The R&D tax credit is one of the most powerful (and underused) tools in the tax code—but here’s the catch: claiming it successfully depends entirely on identifying the right activities. If you miss them, you leave money on the table. If you overreach, you risk audit exposure. And in 2025, with the IRS turning up the heat on compliance, it’s never been more important to get it right. That’s why more firms are turning to R&D tax credit software to identify Qualified Research Activities (QRAs) faster, with less guesswork and more confidence.
In this guide, we’ll walk through how to pinpoint QRAs without wasting time, missing credits, or putting your clients at risk.
Table of Contents
1. Start with the 4-Part Test (And Actually Understand It)
If you’ve ever helped a client with the R&D tax credit, you’ve probably heard of the 4-part test. But in practice, most firms oversimplify or misapply it. Let’s break it down:
- Permitted Purpose: The activity must aim to develop or improve a business component (product, process, technique, invention, formula, or software).
- Elimination of Uncertainty: There must be uncertainty about capability, methodology, or design.
- Process of Experimentation: The activity must involve a process of evaluating alternatives (e.g. testing, prototyping).
- Technological in Nature: The activity must rely on principles of engineering, physical sciences, biology, or computer science.
Pro tip: Train your staff to recognize this language in project descriptions. Better yet, use AI-powered R&D software that flags these elements in project documentation.
2. Focus on the Gray Areas—That’s Where the Credits Hide
The obvious stuff (like creating new software from scratch) is easy. But the gold is often in the gray areas—incremental improvements, backend integrations, algorithm optimization, or re-engineering existing systems.
Examples of activities worth a second look:
- UX or UI improvements that required iteration or A/B testing
- Integrating two platforms with custom APIs
- Enhancing performance, scalability, or security of software
- Adapting a product to work in a new environment or industry
These may not scream “R&D” to the untrained eye—but they often qualify.
3. Collaborate with Engineers and Developers—Not Just Finance
Most accountants rely too heavily on the finance team when gathering info. The real R&D lives with your clients’ engineers, product managers, and technical teams.
How to streamline this:
- Build a short intake form for tech leaders using layman’s terms (no “Section 41” jargon)
- Sit in on sprint retros, JIRA reviews, or dev standups
- Use collaboration tools that map technical descriptions directly into your documentation workflow
R&D tax credit software makes this easier by bridging the language gap between CPAs and developers.
4. Use Time-Tracking and Project Management Data
You don’t have to reinvent the wheel. Most of your clients are already using tools like Jira, GitHub, Asana, or ClickUp. These tools contain hidden insights about what work qualifies—you just have to connect the dots.
What to look for:
- Task descriptions with technical uncertainty or experimentation
- Worklogs by developer
- Tags for sprints, feature releases, or bug testing
Using software that integrates with these platforms can automatically surface QRAs without endless interviews or guesswork.
5. Segment Qualified vs. Non-Qualified Activities Clearly
Just because someone worked on a software project doesn’t mean every task qualifies. Admin, bug fixes, and routine maintenance don’t count.
How to approach it:
- Break projects into phases: planning, experimentation, refinement, deployment, maintenance
- Assign time to each phase, and isolate the “qualified” pieces
- Let the client review and confirm
The IRS doesn’t expect perfection—but they do expect effort. A clear, reasonable approach goes a long way in an audit.
6. Don’t Skip the Non-Technical Roles
One of the biggest missed opportunities? Ignoring contributors outside of engineering. QA testers, product managers, UX designers, and even data scientists may be doing work that qualifies.
Questions to ask:
- Did this person help define or test a new technical solution?
- Were they involved in experimentation or iteration?
- Did they help solve uncertainty related to tech functionality?
If yes, they likely count. Just be sure to document it well.
7. Build Repeatable Workflows to Save Time Every Year
Chasing down info every year is exhausting. Instead, build a process that captures QRAs as the work happens.
Smart workflow tips:
- Use R&D tax credit software that collects data passively throughout the year
- Train clients to tag qualifying work in Jira or Trello
- Set quarterly check-ins instead of year-end scrambles
A little process now saves a lot of pain later.
8. Watch for Red Flags That Trigger IRS Scrutiny
Even if you identify QRAs correctly, sloppy reporting can bring trouble. Here’s what to avoid:
- Vague project descriptions (e.g. “software development” with no details)
- Copy-paste documentation across tax years
- Inconsistent treatment of similar projects year over year
- Claims with no supporting technical documentation or time-tracking
Want to stay off the radar? Be consistent, be specific, and be organized.
Final Thoughts: QRAs Are Everywhere—If You Know Where to Look
In 2025, with the IRS more focused on enforcement than ever, identifying Qualified Research Activities isn’t just a nice-to-have—it’s critical to maximizing R&D tax credit value without increasing audit risk.
The good news? You don’t have to do it manually.
Let TaxRobot make it easy.
TaxRobot’s AI-powered R&D tax credit software helps identify, document, and defend your clients’ QRAs—saving you hours while capturing every eligible dollar.
Ready to stop guessing and start maximizing? Visit TaxRobot.com and see how smarter software turns compliance into confidence.