April 15 feels like the finish line.
Returns filed. Extensions submitted. Everyone exhales and moves on.
But the decisions that shape a business’s tax position aren’t made in April. They’re made in the critical months leading up to it. Or they’re not made at all.
And that’s often where costly mistakes happen.
This article covers the three specialty tax areas most often missed due to timing rather than eligibility: R&D tax credits, cost segregation, and the Section 179D deduction. It also covers what audit readiness means in practice, and what CPA firms should be doing right now in Q2.
In this article:
- Filing Season Is Reporting. Not Strategy.
- What Gets Missed: R&D Credits, Cost Segregation, 179D, and Tax Credit Transfer
- The Audit Reality Most Firms Don’t Talk About
- What to Do Right Now: Q2 Is the Planning Window
- How Tri-Merit Works with CPA Firms
- FAQ
Filing Season Is Reporting. Not Strategy.
Filing season is a reporting exercise. By the time a return is submitted, the choices that shaped it were already made, or missed, over the prior twelve months.
Most specialty tax opportunities don’t get missed because a business doesn’t qualify.
It’s not a lack of eligibility; it’s timing.
The documentation wasn’t built during the year. The study wasn’t commissioned when the property was acquired. The conversation happened in April, not June.
When that happens, there are two outcomes: the opportunity is lost, or it’s reconstructed. Reconstruction is always harder to defend.
If the documentation didn’t exist during the year, you’re already on defense.
This is the starting point for every audit conversation Tri-Merit has, and the reason acting early in Q2 is urgent for every firm.
What Gets Missed: R&D Credits, Cost Segregation, 179D, and Tax Credit Transfer
R&D Tax Credit Documentation: The Real Issue in 2026
The R&D tax credit is one of the most valuable federal incentives available to U.S. businesses. It’s also one of the most under-documented.
The common assumption is that R&D credits apply to formal research environments: dedicated labs, patent filings, scientists in white coats. That’s not how the credit is defined under Section 41.
To qualify, a business component must satisfy four criteria: the activity must be technological in nature, it must have a permitted purpose of developing or improving a product or process, there must be technical uncertainty about how to achieve the result, and the company must conduct a process of experimentation to resolve that uncertainty.
That standard applies to manufacturers developing new tooling, engineering firms evaluating design alternatives, software teams building custom architectures, and food producers testing new formulations. Most of this work qualifies. Most of it isn’t tracked for credit purposes.
Cost Segregation: A Timing Conversation First
Cost segregation is an engineering analysis of how a building’s components depreciate. Without it, commercial real estate is typically depreciated over 39 years as a single asset. With it, components that qualify as personal property or land improvements can be depreciated over 5, 7, or 15 years instead.
That acceleration of deductions significantly improves near-term cash flow.
The study should happen as close to the triggering event as possible: a building acquisition, new construction placed in service, or a major renovation or leasehold improvement.
With bonus depreciation fully restored in 2026, the value of identifying short-life assets is higher than it’s been in years. A well-timed study can produce substantial first-year deductions that a standard straight-line approach leaves on the table for decades.
If no one has reviewed the property promptly, major deductions may be lost, and every week of delay makes recovery harder.
Section 179D: Still Available, Still Valuable…But the Clock Is Running
Section 179D remains fully available for eligible projects and continues to offer significant value, particularly given the increased deduction amounts in recent years.
The deduction applies to energy-efficient improvements in commercial buildings: HVAC systems, lighting, and building envelope upgrades. Deduction amounts vary based on whether prevailing wage and apprenticeship requirements are met and can be substantial on larger commercial properties.
The deduction is available to commercial building owners and to designers, specifically architects, engineers, and contractors working on government-owned buildings. The designer eligibility category is frequently missed.
Lookback provision: Work already completed can still be evaluated and claimed. That window does not close on June 30. What closes is eligibility for new projects that haven’t yet broken ground.
