What does the four-part test ask?
- What were you improving? Identify the intended functional improvement in a product, process, or other business component.
- What was uncertain? Describe the unresolved capability, method, or design question at the outset.
- What technical principles did you rely on? Explain the science or engineering behind the work.
- How did you evaluate alternatives? Describe the experiments, models, simulations, or systematic trials.
These questions summarize an activity review under IRC §41(d); they are not a substitute for applying the full law. Current Form 6765 instructions refer to domestic research or experimental expenditures under §174A. Earlier tax years need review under their applicable rules.
You do not need to translate your work into tax terminology before calling. Start with a technical problem your team tried to solve.
What does that look like in a project?
Consider a manufacturer trying to improve the reliability of a sealing process. The team does not know which temperature and material combination will achieve the required performance. It designs trials, compares the results, and changes its approach based on what it learns.
Useful questions include which performance requirement was unresolved, what alternatives were considered, how results were evaluated, and what records remain. The fact that the team ran tests matters less than what those tests were designed to resolve.
Compare that with checking finished items against an established specification. Ordinary quality-control testing does not automatically become research because measurements were collected. These examples illustrate the distinction; your actual activities still need review.
If the boundary between experimentation and routine work is unclear, describe a project and we can discuss the records needed to evaluate it.
What else affects eligibility?
An affirmative answer to a short questionnaire does not settle every qualification question. Activities such as funded research, certain software development, work outside the United States, and work after commercial production can require additional analysis or be excluded.
Expense eligibility is a separate step. An activity conclusion does not automatically make every associated wage, invoice, or equipment purchase eligible. Use the QRE guide to understand how the activity review connects to the expense schedules.
Discuss mixed project phases openly. The study should identify the qualifying work, if any, without treating routine implementation or business planning as experimentation.
Explain the process with the records you have.
Gather original requirements, design alternatives, test plans, revision histories, engineering notes, and results. A useful project description connects those records in sequence: the initial question, the attempted approaches, the evaluation, and the next decision.
Avoid replacing specifics with broad statements such as “we innovate” or “the solution was difficult.” Ask the people who performed the work to explain what was unknown and what changed during development. If a project stopped before launch, keep the investigation record; our failed-project guide explains why the outcome is a separate question.
Could your project meet the requirements?
Paribus Advisors prepares R&D tax credit studies and supporting claim packages for businesses and their accountants. We can discuss the projects, periods, and information that belong in a focused review.
Call with one or two development examples. Your accountant can help with tax-year questions and using the study to prepare your return. You can also request a callback below without sending technical files through the website.