The IRS is intensifying scrutiny of R&D tax credits even as the agency undergoes significant downsizing, creating new compliance challenges for businesses claiming these valuable incentives. Here's what you need to know to protect your claims and maximize your returns.
What's Changing at the IRS
Recent organizational changes at the IRS mean fewer agents reviewing more claims, but enforcement priorities around R&D tax credits remain unchanged. The agency continues flagging common issues including inadequate documentation, overclaimed activities, and insufficient nexus between claimed expenses and qualified research.
Key compliance challenges emerging in 2026:
- Enhanced documentation requirements – The IRS expects contemporaneous records proving technological uncertainty, systematic evaluation processes, and qualified expenditure tracking
- Longer audit timelines – Reduced staffing means extended review periods when questions arise about your claims
- Heightened scrutiny of first-time filers – New claimants face additional documentation requests as the IRS validates qualification criteria
- Increased penalties for inadequate substantiation – Claims lacking proper support face higher rejection rates and potential penalties
Critical Filing Changes for 2026
Businesses must adapt to evolving IRS requirements while navigating reduced agency support:
New R&D capitalization rules – Section 174 changes require capitalizing and amortizing R&D expenses over five years (15 years for foreign research), significantly impacting cash flow and credit calculations for tax years beginning after December 31, 2021.
Form 6765 complexity – The R&D credit calculation form demands precise activity-by-activity documentation that many businesses lack without specialized expertise.
State-federal coordination – Multi-state operations face complex compliance requirements as state programs diverge from federal standards.
How Big 6 Firms Leave Money on the Table
Traditional accounting firms like KPMG treat R&D credits as another tax line item, not a specialized discipline requiring deep technical expertise. This generic approach creates three critical gaps:
Surface-level qualification – Broad-brush assessments miss nuanced activities that actually qualify, particularly in software development, process improvements, and manufacturing innovation.
Reactive compliance – Generic documentation strategies collapse under IRS scrutiny, leaving businesses exposed during audits.
Limited state optimization – Without dedicated R&D focus, firms miss credit stacking opportunities across federal and state programs that could significantly increase total returns.
The Boast Advantage: Specialized Expertise When It Matters Most
Boast combines advanced AI technology with seasoned R&D tax credit specialists who speak the language of innovation and understand IRS requirements inside and out:
Proactive audit defense – Our platform creates comprehensive documentation from day one, building an unshakeable system of record that anticipates IRS questions before they arise.
Maximum qualification – Our experts identify all eligible activities across your organization, including often-overlooked areas like internal software tools, supply chain optimization, and quality control improvements.
Multi-jurisdiction optimization – We navigate complex federal, state, and provincial programs to maximize total returns while maintaining bulletproof compliance.
Year-round value – Unlike project-based services that disappear after filing, our platform provides continuous optimization, policy monitoring, and strategic guidance.
Immediate Steps to Protect Your 2025 Claims
With IRS resources shrinking but enforcement priorities unchanged, businesses need specialized expertise more than ever:
- Audit your current documentation – Ensure you have contemporaneous records proving technological uncertainty, systematic experimentation, and qualified expenditure allocation
- Review qualification criteria – Verify your claimed activities meet the four-part test: technological uncertainty, process of experimentation, technological in nature, and qualified purpose
- Evaluate state opportunities – Many states offer enhanced credits or alternative calculation methods that significantly boost total returns
- Build audit-ready systems – Implement documentation practices that create defensible records as work happens, not retroactively
Get Expert Guidance Before Filing
Don't let reduced IRS capacity and increased complexity jeopardize your R&D tax credits. Boast's specialized expertise ensures you claim every dollar you deserve while maintaining ironclad audit protection.
Schedule your free R&D credit assessment to discover how our technology-plus-expertise approach delivers higher returns and stronger compliance than traditional accounting firms or tech-only competitors.
About Boast: Boast specializes in helping organizations claim and access eligible R&D tax credits, minimizing audit risks and time-consuming processes in Canada and the United States. We combine in-house technical and R&D tax expertise with advanced AI technology to help companies effortlessly navigate complex tax credit programs. Since 2011, we've helped more than 1,700 businesses across North America access over $625 million in innovation capital.