Most missed 179D opportunities fall into two categories: projects that have already occurred without proper review, and projects currently in progress that have not yet started the certification process. Both are still addressable — but the second category has a hard deadline.
Tax Credit Transfer: The Overlooked Option
One area that remains underutilized is tax credit transfer.
Even if a client doesn’t directly qualify for certain credits, the ability to purchase credits generated by other taxpayers is still available and can create immediate value for the 2025 tax year.
This option is often missed simply because it’s not part of the standard tax conversation.
For firms working with clients who have tax liability but limited access to traditional incentives, it’s worth evaluating whether credit transfer should be part of the strategy.
Under IRC Section 6418, certain energy tax credits are transferable. Businesses that generate eligible credits through qualifying energy projects (but can’t fully use them against their own tax liability) can sell those credits to unrelated buyers in exchange for cash. The buyer receives a dollar-for-dollar reduction in federal tax liability. The seller converts credits they couldn’t otherwise monetize into immediate liquidity.
For the 2025 tax year, the transfer market is active, and the opportunity is real on both sides:
- Sellers: Businesses with qualifying energy projects that generate more credit than they can absorb have a mechanism to monetize those credits rather than carry them forward.
- Buyers: Profitable businesses with federal tax liability can reduce their liability by purchasing credits without owning or operating an energy project.
This option is consistently overlooked by both CPA firms and their clients. It doesn’t require a new project or new activity on the buyer’s side. It requires knowing the market exists, understanding which credits are eligible, and working with someone who can validate eligibility and structure the transaction correctly.
The Audit Reality Most Firms Don’t Talk About
The typical specialty tax conversation goes like this: ” Here’s the credit, here’s the cash flow benefit.
That’s not the full picture.
What “Audit-Ready” Actually Means
Audit-ready isn’t a descriptor. It’s a standard.
It means the methodology is documented. The connection between people, activities, and costs exists on paper and is built during the year it’s claimed. Not summarized after the fact.
The IRS is not reviewing math. When a credit is examined, reviewers look at whether there’s a clear definition of qualifying activities, whether contemporaneous records exist to support those activities, and whether there’s a documented connection between time, wages, and the technical uncertainty being resolved.
When that structure wasn’t built in real time, the position became much harder to defend. That’s not hypothetical. It’s the most common pattern in challenged R&D credits.
What Gets Challenged First
When the IRS reviews an R&D credit claim, it doesn’t start with the calculation.
They’re looking at documentation gaps where activities were described in general rather than specifically. They’re looking for missing contemporaneous records: no project logs, no employee time allocation, no technical write-ups from the period. And they’re looking at whether costs tied to the credit have a clear line back to qualifying work.
This is what gets challenged first. And it’s where most studies fall apart. Not in the calculation. In the substantiation.
A number without a defensible methodology isn’t a credit. It’s an exposure.
What to Do Right Now: Q2 Is the Planning Window
Filing season is done. Bandwidth opens. This is the most underused planning window in specialty tax.
By Q4, setting up documentation for the current year is a harder, more expensive conversation. The earlier these frameworks are in place, the cleaner the position at year-end.
Three Questions Worth Asking Before June
- Did any clients build, acquire, or renovate commercial property recently?
- Are they solving technical problems as part of normal operations — new processes, new products, defect troubleshooting, design iteration?
- Did they complete energy-efficient improvements to a commercial building in the last two years?
These questions reveal the most common qualifying scenarios. You don’t need to know the credit details, just when to involve the right support.
What “Setting It Up Correctly” Looks Like
Identify qualifying activities before year-end. Set up a documentation framework now. Act early, not later, for a defensible credit position.
The goal isn’t to manufacture a position. It’s to build support for one that already exists.
How Tri-Merit Works with CPA Firms
The CPA relationship stays intact. That’s not a talking point. It’s how the work actually runs.
We come in as technical support: scoping the incentive, documenting the activities, and substantiating the position. The CPA firm stays in the loop throughout. If the position gets reviewed, we’re part of that process.
