Since the research and development (R&D) tax credit’s enactment over 40 years ago, it has steadily increased in importance for businesses investing in R&D work.
The disallowance of current expensing of R&D costs that fall under Section 174 — effective from Jan. 1, 2022 — amplified the credit’s importance in recent years. As the value of the credit has increased for taxpayers, so has the IRS’ scrutiny of the credit.
Taxpayers may wonder how major cuts to the IRS’ workforce will affect the potential of an R&D audit and what audits will look like if they continue. For now, R&D audits are still moving forward, so businesses should ensure they’re prepared for such audits by examining their documentation processes and seeking experts’ counsel.
