Frequently Asked Questions

About the R&D tax credit

What is the R&D tax credit?

The Research and Development tax credit under IRC Section 41 is a federal tax credit that reduces your tax liability dollar for dollar. It rewards businesses that invest in developing or improving products, processes, formulas, or software. It is a credit against taxes owed, not a deduction from taxable income.

What counts as R&D for the tax credit?

Qualifying activities must meet the IRS four-part test: they must relate to a new or improved business component, involve technological uncertainty, require a process of experimentation, and be technological in nature (relying on engineering, computer science, biological science, or physical science). This includes software development, manufacturing process improvements, product design, chemical formulation, and more. See What Qualifies for detailed examples.

Does my business qualify?

Many businesses qualify without realizing it. If your team spent time developing, testing, or improving products, processes, formulas, or software, you may be eligible. The credit is not limited to laboratories or tech companies. Use our free calculator to check in about three minutes.

What expenses qualify?

Qualified research expenses (QREs) under IRC Section 41(b) include W-2 wages for employees performing, supervising, or supporting qualified research, supplies consumed in R&D, and a portion of contractor payments for qualified research performed on your behalf. See Qualified Research Expenses for a full breakdown.

What is the four-part test?

The IRS requires qualifying research to satisfy four criteria:

1. Business component test — the research must relate to a new or improved product, process, formula, technique, invention, or software
2. Technological uncertainty — there must be uncertainty about the method, capability, or design at the outset
3. Process of experimentation — the taxpayer must evaluate alternatives through modeling, simulation, systematic trial and error, or other methods
4. Technological in nature — the process must rely fundamentally on principles of engineering, computer science, biological science, or physical science

Learn more on the What Qualifies page.

Can contractors count toward the credit?

Yes, but only a portion of contractor payments qualifies. Under IRC Section 41(b)(3)(A), payments to outside firms for qualified research performed on your behalf are included as QREs at a reduced rate. The research must meet the same four-part test, and the taxpayer must retain substantial rights to the research results.

What is the difference between the Regular Credit and the Alternative Simplified Credit?

The Regular Research Credit (RRC) and Alternative Simplified Credit (ASC) are two methods for calculating the R&D credit under IRC Section 41. Each uses a different formula and base amount. The platform calculates both and identifies which produces the larger credit for your situation.

What is Section 174 and how does it relate to the R&D credit?

IRC Section 174 governs the tax treatment of research and experimental expenditures — how R&D costs are deducted or amortized. The Section 41 R&D tax credit is a separate provision that provides a credit against tax liability. They are related but distinct. See Section 174 for more detail.

What is a qualified small business?

Under IRC Section 41(h), a qualified small business may elect to apply the R&D credit against payroll taxes instead of income taxes. This is valuable for startups and pre-revenue companies that do not yet have income tax liability. See Payroll Tax Offset for eligibility details.

Can I claim credits for prior years?

Yes. You can file amended returns to claim the R&D credit for prior tax years within the statute of limitations. The platform supports claims for multiple tax years. See Amended Returns for details.

Does the credit apply to state taxes?

TaxCredit4U calculates the federal R&D tax credit only. Many states offer their own R&D credits with different rules and rates. Consult your tax advisor about state-level credits in your jurisdiction.

About TaxCredit4U

How does TaxCredit4U work?

You use the free calculator to check eligibility, create an account, upload your payroll and project records, and the platform computes your credit and generates your tax documents. No calls, no meetings. See How It Works for the full process.

What documents does TaxCredit4U produce?

You receive three documents:

• IRS Form 6765 — pre-filled with your qualified research expenses, ready to file
• Technical Narrative Report — a detailed analysis of each project against the four-part test
• Finalization Letter — credit summary, QRE breakdown, and filing instructions

How much does TaxCredit4U cost?

TaxCredit4U charges 15% of your calculated credit amount. It is a success fee — you pay after your credit is calculated and before your documents are released. The calculator is free and requires no account. See Pricing.

Do I need to talk to anyone?

No. TaxCredit4U is fully automated. There are no calls, meetings, or interviews. You interact with the platform directly — answer questions, upload documents, review results.

Is the calculator estimate accurate?

The homepage calculator provides a preliminary estimate based on limited information. The full platform calculation uses your actual payroll records, project details, and expense data to compute the credit under both IRS-recognized methods. The full calculation is more precise.

What happens after I receive my documents?

You provide the Form 6765 and supporting documents to your accountant or tax preparer. They attach the Form 6765 to your federal tax return. The Technical Narrative and Finalization Letter serve as your substantiation file in case of IRS examination.

Who reviews the output?

Individual claims should be reviewed by your own tax advisor before filing. TaxCredit4U does not provide tax advice.

Is my data secure?

Yes. All data is encrypted in transit and at rest, and access is controlled by role-based permissions. See our Security page for full details.

How is this different from hiring a CPA firm?

Traditional R&D tax credit studies involve weeks of consultant interviews, spreadsheet exchanges, and fixed fees. TaxCredit4U automates data collection, calculation, and document generation. You upload your records and the software handles the rest. Our fee is a percentage of the credit amount, not a fixed cost.

What if I have never claimed the credit before?

You do not need to have claimed the credit in prior years to claim it now. First-time claimants may also be eligible for the payroll tax offset if they meet the qualified small business criteria. You may also be able to claim credits for prior years by filing amended returns.