Give Me 20 Minutes, And I'll Tell You If Your 510 Engineer Team Probably Qualifies - Episode 07
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R&D Tax Credit for Small Engineering Teams: The 4-Part Test, 3 Layers, and Top Disqualifiers
The episode explains how founders with 5–10 person engineering teams often miss six-figure R&D tax credits by using their own definition of R&D instead of the IRS’s four-part test: permitted purpose, technological in nature, technical uncertainty, and process of experimentation. It recommends auditing the top five engineering projects with a short write-up to see which qualify, then estimating the credit using three layers of qualification: direct R&D, direct supervision (e.g., CTO/tech founders), and qualified support roles. It contrasts W-2 vs 1099 contractor treatment, noting contractors face a 35% reduction and no “substantially all” rule. It highlights key disqualifiers: mostly offshore engineering, failing the risk-and-rights test for client work, or being too early with no payroll, and provides a probable yes/maybe/no self-triage.