For many companies, innovation and tax planning exist in two different universes. Innovation is fast-paced while tax is deadline-driven. However, failing to bridge this gap mean leaving money on the table, since the Research and Development tax credit (RDTC) is one of the most powerful tools in the U.S. to offset high cost of innovation.
Many companies today are aggressively investing in innovation by launching new product lines, experimenting with emerging technologies, and scaling R&D functions to stay competitive. Yet despite these ambitions, one recurring challenge undermines the financial impact of these efforts: a persistent misalignment between innovation strategy and tax incentive timelines.
This “alignment gap” often stems from the natural difference between how innovation teams operate (fast, iterative, exploratory) and how tax processes work (structured, deadlinedriven, and bound by regulatory requirements). As a result, companies may conduct substantial qualifying R&D but fail to capture the full tax benefits available to them simply because their planning cycles and documentation practices are out of sync with IRS timelines.
By integrating tax-related planning directly into your innovation strategy, you transform a year-end compliance task into a proactive financial engine that funds your next product cycle.
The RDTC is a valuable mechanism available to reduce the net cost of innovation. It rewards companies for developing new or improved products, processes, software, or technologies, activities that already often occurred as part of normal business operations.
The IRS Four-Part Test is used to determine whether each project or business component may qualify:
When properly planned and integrated into the innovation cycle, the R&D Tax Credit can:
Despite its value, many companies leave money unclaimed because they only consider tax incentives after R&D activities are completed, when documentation is weaker, deadlines are tighter, and strategic coordination is already lost.
Aligning innovative activities with R&D Tax Credit (RDTC) criteria starts with understanding how the innovation lifecycle maps to IRS expectations. Every phase of product development contains opportunities to generate qualified research activities if they are planned and documented intentionally.
The ideation stage is when teams brainstorm solutions, evaluate customer problems, outline product concepts, and assess technical feasibility. This is also the ideal moment for flagging projects that may qualify for the R&D Tax Credit.
At this phase, companies should:
Early identification ensures the project meets the IRS’s four-part test and sets the stage for documentation that directly supports the credit.
Before the product or process transitions into full production, teams should complete a final documentation sweep to make sure the project’s story aligns with the IRS’s definition of qualified research. This includes:
To capture all qualifying costs before deadlines it is a must to coordinate with finance by doing a final review of cost centers associated with the project, review all R&D labor allocations, contractor invoices and supply costs
Federal R&D Tax Credit claims are filed using Form 6765, which must be attached to a timely filed federal income tax return, the primary deadlines for calendaryear businesses are:
Companies that miss claiming the RDTC on an original return can amend prior years, within the IRS’s statute of limitations, taxpayers typically have three years from the original filing date to amend returns and claim R&D credits. If the original return was filed on extension, the threeyear period runs from the actual filing date.
Unlike the federal RDTC, each state sets its own deadlines, application windows, eligibility criteria, and documentation standards. Some states automatically follow federal deadlines, while others impose fixed filing dates, preapproval requirements, or competitive application windows.
Because rules may vary, deadlines, caps, refundability, and qualifications, companies must plan early to avoid missing opportunities.
A qualified small business can use RDTC against payroll taxes, but this election must be made on its original, timely filed income tax return, not on an amended return.
After the election is made, the RDTC payroll offset begins with the next Form 941 filing, typically one of:
Any excess credit rolls forward to subsequent quarters automatically.
By tracking R&D activities and expenses in real time, businesses can prepare and file their R&D tax credit documentation earlier, enabling them to access the payroll tax offset sooner and accelerate the financial benefits.
Real-time tracking of R&D activities and expenditures also creates strategic opportunities for businesses to apply the R&D tax credit amounts calculated throughout the year to reduce their quarterly tax payments. Instead of waiting until the end of the fiscal year to realize these benefits, companies can leverage accurate, uptodate data to adjust estimated tax payments proactively. This approach not only improves shortterm cashflow but also provides earlier access to the financial advantages of innovation investments. By smoothing cash needs across the year, businesses can mitigate the financial risks typically associated with R&D projects, support more predictable budgeting, and reinvest those savings directly into ongoing innovation efforts.
Do not wait for tax season, real-time documentation prevents end-of-year scrambling, builds accuracy, reduces audit exposure, and ensures the organization never loses credit value due to missing information.
When companies synchronize their R&D activities, documentation practices, and budgeting cycles with federal and state tax requirements, they unlock the full financial value of their innovation efforts. This alignment not only maximizes the return on R&D investments but also reduces compliance risk by ensuring teams maintain auditready documentation and clear technical narratives rather than scrambling at yearend.
