Many CPAs inadvertently underclaim or overreach when filing for the R&D tax credit. This blog breaks down the most common mistakes—like misidentifying qualified research activities, lacking proper documentation, or failing to adjust for Section 174 changes—and explains how trusted collaborators like B10 Capital can support CPA firms in navigating these risks and maximizing returns for their clients.
For CPAs advising innovative businesses, the R&D tax credit can be a powerful tool to unlock substantial savings. But navigating its nuances is no easy feat. While the credit is designed to reward experimentation and advancement, it comes with layers of complexity that trip up even seasoned professionals. Missteps can result in underutilized credits—or worse, IRS scrutiny.
This blog highlights the most common mistakes CPAs make when advising clients on the R&D tax credit and how to avoid them.
At the core of the R&D tax credit is the identification of Qualified Research Activities. Many CPAs assume that only high-tech labs or software developers qualify—but the scope is much broader. Manufacturing process improvements, prototyping, and even custom product design can all qualify under the right conditions.
Mistake: Failing to fully explore a client’s operations and missing QRAs that meet the IRS’s 4-part test.
Fix: Partner with specialists who can dig deep into operational processes to uncover eligible activities that might not appear obvious at first glance—all while adhering to strict IRS standards. At B10 Capital, we help ensure that every claim is fully defendable, drawing on our experience to identify qualifying work that often falls outside traditional definitions of "research," but still meets the 4-part test with verifiable confidence.
The IRS doesn’t require pre-approval for the R&D tax credit—but it does require rigorous documentation to defend your claim. Many CPA firms don’t collect the right evidence up front or rely too heavily on client-provided summaries.
Mistake: Submitting estimates or vague narratives without contemporaneous documentation.
Fix: Implement a system for capturing technical project data, employee time tracking, and financial records that align with the claimed research activities. B10 Capital assists CPA partners in structuring this documentation from the beginning in a way that is both audit-ready and efficient, saving time and resources for both you and the client.
The Tax Cuts and Jobs Act (TCJA) and the 2022 updates made a major impact on how Section 174 R&D expenses must be treated. As of now, domestic R&D costs must be capitalized and amortized over 5 years (15 for foreign), regardless of whether a credit is claimed.
Mistake: Treating R&D expenses as immediately deductible, or not accounting for Section 174 amortization in financial planning.
Fix: Understand how Section 174 interacts with Section 41 (the R&D credit) and advise clients accordingly—especially regarding cash flow and tax forecasting. B10 Capital supports CPA teams in planning and aligning these requirements proactively.
CPAs sometimes walk a tightrope between maximizing credits and staying out of trouble. Without deep R&D tax experience, it’s easy to veer too far in either direction:
Fix: Lean on a team that understands the nuance—aggressively accurate and defensible is the goal. B10 Capital collaborates with CPA firms to find the right balance: maximizing opportunity while upholding full compliance.
Not all wages or supply costs qualify. Time spent on admin tasks, customer support, or post-production work may be disallowed. CPAs may apply broad percentages to entire departments, which can lead to overclaims.
Mistake: Allocating qualified expenses based on job titles or departmental averages rather than activity-based substantiation.
Fix: Track R&D time and costs at the project level, and apply allocations based on documented efforts. B10 Capital brings proven systems and methodology to make this process easier and more precise.
Federal credits often take center stage, but many states offer lucrative R&D incentives too. Failing to file at the state level leaves money on the table.
Fix: Identify which states offer credits, understand the eligibility thresholds (which vary by state), and align federal filings with state credit opportunities. B10 Capital helps CPA firms map federal and state opportunities for comprehensive benefit.
The R&D tax credit isn’t just a form to file—it’s a planning opportunity. Filing retroactively can help, but integrating R&D strategy into quarterly planning can produce stronger results and a smoother documentation process.
Fix: Work with advisors who help clients think ahead. Forecasting, segmenting, and tracking R&D activity throughout the year pays off come filing season. B10 Capital serves as a strategic partner in this process, helping CPA firms elevate their tax planning capabilities.
Since 2017, B10 Capital has helped clients maximize their tax credit opportunities while minimizing audit risk. Our team blends technical expertise with a deep understanding of IRS compliance. We work closely with CPAs and tax professionals—not in competition with them—to ensure clients get the credit they deserve, supported by bulletproof documentation and a white-glove experience. Everything we do is designed to enhance—not replace—the role of your trusted advisor.
If you're a CPA looking to strengthen your clients’ R&D tax position—or reduce exposure to IRS risk—B10 Capital can help. Contact us today to discuss a partnership or refer a client for a white-glove R&D review.
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