO coordinates strategy, diagnostics, documentation, and advisory execution. Legal, investment advisory, financial planning, securities-related, insurance, and other regulated services are provided only by properly licensed or registered professionals under appropriate written terms.