Case Study: Software Company Recovers $92,000 Through Retroactive Credit Filing
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A B2B SaaS company with $8 million in annual revenue and a 14-person engineering team had been building and scaling their platform for five years. Their accounting firm handled standard tax preparation but had never conducted an R&D credit analysis or suggested the company might qualify.
The Situation
The company's engineering team was responsible for developing new platform features, architecting system integrations, building internal tools for operational efficiency, and continuously improving application performance and reliability. Annual engineering payroll exceeded $2.4 million. The CTO estimated that roughly 70% of engineering time was spent on work that involved meaningful technical uncertainty rather than routine maintenance or known implementations.
The company also engaged outside contractors for specialized development work, spending approximately $300,000 per year on contract engineering resources dedicated to qualifying projects.
What We Found
Our R&D credit study documented qualifying activities across four major categories: new feature development involving architectural decisions and technical trade-offs, performance optimization work that required experimentation with different approaches, system integration projects that involved resolving technical uncertainty around data handling and API behavior, and internal tooling that represented genuine technical advancement beyond commercially available alternatives.
Across three open tax years, total qualified research expenses exceeded $5.1 million. Using the ASC method, the federal credit calculation produced $71,400 in total credits. The California state credit analysis added another $20,600, bringing the combined recovery to $92,000.
The Outcome
Amended federal and California state returns were filed for all three years. The federal refund processed in approximately seven months. The California credit was applied as a carryforward against current-year state tax liability, providing immediate benefit on the next quarterly estimated payment.
The company now includes R&D credit analysis in their annual tax planning cycle, with projected annual savings of $28,000 to $35,000 in combined federal and state credits going forward. Their engineering leadership also implemented lightweight time-tracking practices that strengthen the documentation basis for future credit claims.
Key Takeaway
Software companies are among the strongest candidates for the R&D tax credit, but they're also among the most likely to have never been told they qualify. If your engineers are solving technical problems and building things that didn't exist before, the credit applies. The combination of high engineering salaries and the ASC calculation method typically produces meaningful credits, and the retroactive opportunity for companies that have never claimed often represents the single largest immediate tax recovery available.
