VIRTUAL
R&D Credits: What the IRS Is Challenging and How Taxpayers Can Respond
Webinar
September 9, 2026
September 9, 2026
1:00 pm (ET)
IRS examinations of research credit claims continue to create significant challenges for taxpayers, with exam teams closely scrutinizing both whether activities qualify and how companies substantiate their claims. During this webinar, Edward Froelich, Shawn O’Brien, and Susan Ryba of our Tax Controversy & Litigation Group discussed what the IRS is focusing on in current R&D credit examinations, where claims are most vulnerable, and practical steps taxpayers can take to strengthen their positions and prepare for potential disputes.
Top takeaways included:
- IRS scrutiny of R&D credit claims is becoming increasingly granular. Exam teams are looking closely at how taxpayers define business components, whether claimed activities satisfy the four-part test, and whether wages, supplies, and contract research expenses can be tied directly to qualified research.
- A strong research credit study is only the starting point. Taxpayers should expect the IRS to seek information beyond what was collected for the study, including underlying documents, details about subject matter experts, support for expense allocations, and evidence that potentially excluded activities were considered.
- Business components remain a key area of IRS challenge. Components defined at the business segment, product family, or program level may attract scrutiny, so taxpayers should pressure-test how their components were selected, consider whether a “shrinking back” analysis is appropriate, and identify the components with the strongest factual support.
- Developing something new does not, by itself, establish eligibility for the credit. Taxpayers must be able to show how the underlying activities satisfied the process-of-experimentation requirements, including identifying technical uncertainty, considering alternatives, and evaluating those alternatives through a structured process.
- Job titles and accounting labels can create avoidable audit issues. The IRS may question wages for senior employees or workers with titles that do not appear research-focused, as well as costs labeled “production,” “optimization,” or similar terms. The activities actually performed matter, so taxpayers should be prepared to explain potentially misleading titles and labels before they become points of contention.
- Contemporaneous evidence and credible witnesses can make a significant difference. Companies should identify documents created in the ordinary course of business that support the claim and determine which engineers or other subject matter experts can clearly explain the research, particularly because examinations may occur years after the activities took place.
- Taxpayers should build their audit record early and tell a consistent story. Information reported on Form 6765 gives the IRS an earlier view into business components and associated expenses, and the factual record developed during an examination may follow the taxpayer through Appeals or litigation. Getting ahead of likely IRS challenges can help position the claim for resolution at the earliest possible stage.
Access to the webinar replay is available upon request. Get in touch to learn more.
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