A Grand Rapids metal fabrication S-Corp had filed standard returns for 8 years. Nobody had evaluated them for the R&D credit. We found qualifying activities and recovered $94K across 4 years of claims.
01The Situation
The owner had been in metal fabrication for 23 years. His shop custom-designed tooling for automotive and aerospace clients, regularly tested new alloy combinations, and ran continuous process improvement projects. Classic R&D credit activity, but it had never been identified as such.
His prior CPA had filed straightforward business returns every year. The R&D credit had never come up. A peer at an industry conference mentioned he had claimed $60K in R&D credits on a similar operation. The fabricator called us the following week.
02What We Did
We conducted a technical interview with the owner, plant manager, and lead engineer to identify activities meeting the four-part R&D credit test. Four activity categories qualified: custom tooling design, process improvement, alloy testing, and prototype development. Each was documented with time records, project files, and supply invoices.
Amended returns filed for FY 2021–2023. The IRS issued refunds for all three years. Going forward: $28K annual credit reduces effective tax rate by 4.2 points at current income.
03Client Impact
The fabricator had been doing R&D in the literal sense, experimenting with materials and processes under technical uncertainty, for his entire career. The tax code had a credit for exactly that. Eight years of it had gone unclaimed simply because nobody had asked the right question.
Breakdown
| Qualifying Activity | Annual Wages | Supplies | Credit Rate | Annual Credit | Status |
|---|---|---|---|---|---|
| Custom Tooling Design | $184,000 | $42,000 | 6% | $13,560 | |
| Process Improvement Projects | $124,000 | $18,000 | 6% | $8,520 | |
| New Alloy Testing | $68,000 | $84,000 | 6% | $9,120 | |
| Prototype Development | $96,000 | $28,000 | 6% | $7,440 | |
| TOTAL QUALIFYING | $472,000 | $172,000 | 6% | $27,840/yr | |
| 4-Year Total Claim | $1,888,000 | $688,000 | — | $93,820 |
What changed
R&D Credit Identified for Metal Fabrication
Four qualifying activity categories documented. Custom tooling, process improvement, alloy testing, prototypes.
$94K Recovered Across 4 Years
Amended returns filed for FY 2021-2023. Current year claim filed. All credits paid without audit.
$28K Annual Credit Going Forward
Ongoing documentation system built. Credit claimed every year at reduced preparation cost.
Effective Tax Rate Reduced 4.2pts
At current income: from 28.4% to 24.2% annually.
The fabricator had been doing R&D in the literal sense, experimenting with materials and processes under technical uncertainty, for his entire career. The tax code had a credit for exactly that. Eight years of it had gone unclaimed simply because nobody had asked the right question.
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