How Did Overlooked Opportunities Increase R&D Tax Credits by 4x?

Client Success Story

For years, this Fortune 500 industrial distribution company relied on a Big Four accounting firm to perform its R&D tax credit study. The methodology centered on a “same as last year” approach: interviewing a relatively small group of employees, pulling W-2 compensation data for anyone identified as participating in research activities, and calculating qualified wages based on those conversations.

This approach had been in place for many years. But the company’s tax leadership believed the credit was significantly understated, and SMEs had given the process negative feedback.

When we were engaged, we initially stepped into essentially the same scope and framework the Big Four provider had used. Rather than simply repeating that process, though, our Architecture Phase took a deeper look at how the client tracked engineering and development activities. That closer look paid off immediately.

Discovering a Better Data Source

During our review, we found something that had largely gone overlooked: a robust time-tracking system the client had used for years.

Instead of relying solely on interviews to identify technical personnel, the time-tracking data gave us objective evidence of who was performing qualified research activities and how their time was allocated across projects.

The impact was immediate. The time-tracking records identified a substantially larger population of employees engaged in qualified research than interviews alone had captured. As a result, the pool of qualified wage expenses expanded significantly, while staying grounded in contemporaneous business records rather than reconstructed memory.

Speaking the Client’s Language

The benefits extended beyond employee identification.

Under the prior methodology, technical subject matter experts often struggled to answer questions, because the discussions were framed around high-level “business components” and project groupings that didn’t match how engineering teams viewed their own work.

We took a different approach. By working within the client’s existing project and time-tracking structure, our team discussed research activities using the same terminology engineers and technical teams used every day. Rather than forcing projects into an external framework, we met employees where they worked. The result: better conversations, more accurate documentation, and a clearer understanding of the activities being performed.

A Performance-Based Partnership

The client’s tax department was confident there was untapped value in its R&D program, and we shared that belief.

To demonstrate that confidence, we structured the engagement around performance-based economics. We stepped into the existing provider relationship, but built in a provision that let our fee increase only if we materially improved the credit. The client welcomed that structure because it aligned incentives and placed the performance risk on us, not them.

The Outcome

After implementing the enhanced methodology and incorporating the newly identified qualifying population, we delivered a dramatic improvement in results. Even after making the appropriate base period adjustments, the client’s federal and state R&D tax credits increased by approximately four times the amount generated under the prior approach.

The outcome confirmed what the client’s tax team had long suspected: valuable qualifying research activities weren’t being fully captured under the previous methodology. The results were significant enough that the company is now evaluating whether to amend prior years completed by its former provider.

Key Takeaway

Many organizations already have valuable data sources sitting inside their own systems, but don’t fully use them in their R&D tax credit process. By combining technical tax expertise with a deeper understanding of operational data, we helped this client move beyond an interview-driven methodology, put existing business records to better use, and uncover substantial value that had previously gone unrecognized.

The result: a more defensible process, better alignment with how the business operates, and a fourfold increase in the R&D tax credit.

Jason Massie, CPA, Esq.

As the Founder and President of MASSIE R&D Tax Credits, Jason is responsible for the quality, consistency, and integrity of our services. His strategic vision and leadership drive innovation within the company, encouraging collaboration and ne...