Integrating R&D Tax Credit (RDTC) planning into the innovation lifecycle, from ideation to development to commercialization, transforms tax incentives into a meaningful and recurring source of funding. The organizations that excel are those that treat tax strategy as a core component of their innovation roadmap, not as a backoffice afterthought. As regulations evolve and competition accelerates, businesses that embed RDTC awareness into their workflows will be better positioned to accelerate product development, improve cashflow, and fuel continuous technological advancement. Innovation moves faster and farther when tax strategy moves with it.
To achieve this level of alignment, however, companies often need a partner who understands both the technical dynamics of innovation and the complexity of tax legislation. That’s where FI Group by EPSA plays a critical role and helps organizations:
With the right support, tax incentives become not just a compliance exercise but a strategic lever for growth.
Contact FI Group by EPSA to ensure your innovation strategy fully captures every available tax advantage.
The U.S. Research & Development (R&D) credit is a federal incentive that provides a dollar-for-dollar reduction in the taxes owned for companies that perform qualifying research activities. These companies can significantly reduce their tax burden simply by capturing technical work they’re already doing. The credit improves cash flow and frees capital for further investment; it also does not have a limit of specific industries. Instead, the credit focuses on the nature of the work, not the sector where it happens.
As we approach the March and April 2026 tax deadlines, business owners should be aware that the R&D Tax Credit landscape looks significantly different than in years past. For the first time, many taxpayers will be navigating the new section 174A made by the One Big Beautiful Bill Act (OBBBA), which restored the ability to immediately expense domestic R&D costs.
For the last couple years, R&D expenses were a drain on cash flow due to the Tax Cuts and Jobs Act (TCJA), which forced businesses to amortize domestic research costs over five years. This created a “phantom tax” where companies had to pay taxes on money they had already spent. However, the OBBBA of 2025 introduced Section 174A, which restores the ability to choose immediately 100% deduction of domestic R&D expenses in the year. Furthermore, for businesses with average gross receipts under $31 million, Sec. 70302(f)(1) of the OBBBA offers a retroactive application opportunity, allowing to amend 2022–2024 returns and reclaim the cash lost to amortization during those years, provided you act before the July 4, 2026 election deadline. In case of amending 2022-2024 RDTC claims, taxpayers have the possibility to claim the reduced credit under the Sec 280C(c) election and should analyze which option is the best for their business. In addition, all businesses can also elect to fully deduct remaining unamortized amounts in 2025 or split the catch‑up deduction across 2025–2026.
With these changes, planning ahead is critical and expert guidance ensures you maximize benefits and stay compliant.
Successfully claiming the R&D credit requires more than just high-level calculations, it demands strategic scenario modeling to determine the interplay between the new Section 174A expensing and your specific entity structure.
If you take a deduction for R&D expenses you cannot claim credit for these same expenses, you must choose between a reduced credit with full deduction or the other way around. Choosing the best option is more than just calculations, the company scenario also matters. For instance, electing the Section 280C(c) reduced credit might be more advantageous for S Corps looking to simplify K-1 reporting and preserve individual-level deductions, whereas a C Corp with significant Net Operating Losses (NOLs) might prioritize different elections to maximize long-term cash flow.
In parallel, the IRS has raised the bar for audit readiness. With the restoration of 100% immediate deduction, making sure you have contemporaneous documentation is the only way to mitigate risk and prevent costly adjustments. But navigating these complex elections and documentation hurdles should not be a solo endeavor, our specialists provide the expert support needed to help you choose the right elections, prepare robust documentation, and file confidently.
The window to maximize your R&D benefits for the year is shorter now. January through February is the data collection phase, where you must finalize your list of qualified expenses and aggregate technical documentation before March 16, 2026, deadline for S Corps and April for C-Corps. As we move into March and April, the focus shifts to strategic modeling: determining whether to claim the full domestic expense under Section 174A or opt for the acceleration election to clear out remaining 2022–2024 amortization balances. Finally, for many, the ultimate deadline isn’t April, it’s July 6, 2026.
This is the hard cutoff for the Small Business Retroactivity Election, your final chance to amend 2022–2024 returns and claw back the cash flow lost during the amortization years.
Ensure your R&D tax credit claim is fully optimized and audit‑ready.
👉 Request your complimentary R&D Tax Credit audit here
The U.S. Digital Transformation Market is being shaped undergoing several evolutions, advancements in technology are shifting consumer expectations, and starts a growing need for resilient, adaptive organizations fundamentally reshaping how businesses operate and engage with their customers. Driven by the rising demand, organizations across the United States are rapidly adopting advanced technologies such as artificial intelligence (AI), cloud computing, and the Internet of Things (IoT). These innovations enable companies to optimize operations, enhance service delivery, and personalize customer interactions, ultimately boosting satisfaction and long-term loyalty.
As companies and public institutions continue to modernize, several emerging trends are redefining how digital tools are developed, deployed, and leveraged across the economy. These trends are not only accelerating innovation but also reshaping the strategic direction of industries and influencing national competitiveness.
