Software Companies: Unlock $60k - $400k in R&D Tax Credits

You're not alone—and there's a good reason for the confusion. From 2022 to 2025, R&D tax treatment became extremely complex. The Tax Cuts and Jobs Act required companies to amortize R&D costs starting in 2022, which created confusing and often penalizing tax treatment. Many companies (and their accountants) simply gave up trying to navigate it. Everything changed in 2025 with the "Big Beautiful Bill": • Special Relief for Small Businesses under Section 174 was restored • Companies with <$31M in average annual revenue can now claim immediate R&D deductions again • A 6-month supersede window opened for 2024 returns • The 3-year lookback opportunity is available (but closing soon for 2022 returns) Additionally, most Big Four accounting firms treat R&D credits as a "backwater"—they only pursue them if clients specifically ask. It's not proactively offered because it requires deep specialization. That's why now is the perfect time to revisit this, even if you looked into it before and got confused.

Ask them these three questions: 1. "Have you calculated and claimed R&D tax credits for us in the past 3 years?" (If no, there's your answer) 2. "What percentage of our qualified research expenses did you claim?" (Most firms claim 60-70% because they miss contractor costs and don't apply the four-part test properly) 3. "Can you show me documentation of how you calculated our credits?" (If they can't produce this immediately, it hasn't been done) If you're not satisfied with their answers, we offer a free audit of your last 3 years of returns. We'll tell you exactly what was claimed (if anything) and what was missed. No obligation.

The R&D Tax Credit is one of the most beneficial sections of the tax code. It allows for a dollar-for-dollar tax credit for any company engaged in qualified research activities. The definition of qualified research has been continually expanded in recent years, thus allowing companies from a variety of industries to obtain the benefit. These credits can be used to offset income tax or payroll taxes.

There are numerous sections of the tax code and lengthy U.S. Tax Court rulings defining which activities qualify as R&D and which do not. Companies performing the following types of activities usually qualify: • Architecture or Engineering services • Software development & testing • Product development and testing • Process development or improvement • Custom manufacturing • Industrial engineering • SBIR/STTR R&D • Systematic trial and error • Developing models or simulations These types of activities and more are an indicator that the R&D Credit may benefit your company.

If a company can show that it meets the four-part test, it can claim the following expenses towards the credit: • Wages • Subcontractor/consultant expenses • Supplies and materials used in R&D • Cloud service provider costs associated with development and test server space Any expense claimed toward the credit must be eligible for treatment as an expense under Section 174 of the tax code. In other words, no items that are depreciated for tax purposes can be claimed.

For every dollar of qualified research expenditure, a company will receive between 8 and 10 cents of tax credits. These tax credits directly offset any taxes owed. For pass-through entities, the tax credits flow directly to the owner's tax returns. Taxpayers can also amend tax returns for the previous three open years to claim the credit and obtain a treasury refund. For qualified start-up companies, these tax credits can be used to offset the employer portion of payroll taxes owed. Since 2009, both Congress and the Tax Courts have taken measures to make the R&D Credit available to a broader range of businesses. As a result, many companies that previously thought they might not qualify have tapped into this incentive on the federal and state levels.

Alternate Tax Solutions leverages the expertise of its CPAs, subject-matter experts, and tax professionals to develop comprehensive research and development studies and to prepare the necessary tax forms. These studies are designed to capture as many R&D expenses as possible and to ensure that claims adhere to all of the standards laid out by the IRS.

If you're developing new products, improving processes, or solving technical challenges, you almost certainly qualify. Phase 1-2 biotech? 100% of your activities qualify. Software development? Nearly everything before general availability counts. Manufacturing? Tooling design and process optimization qualify. Most companies think they don't qualify when they absolutely do.

Absolutely! While you don't qualify for the payroll tax offset (only available to companies with <$5M revenue), your R&D Tax Credits are still extremely valuable: • If profitable: Credits reduce your federal income tax dollar-for-dollar • If not yet profitable: Credits carry forward for 20 years • In M&A: Credits increase company valuation as deferred tax assets • State credits: May offset state income taxes (varies by state) The payroll offset is a nice benefit for early-stage companies, but the majority of R&D Tax Credit value comes from offsetting income taxes and increasing enterprise value. Many of our most successful clients are beyond the $5M threshold.

This refers to gross receipts reported on Line 1C of your corporate tax return—not book revenue. Grant revenue: NIH grants, SBIR funding, and similar non-product revenue may or may not count depending on how they're classified on your tax return: • If reported as "gross receipts" on Line 1C → starts the 5-year clock • If classified as "other income" → does NOT count toward the $5M threshold Product revenue: Sales of products or services always count toward the threshold. Interest/investment income: Typically classified as "other income" and does not count. We'll verify exactly how your revenue is classified during your free analysis.

The Big Four don't proactively offer this. The tax side tends to be a bit of a backwater compared to audit services. Big firms only pursue R&D credits if you specifically ask for them—and even then, they often outsource the work to specialists like us. Multiple Big Four firms are our clients.

We charge transparent, fixed fees based on complexity—not a percentage of your credits. Engagements range depending on complexity and number of years filed. Our average client ROI is 11:1, and we guarantee at least a 10x ROI.

From initial call to filing: 4-6 weeks. From filing to refund: 90-120 days (IRS processing time). Your time investment: 3-4 hours total for calls and document gathering. We handle everything else.

Yes! Thanks to the OBBB you can amend the previous 3 years of tax returns. But the statute of limitations is ticking—you have until April 15, 2025 to claim 2022 credits. After that, they're gone forever. This means you could recover 3 years of credits you've already earned but never claimed.

Perfect. Most of our clients are first-time filers. We'll document everything properly from the start, establish a clean audit trail, and position you for ongoing annual claims. Being a first-time filer actually gives you more flexibility in certain calculations.

R&D credits are worth significantly more than Net Operating Losses (NOLs) because: • Credits = dollar-for-dollar tax reduction (100% effective) • NOLs = subject to 80% limitation (only 80% effective) • Credits can offset AMT; NOLs cannot • Credits survive M&A better under Section 382/383 This means R&D credits are typically worth 20-25% more than equivalent NOLs.

Our audit defense rate is 100% because we don't include questionable activities. We 'red team' every claim from the IRS perspective. If something wouldn't survive scrutiny, we don't claim it. Conservative, defensible claims don't get audited—and even if they are, we defend them successfully every time.

It's critical that you structure credits properly ASAP. Improperly documented credits get excluded or heavily discounted (40-60%) by buyers in M&A. We prepare Section 382/383 analyses that preserve full credit value in transactions. This can be worth hundreds of thousands to millions in additional exit proceeds.

The 2017 Tax Cuts and Jobs Act created confusion around R&D deductions that caused many companies to stop claiming credits. The 2025 'Big Beautiful Bill' just reopened the window with special relief for businesses under $31M in revenue—but most CFOs haven't heard about it yet. Now is actually the BEST time to claim.