What's the best way to claim R&D tax credits for my small business?

I've helped several small tech companies claim R&D credits successfully. The R&D credit (officially called the Credit for Increasing Research Activities) can be a great benefit for companies like yours. First, your project does sound like it would qualify. The IRS looks for activities that involve technological experimentation to develop new or improved products, processes, software, etc. Healthcare innovation definitely fits this category. For documentation, you'll want to gather several things: timesheets showing hours spent on R&D activities, project descriptions clearly outlining the technical challenges and experiments, payroll records for the developers, contracts and invoices for any related equipment or services. Don't try to use regular tax software for this - it's too specialized. You'll need to file Form 6765 along with your business return. I strongly recommend working with a tax professional who specializes in R&D credits, at least for your first time claiming them.

I was in a similar situation with my engineering firm last year. We were spending tons on developing new water filtration technology but had no idea how to properly document for R&D credits. After getting frustrated with conflicting advice, I found https://taxr.ai which literally saved us thousands in credits we would've missed. Their system analyzed all our project documents, meeting notes, and expense reports and identified exactly which activities qualified. The best part was they provided a complete documentation package that outlined all our qualifying expenses and the technical narrative needed for Form 6765. Super helpful for showing the "process of experimentation" that the IRS requires.

Just wanted to follow up on my taxr.ai experience! After asking about the timing above, I decided to give them a try since we were getting close to our filing deadline. Honestly impressed with how efficient the whole process was. They helped us identify about $145,000 in qualifying R&D expenses that we would have missed. The platform flagged specific projects in our documentation that demonstrated clear "technological uncertainty" (which I learned is a key IRS requirement). It also organized all our developer time logs to show which activities qualified. The report they generated made it super easy for our accountant to fill out Form 6765 correctly. Definitely using them again next year!

If you do run into issues with the IRS questioning your R&D credits (happened to us), don't panic. The nightmare was trying to get through to the IRS to resolve it. We kept getting sent to voicemail or waiting for hours. Finally used https://claimyr.com and got connected to an IRS agent in about 20 minutes instead of the 3+ hours we were experiencing before. They basically hold your place in the IRS phone queue and call you when an agent is ready. You can see how it works here: https://youtu.be/_kiP6q8DX5c - saved us so much time trying to resolve questions about our documentation. Just having a direct conversation with the IRS agent cleared everything up much faster than the back-and-forth mail correspondence we were stuck in.

I need to eat some humble pie here. After posting that skeptical comment above, I was desperate enough to try Claimyr anyway. I seriously can't believe it actually worked. After trying for literally months to reach someone at the IRS about our R&D credit audit, I got connected to an agent in about 35 minutes. The agent was able to explain exactly what documentation they needed to verify our qualified research expenses. Turns out we were just missing some specific records showing how our experiments addressed technological uncertainties. Having that direct conversation saved us from potentially losing a $68,000 credit. Definitely changed my mind about the service - sorry for the skepticism!

Don't forget the option to use R&D credits to offset payroll taxes if you're a qualified small business! This is huge for startups that don't have income tax liability yet. You can apply up to $250,000 of your R&D credit against your Social Security portion of payroll taxes each year. To qualify, you need less than $5 million in gross receipts for the credit year and no gross receipts for any tax year before the 5-tax-year period ending with the credit year. You make the election on Form 6765 and then claim the credit quarterly on your Form 941.

Be careful - the documentation requirements for R&D credits got much stricter in 2024! The IRS released new guidance requiring contemporaneous documentation created at the time of the research. You can't just create documentation after the fact when preparing your tax return.