We don’t mass-produce studies. And we don’t hand off the report and disappear.
We scope the work, document it properly, and substantiate the position. We’ll tell you if it holds up. And if it doesn’t, we’ll tell you that too.
That’s the difference between a number and a defensible position.
Frequently Asked Questions
- When should R&D documentation start? At the beginning of the tax year, or as early as possible in the project lifecycle. Documentation built during the year is significantly more defensible than records reconstructed after the fact. The IRS expects contemporaneous support, meaning records that existed at the time the work was performed.
- What is the four-part test for the R&D tax credit? The four-part test requires that the activity is technological in nature, relying on principles of physical science, engineering, computer science, or a biological science; has a permitted purpose of developing or improving a business component; involves technical uncertainty about how to achieve the desired result; and involves a process of experimentation to resolve that uncertainty. Meeting all four parts is required for an activity to qualify.
- What changed about R&D credit reporting requirements in 2026? Starting with the 2026 tax year, the IRS requires project-level reporting of qualified research expenses rather than summary totals. Wages must be broken down by role type — direct research, supervision, and support. This is a significant increase in disclosure requirements, making project-level contemporaneous documentation more critical than ever.
- When is the best time to commission a cost segregation study? As close to the triggering event as possible: property acquisition, completion of new construction, or a significant renovation. Earlier timing allows for a cleaner analysis and maximum benefit. With bonus depreciation fully restored in 2026, the first-year impact of identifying short-life assets is substantial. Studies can be done retroactively, but the process becomes more complex.
- Who qualifies for the Section 179D deduction? Commercial building owners who have made qualifying energy-efficient improvements to HVAC, lighting, or the building envelope. Also, designers — including architects, engineers, and contractors — who worked on energy-efficient improvements to government-owned buildings. Deduction amounts vary based on whether prevailing wage and apprenticeship requirements are met.
- What is a tax credit transfer, and who can participate? Under IRC Section 6418, certain energy tax credits can be transferred from the business that generated them to an unrelated buyer in exchange for cash. Sellers are typically businesses with qualifying energy projects whose credits exceed their own tax liability. Buyers are typically profitable businesses looking to reduce their federal tax liability without owning or operating an energy project. The transfer market for the 2025 tax year is active and is one of the most overlooked planning opportunities in specialty tax. Tri-Merit works with both sellers and buyers to validate eligibility, document the credit, and support the transfer process.
- What happens if documentation isn’t in place during the year? The position becomes harder to defend. In many cases, this is the primary reason R&D credits are challenged or reduced during an examination. The IRS expects to see records that connect people, activities, and costs in a way that was built contemporaneously, not assembled after the fact. Reconstruction is possible but carries significantly more risk.
- What does an audit-ready R&D tax credit study look like? A defensible study includes activity-by-activity documentation of qualifying research; employee interview records or equivalent contemporaneous records; the four-part test applied to each qualifying business component; qualified research expense breakdowns with wages categorized by role; and a clear methodology connecting all of the above. A study that provides only a summary calculation and a credit amount is not audit-ready, regardless of how the number was derived.
- How does Tri-Merit work with CPA firms? Tri-Merit functions as technical support alongside the CPA engagement. The CPA maintains the client relationship. Tri-Merit scopes the qualifying activity, builds the documentation framework, and substantiates the position. If the credit is reviewed, Tri-Merit is part of that process. The firm does not mass-produce studies or hand off reports without ongoing support.
The Work That Happens After April 15
April isn’t where specialty tax outcomes are decided. It’s where the results show up.
R&D credit documentation that wasn’t built during the year doesn’t become defensible by filing it. Cost segregation that wasn’t commissioned when a property was acquired doesn’t recover the first-year benefit. 179D deductions on projects that have already closed without a study require reconstruction.
Q2 is when the groundwork for the current year’s positions can still be set up correctly. That window is open now.
If you’re working with clients who have a qualifying activity and no structure in place, that’s where this conversation starts.
