A mid-sized California technology company specializing in cloud infrastructure and digital transformation just found out they’d been eligible for $62,503 in R&D tax credits for a single tax year.
The kicker? They’d been doing the same qualifying work since 2019. We’re talking potentially $180,000+ left on the table.
They had no clue their daily engineering work qualified.
And they’re not alone. Most software and cloud services companies think federal R&D tax credits under IRC Section 41 are for biotech firms or manufacturers building physical products. Not true. The multi-cloud architecture they were building? Qualified. Those AI integrations they were testing? Qualified. The automation systems they were developing? All legitimate research activities under IRS guidelines.
The result for just 2021: $62,503 in federal R&D tax credits discovered through a completely risk-free assessment process. No fees to find out what they qualified for. Total transparency before moving forward.
Why Cloud Infrastructure Companies Miss Out on R&D Credits
Here’s what catches most technology companies off guard.
When you’re experimenting with different cloud configurations to reduce latency, that’s qualified research. Testing various integration approaches for multi-cloud environments? That counts. Prototyping automation systems to streamline deployment? The IRS considers it research and development.
This California-based company spent roughly 90% of their engineering time on activities that qualified under Section 41. Solving technical uncertainties every day through systematic experimentation, documentation, and testing.
IRC Section 41 rewards companies for attempting to develop new or improved business components through a process of experimentation. In simple terms: if you’re solving technical problems through trial and error, you likely qualify. Doesn’t matter if you’re building cloud infrastructure or kitchen appliances.
The company serves clients across healthcare, technology, and retail sectors. Every client project required custom solutions, technical problem-solving, and systematic testing to ensure security, scalability, and performance. Standard stuff for them. R&D tax credits to the IRS.
What Actually Qualified: Real Engineering Work Under IRS Section 41
After reviewing three years of activities and documentation, we identified several categories of qualifying research expenses.
Cloud Infrastructure Development: They’d invested serious resources upgrading and optimizing their cloud infrastructure solutions. Experimenting with different integrations and frameworks to enhance security and performance for multi-cloud and hybrid cloud environments. Each configuration required extensive testing to figure out the optimal approach for specific client needs.
AI and Machine Learning Integration: The engineering team spent considerable time incorporating AI and machine learning capabilities into their cloud-native applications and data analytics services. This meant experimenting with different AI frameworks and platforms, testing various approaches to natural language processing and predictive analytics, systematically evaluating performance across different use cases.
Experimental Testing and Analysis: Extensive experimental testing of cloud architectures and infrastructure strategies. Consistently testing various configurations to reduce latency, increase data throughput, strengthen security protocols. They experimented with emerging technologies like containerization and microservices to enhance scalability and modularity.
Software Prototyping: Engineers actively developed prototypes for new cloud service architectures and automation systems. These prototypes underwent rigorous testing and refinement to meet client needs for security, scalability, and performance before final deployment.
Process Automation: Heavy investment in automating various elements of their cloud deployment processes. Implementing continuous integration and deployment (CI/CD) pipelines, streamlining software development workflows, automating resource allocation and scaling in multi-cloud environments.
All of these activities satisfied the four-part test required by the IRS: permitted purpose (improving functionality and performance), technical uncertainty (best approaches weren’t readily apparent), process of experimentation (systematic testing of alternatives), and technological in nature (relying on principles of computer science and engineering).
The Numbers: $62,503 Discovered for One Year Through Risk-Free Assessment
Our analysis focused on the 2021 tax year, though the company had been performing qualifying activities since 2019. The feasibility analysis identified qualified research expenses across multiple engineering categories.
2021 Tax Year Results:
- Federal R&D Tax Credits Identified: $62,503
- Timeline from initial contact to feasibility determination: ~1.5 weeks
- Cost to discover this opportunity: $0
- IRS audit protection: Included with study
What made this particularly valuable was the company’s size and profitability position. A lot of mid-sized technology companies assume they need massive revenue to benefit from R&D credits.
Not true.
The credit is based on qualified research expenses (primarily engineer wages and contractor costs), not total revenue.
For this California company, discovering $62,503 for a single year represented a clear opportunity to improve cash flow. Once they saw the numbers and decided to move forward with the full study, they used our documentation to amend their tax return and apply the credit against their federal tax liability. Lower effective tax rate for the year.
Here’s how we’re different: you pay nothing to discover the opportunity. Many competitors charge $5,000-$15,000 just to evaluate whether you might qualify. Our model works differently. We complete the full feasibility analysis at no cost, show you exactly what you qualify for, and give you a transparent decision point about whether to proceed with the comprehensive study needed to claim the credits.
The part that keeps the CFO up at night? Realizing they’d been performing these same qualifying activities since 2019. If they’d known about R&D credits earlier, they could have captured similar benefits for multiple previous years.
From Assessment to Results: How We Work
The engagement started with a free, no-obligation assessment. One of our specialists reviewed the company’s basic business activities and immediately spotted multiple qualifying areas. Unlike competitors who charge several thousand dollars upfront just to evaluate feasibility, we charge nothing to discover your opportunity.
