Code Sec. 41 Research and Experimentation Tax Credit Audit Considerations

8 Pages Posted: 25 Sep 2011

Date Written: February 1, 2008

Abstract

The Internal Revenue Code Section (“Code Sec.”) 41 research and experimentation tax credit was enacted in 1981 to provide a significant tax incentive to encourage taxpayers to increase domestic research and experimentation spending. However, recent IRS audit initiatives and procedures frustrate this goal, forcing many taxpayers to make a difficult business decision: claim the Code Sec. 41 tax credit as provided by Congress and face the almost certain prospect of a costly and time-consuming IRS audit, or forgo the Code Sec. 41 tax credit altogether.

This article discusses the recent IRS initiatives and current audit procedures related to Code Sec. 41 tax credits. This article also explores the initial audit considerations and potential audit hazards that taxpayers encounter during Code Sec. 41 audits. Finally, an overview of the IRS’s research credit recordkeeping agreement program is provided

Keywords: research tax credit, research tax credit audit, R&D tax credit, R&D tax credit audit

JEL Classification: H2, H25

Suggested Citation

Mitchell, Kreig D., Code Sec. 41 Research and Experimentation Tax Credit Audit Considerations (February 1, 2008). Journal of Tax Practice and Procedure, Vol. 9, No. 7, p. 69, February-March 2008, Available at SSRN: https://ssrn.com/abstract=1933251

Kreig D. Mitchell (Contact Author)

Mitchell Tax Law ( email )

6671 Southwest Fwy, Ste 820D
Houston, TX 77074
United States
713-909-4906 (Phone)

HOME PAGE: http://mitchelltaxlaw.com

Kreig LLC ( email )

6671 SW FWY STE 490A
HOUSTON, TX 77074
United States

HOME PAGE: http://kreiglaw.com

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