The credit depends on what you can prove. Teams do the technical work, but claims fail when records are thin or hard to follow. A simple process fixes this. Capture time by project, link it to evidence, and keep a file that a reviewer can read without a meeting. Offshore support can run much of the routine work while you keep control of scope and judgments.
What the R&D credit looks for
Reviewers look for qualified projects, qualified activities, and qualified costs. Projects must try to resolve uncertainty with a technical approach. Activities should include planning, design, prototyping, and testing that move the project forward. Costs usually include wages for staff who do or direct the work, some contractor spend, supplies used in development, and certain cloud costs when they support testing or development. The process below turns these ideas into steady records.
Set scope and owners before you start
Choose who will lead the claim. Give technical managers responsibility for project lists and milestones. Give finance responsibility for costs and tie-outs. Give an offshore coordinator responsibility for gathering files, checking formats, and keeping the calendar. This split keeps judgments with your team and sends repeatable tasks to support staff who work from a playbook.
Design a time-tracking model that people will use
Time-tracking fails when codes change often or descriptions are vague. A good model is simple and stable across the year. Each engineer or scientist records hours to a single project code for the week. Each code maps to a project name, a short goal, and a stage such as design, prototype, or test. Add one code for non-R&D so hours outside the claim do not mix with the project.
Project codes and activity types
Use clear names such as “Mobile app sync engine” or “Thermal test rig v2.” For each code, define which activities count for the credit. Design, modeling, code changes, lab setup, test runs, and analysis often qualify. Routine bug fixes, UI polish, and nontechnical admin usually do not. Put this rule in one page that sits next to the timesheet so entries stay clean.
Capturing time and reviews
Ask staff to log time weekly. A weekly habit is easier to recall than a month-end rush. A technical lead reviews entries at the end of the week and leaves short notes when an entry looks out of scope. Offshore staff check for missing entries and follow up. This two-step review keeps quality high without long meetings.
Contractors and vendors
If you use contractors, ask them to track hours to your codes and to describe the work. Store statements of work and invoices with the same code. If a vendor runs tests, collect test reports on the same day you receive the invoice. These links help you prove both activity and cost in one place.
Build the substantiation file as you go
Do not wait until year end to gather evidence. Store files as the work happens. For software, this means design notes, tickets, sprint plans, pull requests, and test results. For hardware, store drawings, lab notes, photos, and test logs. For data science, keep model notes, sample sets, and error analysis. A short summary per project should state the problem, approach, tests run, and outcome. Keep the summary at the top of the project folder so a reviewer understands context before opening the raw files.
Link evidence to costs
Tie wage reports to timesheets. Tie contractor invoices to codes. Tie supply and cloud invoices to the project that used them. If a cost supports more than one project, write the split and the reason in a short note. Finance keeps a master list that shows each cost line, the project code, and the path to the file that proves it.
Run a monthly cadence that never slips
Pick one week each month for R&D housekeeping. Staff finish timesheets. Technical leads approve. Offshore staff check completeness, rename files to the standard, and file them. Finance pulls payroll and accounts payable exports and updates the cost list. Hold a 20 minute review to clear gaps. This cadence turns a year-end scramble into routine upkeep.
Keep quality controls light and real
Make controls visible and short. Require unique logins for time systems. Lock project codes after approval so they do not drift. Track who changed a code name and when. Keep maker and checker roles for timesheet approval and cost mapping. Review access lists each quarter and remove anyone who no longer works on R&D.
Protect privacy and security
Store files in a secure drive with role-based access. Limit who can see payroll detail. If you share work with offshore teams, restrict access to only the folders they need. Use multi-factor login. Avoid sending raw data by email when a secure link is available. These basics protect staff data and client data while you build the claim.
Templates that make work simple
A few templates remove guesswork. A project charter template captures goal, uncertainty, technical approach, and milestones. A weekly timesheet template captures date, project code, hours, and a short activity note. An experiment summary template captures the test, the result, and next steps. A cost mapping sheet lists payroll lines, vendor invoices, and links to evidence. Keep these files in a “Templates” folder and version them once a year.
Calculating the credit with clean inputs
When records are steady, the calculation is straightforward. Finance totals qualified wages by person from the time system. Finance totals qualified contractor costs from invoices tied to R&D project codes. Finance totals supplies and cloud spend that support testing and development. With these inputs ready, you can run the chosen credit method and prepare the forms without guessing. If a reviewer asks for support, you point to the same file paths used to build the totals.
Offshore support that does not add risk
Offshore teams handle routine steps well when the playbook is clear. They collect weekly timesheets, check formats, rename files, and file them by project and date. They request missing evidence from project owners. They update the cost mapping sheet and flag items that do not match a code. Onshore leaders keep decisions on scope, eligibility, and final amounts. This split gives you speed and cost control without losing judgment.
A simple year on year process
Start each year by rolling forward project codes that will continue and archiving those that ended. Train new staff for 30 minutes on the codes and the weekly habit. Check the first two weeks closely, then move to spot checks. Midyear, review totals by project and compare to the plan. If a project stops early, mark it closed so time does not drift to a dead code. At year end, export final reports and lock the folders.
Common problems and how to fix them
Time logged in big blocks to “R&D” hides what happened. Fix this by enforcing project codes and weekly notes. Evidence scattered across chats and drives wastes time. Fix this by filing in the project folder on the same day. Costs mapped without links cause rework. Fix this by adding the file path for every cost line when you record it. Claims that include nontechnical work draw questions. Fix this by training staff on what counts and by having leads review weekly.
How to make reviews quick
A reviewer needs a clean index. Put a one-page index at the top of the claim folder. It lists projects, codes, owners, total hours, and total costs. Each project line links to the summary and then to raw files. Each cost category links to a report and then to invoices or payroll detail. With this index in place, most reviews become short and direct.
What good looks like
A good file shows a small set of active projects with clear goals. Timesheets are complete and approved each week. Evidence sits in project folders with dates. Costs tie to projects with links. The monthly log shows gaps found and closed. The annual total matches the reports you saved during the year. No one needs to rebuild the story at the last minute.
Conclusion
The R&D tax credit rewards real technical work, but only when you can show it with simple, current records. A steady documentation process makes that easy. Track time by project each week. Store design notes and test results as you go. Map costs to codes with links. Use offshore support to gather files and keep the calendar, while your team sets scope and decides what counts. With this approach, your claim is clear, your audit risk drops, and your engineers spend less time digging for old files.