One of the most influential trends is the accelerated adoption of artificial intelligence (AI) and machine learning (ML). These technologies are no longer experimental, they are mainstream tools for automation, predictive analytics, and personalization. AI-powered decision-making is becoming a co-pilot for executives, offering insights and recommendations while leaving strategic choices to humans. Generative AI, in particular, has seen explosive growth, with adoption rates jumping from 55% to 78% of U.S. firms in just one year, fueling innovation in customer experience and operational efficiency. The U.S., as a global AI powerhouse, is expected to see further integration of AI into core processes across finance, healthcare, retail, manufacturing, and the public sector.
Together, these trends are paving the way for a more intelligent, interconnected, and resilient digital economy in the United States. The organizations that thrive in the coming decade will be those that embrace continuous innovation, invest in secure and scalable digital infrastructure, and remain agile in adapting to evolving technologies. The future of digital transformation in the U.S. will be defined not only by technological breakthroughs but also by the ability of institutions to integrate these advancements into strategic, sustainable, and human-centered practices.
Financial incentives such as the federal R&D tax credit will continue supporting innovation by reducing the cost of developing new digital tools, software platforms, and AI systems. As digital transformation becomes more complex and technology development accelerates, these incentives will help companies reinvest in modernization and remain competitive in a global market.
FI Group can help you.
Navigating R&D tax credits can be complex, but you do not have to do it alone. FI Group offers specialized expertise in helping financial firms identify and maximize their R&D tax credit opportunities, both at the federal and state levels.
Our team of professionals understands the intricate IRS requirements and can provide tailored guidance to ensure your firm captures every eligible innovation while maintaining full compliance. If you are looking to transform your research activities into potential tax savings, we are here to help you through each step of the process.
The United States is a global leader in digital transformation, with organizations across the country embracing emerging technologies as a catalyst of growth. Home to world-class innovation hubs and rapid advancements in artificial intelligence (AI), the country benefits from a mature, next-generation digital infrastructure. These strengths helped place the U.S. fourth in Statista’s 2024 Digital Competitiveness Ranking, behind Singapore, Switzerland, and Denmark.
Digitalization has become a cornerstone of U.S. economic competitiveness. Both public and private organizations are modernizing operations, enhancing service delivery, and rethinking traditional governance and business models. What began as a technological shift has evolved into a structural transformation influencing strategy, workforce development, and long-term organizational resilience
U.S. companies are integrating AI-driven analytics, automation, and cloud computing platforms to optimize workflows and enable real-time decision-making. The rise of generative AI has accelerated personalized service delivery and predictive insights. Private companies, especially in retail and financial services, are using big data and AI for hyper-personalized experiences, while public agencies aim to simplify citizen interactions through digital portals. The widespread adoption of remote work has also fueled investments in secure cloud solutions and collaboration tools, creating more agile and resilient organizations.
Federal and state agencies are undergoing strong digital modernization. Initiatives such as the Digital Government Strategy and the U.S. Digital Service aim to modernize federal services, improve accessibility, and promote open data policies. Proposed legislation like the Digital Public Infrastructure Act seeks to build interoperable systems for identity, payments, and data exchange, addressing fragmentation in public services.
A notable example would be the recently announced FedRAMP 20x, the newest iteration of the FedRAMP program. Its goal is to accelerate cloud adoption for federal agencies by making the authorization process faster, cheaper, and replacing the older, highly manual and paperwork-heavy process with a cloud-native, automation-driven compliance framework. Showing that digital transformation is not just for private companies
The United States digital transformation market size stands at USD 0.66 trillion in 2025 and is projected to reach USD 1.66 trillion by 2030, growth is driven by cloud migration, AI integration, and regulatory compliance frameworks. Public services will continue expanding digital identity systems, data-sharing platforms and online citizen services, while private companies will intensify investments in automation, cybersecurity, and customer experience technologies.
Digitalization offers numerous benefits, including operational efficiency through automation, enhanced customer experience, data-driven decision-making, and expanded market reach. However, significant challenges persist. Greater reliance on digital systems exposes organizations to cybersecurity threats, and the U.S. continue to face a shortage of skilled IT, AI and cybersecurity professionals. Many public agencies still operate with outdated infrastructure that are costly to replace, and modernization initiatives often encounter budget limitations and organizational resistance to change, as employees often prefer established processes, leading to hesitation to adopt new technologies.
While the benefits are extensive, realizing them fully requires addressing cybersecurity risks, closing talent gaps, modernizing infrastructure, and ensuring equitable access to digital tools. With coordinated efforts across government, business, and technology providers, the U.S. is well positioned to strengthen its role as a global leader in the digital economy and build a more connected, efficient, and inclusive future.