The initial assessment took about 1.5 weeks. Our team conducted detailed interviews with the engineering leadership to understand specific projects and activities. We reviewed project documentation, timelines, and resource allocation to determine feasibility and calculate the estimated credit value.
Here’s where the transparency comes in. Once we presented the $62,503 opportunity, the company had a clear decision point. They could see exactly what they qualified for and make an informed decision about moving forward with the comprehensive documentation study needed to claim the credits.
No speculation. No hoping there might be value. The opportunity was quantified and clear.
The company chose to proceed. We then handled all the heavy lifting: gathering supporting documentation, calculating qualified research expenses, preparing the detailed study that would support the credit claim. The company’s finance team simply provided payroll records and basic project information.
What stood out to them was the white glove service. This wasn’t an automated software platform spitting out generic reports. The company worked directly with experienced engineers and tax professionals who understood cloud infrastructure and could articulate why specific activities qualified. They weren’t just another case number in a queue.
Our study was built to withstand IRS scrutiny. Every claimed expense was documented. Every activity was tied to specific technical uncertainties. The entire process of experimentation was clearly demonstrated. The company gained peace of mind knowing that if the IRS ever questioned the credit, our audit protection meant they wouldn’t be facing that challenge alone.
The Bigger Picture: Ongoing Annual Benefits
R&D tax credits aren’t a one-time windfall. They’re an annual benefit.
If your engineering team is solving technical problems through experimentation this year, you’re likely qualifying for credits this year.
For this California company, the 2021 credit was just the beginning. Their business model hasn’t changed. Still developing cloud solutions, integrating AI capabilities, optimizing infrastructure for clients. That means they’re generating qualified research expenses every year.
Working with us gives them a systematic approach to capturing this value annually. Instead of leaving money on the table year after year, they now have a process in place to identify and document qualifying activities as they happen. Their CFO knows exactly what activities to track, their engineering team understands the documentation requirements, and we handle the annual study and credit calculation.
A lot of technology companies work with traditional CPAs who focus on compliance and tax preparation. Those firms provide essential services but often lack the specialized expertise needed to identify and document R&D credits properly. We complement the existing accountant rather than replacing them. The CPA maintains the client relationship and handles overall tax strategy, while we provide deep expertise in the technical specialty of R&D credit studies.
Why Technology Companies Leave This Money on the Table
First reason: they simply don’t know the credit exists or don’t realize their work qualifies. Software development, cloud infrastructure, DevOps automation, and AI integration all sound like “normal business activities” rather than “research and development.”
Second reason is cost and complexity. Many specialized tax credit firms charge substantial upfront fees ($5,000 to $15,000) just to evaluate whether a company might qualify. For a mid-sized business, that’s a significant investment with zero guarantee you’ll find anything worth claiming.
Third reason is audit concern. Business owners hear about aggressive tax strategies getting challenged by the IRS and worry that claiming R&D credits will trigger an audit. In reality, R&D credits are a well-established part of the tax code, and properly documented studies face minimal risk.
We address all three barriers. Education about what actually qualifies. No charge to discover your opportunity – you see the full potential value before making any commitment. Audit-tested documentation with audit protection included for peace of mind.
Key Takeaways for Cloud Services and Software Companies
If your engineering team is solving technical problems through systematic experimentation, you’re likely performing qualified research under IRC Section 41.
The credit isn’t limited to breakthrough innovations or patent-worthy inventions. Incremental improvements count. Customization work counts. Failed experiments count.
Activities that commonly qualify for software and cloud services companies:
- Developing new features or functionality that requires technical problem-solving
- Optimizing performance, scalability, or reliability through testing and experimentation
- Integrating complex systems or technologies where the best approach isn’t immediately apparent
- Building prototypes or proof-of-concept systems to evaluate technical feasibility
- Automating processes through custom software development
- Enhancing security protocols through experimentation and testing
The California company in this case study isn’t unique. Thousands of technology companies across all 50 states are performing similar activities every day. The difference is that this company took 1.5 weeks for a free assessment and discovered $62,503 in federal tax credits for a single year.
The question isn’t whether you’re performing qualifying activities. The question is how many years of value you’ve already left unclaimed.
Ready to Discover Your R&D Tax Credit Opportunity?
If you’re running a software, cloud services, or technology company where engineering teams solve technical problems daily, you’re likely generating substantial qualified research expenses. Our free assessment takes approximately 1-2 weeks and shows you exactly what you qualify for – with no fees to discover the opportunity and complete transparency before you make any commitments.
Unlike competitors who charge expensive upfront fees just to evaluate your eligibility, we let you see the full opportunity at no cost. Leading R&D credit specialists nationwide trust us for IRS-compliant studies with audit protection, all delivered with white glove service that treats you as a partner, not a case number.
Top-rated tax credit consultants and trusted by CPAs across the country, we’ve helped technology companies from California to New York discover millions in tax savings. The assessment is risk-free, the pricing is transparent, and the results are documented to withstand IRS scrutiny.
Get your free R&D tax credit assessment today and discover what your cloud infrastructure, AI development, and software engineering work could be worth in federal tax credits. No cost to find out. Complete transparency before you make any decisions. Don’t spend another year wondering what you’re leaving on the table.
