R&D Tax Credit Substantiation Agent
Identifies qualifying R&D activities and assembles contemporaneous documentation to substantiate federal and state research tax credit claims.
Claiming R&D tax credits requires connecting technical project narratives to specific payroll, contractor, and supply expenses under a four-part test that examiners scrutinize closely, and engineering teams rarely document their work in the language tax rules demand
Finance and tax teams typically reconstruct qualifying activities months after the work occurred by interviewing engineers who no longer remember details, resulting in thin documentation that is vulnerable on audit
Multi-state credit claims add complexity since state conformity to federal qualified research rules varies widely
Without a system linking time tracking and project data to the credit calculation, companies either under-claim credits they are entitled to or over-claim in ways that draw IRS attention
The agent connects to project management, time-tracking, and payroll systems to identify activities meeting the qualifying research criteria, then maps employee hours, contractor costs, and supply expenses to specific qualifying projects. It generates contemporaneous technical narratives for each project by summarizing sprint notes, design documents, and commit history against the four-part test, and calculates the credit under both the regular and alternative simplified methods to select the more favorable outcome. Substantiation packages are compiled continuously through the year rather than reconstructed at filing time.
Identify Qualifying Projects
- Scan project management and engineering documentation
- Apply the four-part test to candidate projects
- Flag projects requiring technical lead confirmation
Map Qualified Expenses
- Link employee time entries to qualifying projects
- Aggregate contractor costs and supply expenses
- Apply wage and expense qualification rules by category
Generate Technical Narratives
- Summarize design docs, sprint notes, and commit history per project
- Draft four-part-test narratives for each qualifying project
- Compile supporting documentation into an audit-ready file
Calculate and Reconcile Credit
- Compute credit under regular and ASC methods
- Reconcile qualified expenses to payroll and AP records
- Prepare state-by-state credit calculations for conforming states