In July, the IRS wrapped up its annual Dirty Dozen scams list, designed to warn taxpayers against abusive tax promotions. One practice mentioned is the improper claiming of business credits, specifically the R&D tax credit. But does this mean a taxpayer should not be claiming the research credit?

The credit for increasing research activities was first established in 1981 to reverse the decline in U.S. research spending. This credit had been temporarily extended through the years before becoming permanent with the passage of the PATH Act in 2015. Projects are qualified when they pass a four-part test defined in Section 41 of the Internal Revenue Code. Eligible expenses within qualified projects include wages, supplies, computer leasing and contract research expenses incurred during project development. Regulations released over the years have expanded the definition of qualified research and opened the door for more taxpayers to claim the R&D credit.

The…

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