Every year the Internal Revenue Services releases the “Dirty Dozen,” a list of tax scams and schemes on which the agency focuses. This year, the IRS has put abuse of business tax credits in its crosshairs.
“Improper claims for the research and experimentation credit generally involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses,” the IRS stated.
Why did the research and experimentation credit, better known as the R&D credit, end up on the “Dirty Dozen” list? In 2017, the Treasury Office of the Inspector General reviewed $53.8 million worth of R&D tax credit claims. A total of $11.8 million of credits were deemed potentially erroneous, 21 percent of all R&D tax credit claims. Some claims were filed improperly. Some didn’t meet all the requirements for proper claims or attach the proper documentation.