By. Justin DiLauro, Partner, Chief Quality Officer
With Summer well in sight and getting past what seemed to be the first normal tax season since the start of the pandemic, many prudent business owners and their CPAs are re-assessing their specialty tax credit and incentive provider, whether that be for R&D Tax Credits, 179D Deductions, 45L Tax Credits, or Cost Segregation.
While conventional wisdom points us to mostly the quality of work product (and of course that is of highest importance), BRAYN has learned continuously throughout our twelve year history (coupled with the decades of prior experience of our Partners) that a given provider’s course of dealings with its clients, CPA peers, and the government should be considered much more heavily than it may at times; especially considering most work of such tax credit & incentive providers are subject to the administration of our tax system by the Internal Revenue Service – The IRS.
Right or wrong – the IRS views audits through the lenses of the preparers and providers who were involved, and BRAYN’s collective experience has told us that this could affect the opinion of the merits of a taxpayer’s claim or position.
So, while you should seek a provider that will fight for your argument and position, and not just cower to the IRS’s viewpoint, you should seek a provider whose very structure of their arrangement with you and how they conduct business is operating in your best interests, and not their own.
At BRAYN Consulting, our team of tax professionals, including attorneys, engineers, and other tax professionals spend our effort on advocating for the best position of our clients before the Internal Revenue Service and any other applicable taxing authority. How we do this is embedded in how we conduct ourselves with our clients, our CPAs who introduced us to clients, and the government itself, including but not limited to:
- Fixed Fee/Fixed Rate Proposals: While there are likely legal ways and arguments to structure a contract with a 3rd Party Provider to be based on a percentage or be success-based/contingent, BRAYN recognizes IRS Circular 230 issues with these fee approaches and chooses to focus its efforts on the arguments for its clients and not for our fees.
As such, we conduct our tax credit & incentive study services under Fixed Fees/Fixed Rates. The IRS often requests the contract of the service provider during its audits, and even if legal, a percent-based/success-based fee could shed undue light on the provider if the IRS views this fee arrangement with disfavor (right or wrong), and not the merits of your claim.
BRAYN still provides value relative to our fees, as our fixed fees are determined after BRAYN conducts a no cost and no further obligation Phase 1 Assessment. However, with the Fixed Fee/Rate approach, we seek to aim at demonstrating independency with the results as much as possible.
- Thought Leadership & Value-Added Relationships to CPA Referral Sources, and not Fee Sharing: While it is certainly permissible and common practice (provided the disclosure and other IRS rules are followed) to incorporate fee sharing with CPA referral sources for such tax credit & incentive work, BRAYN has found success in providing value to our CPA referral sources in other ways and avoid sharing fees with CPAs who introduce us to potential clients.
In avoiding fee sharing with CPAs who provide introductions, BRAYN merely seeks every opportunity to demonstrate the independence of our work product with any auditor, preparer, or provider involved, and we aim to provide value to our CPAs in other ways for their referrals, such as education & training, articles and content, arms-length combined marketing efforts, and hosting our Annual BAEC Summit as another summertime conference opportunity (see more here: https://baecsummit.com/)
- Seek Collaborative Dealings with the IRS during Audits: Several things are true relative to IRS Audits of specialty tax credit & incentive claims, such as R&D, 179D, and 45L:
- It is a relatively small chance to be examined by a taxing authority for such claims.
- Who will be audited and when is completely random – anyone can be audited for any reason at any point with the statute of limitations.
- No firm name, brand name, or individual name can guarantee success. The facts and law prevail during an audit.
- An audit is an administrative proceeding administered by the IRS, and as such, the IRS Field Agent has a lot of control.
At BRAYN, our default is to include unlimited audit defense time in our original fixed fee quote and scope of services, and we seek common areas and collaboration in working with the IRS in our staunch client advocacy during any audits that may occur.
That of course does not mean cowering at the taxing authorities every will or conceding our sound arguments within acceptable legal stands, but it means that our team at BRAYN focuses on battles with the IRS to be fought over the client issues and client claims that are odds after establishing common ground.
In that way, we don’t enter a start of an audit aiming to fight, but seek to educate, inform, and help the IRS to their job – which is to audit the claim.
- Strict Independency & Transparency with Governments when Seeking 179D Allocations: The allocation by a non-IRS government entity of the 179D Deduction in instances of A/E/C firms’ government projects makes it unique amongst all the tax incentives within BRAYN’s core competencies.
With the additional interaction with a separate government entity, our team at BRAYN is incredibly sensitive to the nature of these dealings and approach with the utmost propriety, highest ethics, and as much transparency as possible.
There are a lot of things to be excited about looking into the Summer of 2022 and beyond, but there are also definitely many challenges that we are facing and will continue to face. As such, it is best to not add to the problems and behooves you to have your specialty tax credit and incentive provider as one of the highest character, and for us at BRAYN, these are just some of the ways we continue to strive to have the highest ethical and client-value added structure, course of dealings, processes, and procedures as possible.
IRS Circular 230 Disclosure – To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
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