Financial incentives help support innovation during this transition. The federal Research & Development (R&D) tax credit plays an important role by allowing companies to offset costs associated with developing new technologies, software, and processes, making digitalization projects more financially viable and encouraging continuous innovation. Eligible activities include designing digital platforms, creating AI-driven tools, enhancing cybersecurity, and building cloud-based solutions. By lowering the financial barriers to modernization, the R&D credit allows organizations to reinvest in further innovation and accelerate digital transformation across industries.
Navigating R&D tax credits can be complex, but you do not have to do it alone. FI Group offers specialized expertise in helping financial firms identify and maximize their R&D tax credit opportunities, both at the federal and state levels.
Our team of professionals understands the intricate IRS requirements and can provide tailored guidance to ensure your firm captures every eligible innovation while maintaining full compliance. If you are looking to transform your research activities into potential tax savings, we are here to help you through each step of the process.
The financial sector is amid a profound technological transformation. As banks, fintech’s, insurance companies, and investment firms adopt advanced technologies, they are increasingly engaging in activities that qualify for research and development (R&D) tax incentives. For example, in 2023, US finance and insurance sector companies increased their R&D investment by more than 70% compared to the previous year. Yet many financial institutions remain unaware that U.S. government offers a powerful incentive to fund this innovation.
The Federal R&D credit, codified under Internal Revenue Code Section 41, provides a dollar-for-dollar reduction in a company’s federal and often state tax liability, rewarding businesses for their investment in developing new or improved products, processes, and software.
There is a common misconception that the type of research that is eligible for R&D credit must take place in a traditional laboratory, and that an invention must result in a new, patentable invention. While these types of activities would certainly qualify, they are far from necessary.
While not traditionally associated with “R&D,” financial services companies often qualify for the tax credit through technological innovation and process improvement. Financial firms routinely face technological, regulatory, and cybersecurity challenges that require substantial innovation. Activities such as developing new algorithms, automating manual workflows, improving data security, or integrating Artificial Intelligence (AI)-driven systems often meet the IRS’s definition of “qualified research.”
The IRS has prescribed a four-part test that can help determine whether a business is engaging in qualified research activities.
A financial institution may qualify for the R&D credit through the development or improvement of its software system. While internal use software has additional requirements, other software development projects can also qualify.
Examples include enhancing cybersecurity to prevent cyberattacks, creating mobile banking technology that enables bill payments, check deposits, and other online transactions, or developing software that automates previously manual processes.
If engaged in a qualifying activity, an R&D credit up to 20% of qualified research expenditure (QREs) in excess of a base amount may be allowed to offset federal income tax. Typical QREs include salaries and wages, supply costs, and contract research expenses.
To successfully claim the R&D tax credit, meticulous documentation is paramount. Firms must be able to demonstrate that their activities satisfy the Four-Part Test and keep detailed records of expenses related to research and development, especially salaries where employees perform both research and non-research tasks.
Even if your business has no income tax liability, you can still benefit from the credit because unused amounts may be carried forward for up to 20 years. Further, Small Qualified Business, as defined by IRS, may be able to make an election to offset up to $500,000 of the credit annually against payroll taxes instead of income taxes.
If you performed research and development activities in prior years but were unaware, they qualified, amended returns may be filed to recover the credits as long as the applicable statutes of limitation have not expired.
Navigating R&D tax credits can be complex, but you do not have to do it alone. FI Group offers specialized expertise in helping financial firms identify and maximize their R&D tax credit opportunities, both at the federal and state levels.
Our team of professionals understands the intricate IRS requirements and can provide tailored guidance to ensure your firm captures every eligible innovation while maintaining full compliance. If you are looking to transform your research activities into potential tax savings, we are here to help you through each step of the process.
The October 15 tax deadline has passed, but your opportunity to benefit from the R&D Tax Credit is far from over. This year brought a major legislative shift: the One Big Beautiful Bill Act (OBBBA), which changed how businesses handle R&D expenses and created new planning opportunities.
For the last 3 years, companies were required to capitalize and amortize domestic R&D expenses over five years (and foreign research over fifteen), creating cash flow challenges. OBBBA reversed that rule. Starting with tax years beginning after December 31, 2024, businesses can fully deduct domestic R&D expenses in the year incurred. This change improves liquidity and simplifies compliance, making innovation more financially attractive.
Other key updates:
These changes make 2026 a critical year for tax planning.
Even if you missed the October deadline, there are still multiple ways to benefit from the R&D tax credit and the OBBBA changes.
The combination of OBBBA’s immediate expensing and the R&D Tax Credit creates a powerful opportunity to improve cash flow and reduce tax liability. FI Group helps businesses:
A mid-sized U.S. manufacturer partnered with FI Group in early 2025. By implementing real-time R&D tracking and amending prior returns, they:
Now is the time to:
Ready to see how much you could recover? Schedule a free consultation today and let FI Group help you make the most of the R&D Tax Credit.
