Examples of Contemporaneous Documentation Helpful in Supporting Your R&D Tax Credit - for Software Companies
For software development companies gathering contemporaneous documentation to support their R&D tax credit claims, the focus should be on gathering records that demonstrate how each qualifying business component meets the IRS qualification requirements. Below are the types of documentation that would typically be useful. Note: This is not an exhaustive list and a taxpayer is not required to provide examples from each of these categories and subcategories (this is just intended to be a helpful list of common types of documentation that are generated and collected).
1. Technical & Project Documentation (Permitted Purpose Test)
Project Plans & Design Documents – Detailing the architecture, features, and functionality of the software platform.
Software Requirement Specifications (SRS) – Outlining technical requirements, user stories, and intended system capabilities.
Agile/Scrum Artifacts – Sprint plans, backlog items, user stories, and acceptance criteria.
Internal Meeting Minutes & Memos – Documenting discussions on software development challenges and decisions.
Version Control Logs – GitHub, GitLab, Bitbucket, or other repository logs tracking the evolution of the codebase.
2. Experimentation & Testing Records (Process of Experimentation Test)
Proof of Concept (POC) Development – Documents showing different approaches tested before finalizing a solution.
Code Reviews & Peer Feedback – Internal discussions on code iterations, problem-solving, and optimizations.
Test Plans & Reports – Including automated tests, integration tests, unit tests, and load testing results.
Bug Tracking & Issue Logs – Jira, Trello, or other issue tracking systems documenting software failures and fixes.
Algorithm & Architecture Changes – Documenting modifications to optimize performance or resolve technical uncertainties.
3. Technical Challenges & Uncertainty (Technological Uncertainty Test)
Emails & Internal Communications – Highlighting engineering discussions on problem-solving and debugging.
Prototype & Beta Testing Documentation – Showing iterative development before release.
Research into New Technologies – Evaluating AI/ML models, cloud architecture, database structures, or security protocols.
Software Integration Documentation – Addressing challenges in integrating third-party APIs, frameworks, or cloud solutions.
Performance & Scalability Challenges – Logs, reports, or presentations analyzing system optimization efforts.
Conclusion
By keeping these records, the company can create a strong contemporaneous documentation trail to support its R&D tax credit claim, ensuring compliance and reducing the risk of disallowance on examination.
