Do you want the good news or the bad news first? The bad news is that research credits are not getting easier to claim in 2024. Internal Revenue Service audits have become more frequent. Taxpayers have suffered losses in court. The IRS has proposed changes to Form 6765, Credit for Increasing Research Activities, including the requirement that, if you claim the research credit in the future, you must put more information related to business components on the form. Due to these expected changes, most taxpayers should start reviewing their current research credit process to see what changes to make to meet ongoing IRS demands.
Now for the good news. You still have time. There are ways to improve and gather more information than ever before. To help design your optimal process for claiming the research credit, we turn to the wisdom of tech titans Steve Jobs and Bill Gates.
Steve Jobs: Customer-centric Innovation
Steve Jobs, the visionary cofounder of Apple Inc., once remarked, “You’ve got to start with the customer experience and work backward to the technology.”
This philosophy of customer-centric innovation has reverberated across industries. Embracing this ethos for your research credit implies crafting solutions that ensure IRS compliance and enhance the overall user experience for everybody involved: tax professionals, subject matter experts (SMEs), and the IRS.
The research credit incentivizes innovation, and your process can align well with Jobs’ customer-focused approach. By investing in technological advancements to improve products, processes, or services, businesses can leverage this credit to offset research expenses, fostering a culture of innovation while benefiting from substantial tax savings.
Take, for instance, the story of how Apple revolutionized the smartphone industry with the launch of the iPhone. Jobs envisioned a device that prioritized user experience and seamlessly integrated technology into daily life. The rigorous research and development (R&D) efforts invested in developing the iPhone reshaped consumer expectations and paved the way for significant technological advancements within the company. Apple’s commitment to innovation not only transformed the industry but also led to the qualification of certain R&D activities for substantial tax credits—an embodiment of merging technological innovation and tax benefits.
Jobs’ vision was vital to crafting products and experiences that resonated with user needs. His emphasis on the customer experience serves as a guiding principle in tax technology. Jobs’ relentless pursuit of simplicity and user-friendliness finds relevance in research credits. Tax technology platforms and tools inspired by this philosophy aim to simplify complex tax regulations and processes, ensuring that companies—especially tax professionals dealing with this credit—can help SMEs navigate the intricacies of substantiating the basis for research credits. When companies offering tax technology solutions adopt Jobs’ philosophy, they design user interfaces to be intuitive and easy to use. Making things easier for SMEs ensures they can focus more on providing information to support their claim for the research credit.
Bill Gates: Technology for Efficiency
Bill Gates, the cofounder of Microsoft Corporation, famously stated, “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency.”
Gates emphasized the transformative power of technology to improve efficiency—a principle instrumental to reshaping the landscape of tax technology and research credit claims. Companies must have a good people process in place to implement the technology. “People process” in this scenario refers to the framework that tax professionals within a company use to foster the relationships between finance, human resources, payroll, and SMEs. These four groups are crucial in providing quantitative and qualitative information during a research credit study.
Gates’ philosophy is highly relevant to the advent of cutting-edge solutions like Microsoft Teams and Power Platform. Microsoft Teams, a collaboration platform, has transformed how tax professionals collaborate and communicate. Its integration with various tax technology tools streamlines workflows, facilitates real-time discussions, and enables secure file sharing, fostering efficiency and teamwork among tax teams and SMEs. An added benefit is that you likely already own the Teams software, which comes standard with the Microsoft suite of products. You may just need to be shown how to use it properly.
A separate but easily available Microsoft product, the Power Platform—a suite of tools for app development and workflow automation encompassing Power Apps, Power Automate, and PowerBI—empowers organizations to create custom solutions, automate processes, and derive actionable insights from data. Leveraging these tools, tax professionals can streamline communication, automate repetitive tasks, gather more documentation, collaborate, generate comprehensive reports, and use available data to magnify research credit operational efficiency. Integrating Power Platform with Teams allows you to create a custom environment for your research credit process, reducing complexities and time-consuming administrative tasks.
Microsoft, under Gates’ leadership, reshaped the software industry by focusing on operational efficiency. By developing innovative operating systems like Windows, Microsoft set a precedent for how technology can revolutionize work processes. This dedication to streamlining operations and creating efficient software solutions aligns with Gates’ principle of using technology to amplify efficiency—a philosophy that easily applies to research credits.
The Fusion: Customer-centricTax Technology
By harnessing the power of automation and data analytics through platforms like Microsoft Teams and Power Platform, tax professionals can streamline compliance procedures, gather more relevant data from SMEs, and unlock insights from large amounts of data collected during a study.
At the intersection of Jobs’ customer-centric innovation and Gates’ efficiency-driven technology, tax technology platforms have evolved to cater to companies’ SMEs—your ultimate customers. Moreover, the use of Microsoft Teams facilitates seamless collaboration and communication among SMEs, breaking down silos and fostering a cohesive environment to manage the research credit process efficiently. The Power Platform improves efficiency by offering tailored automation solutions, enabling companies to optimize their operations and maximize the credits for which they are eligible.
Conclusion
The intersection of tax technology, research credits, and the guiding principles of Steve Jobs and Bill Gates creates a paradigm shift in how businesses approach innovation related to research credits. Integrating user-friendly interfaces, automation, and collaborative tools like Microsoft Teams and Power Platform provides a significant push toward a future where technology enhances the SME experience, simplifies operations, and optimizes claims. As companies navigate the tax landscape, the fusion of customer-centered tax technology and efficient tools illuminates a path toward seamless, efficient, and effective research credit management. By prioritizing SME experience and taking advantage of automation tools to boost efficiency, companies can navigate the complex research credit landscape, drive innovation, and harness substantial tax benefits—all while advancing technologically and delivering greater value to SMEs and stakeholders.
John Hoang, CPA, is director of tax technology at MASSIE R&D Tax Credits.
