1
Identify business components
Tickets, epics, and initiatives become a normalized list of qualified projects — without an interview.
R&D METHODOLOGY
How Neo.Tax computes the
How Neo.Tax computes the
R&D credit, end to end.
A transparent walkthrough of the engine behind every Neo.Tax R&D study — written for tax operators, auditors, and the engineering leaders whose work we’re measuring. Every number on the return ties back to a ticket, a person, and a defensible interpretation of §41.
2
Qualify against the four-part test
Each project is scored on technical nature, qualified purpose, technical uncertainty, and process of experimentation.
3
Allocate effort, ticket-by-ticket
Wages flow to qualified work via real activity — never surveys or top-down estimates.
Step 01
Business components,
identified from real work.
Every credit claim begins with a credible list of qualified projects. Neo.Tax builds that list from the work your engineers already do — tickets, epics, initiatives, pull requests — never a year-end survey.
How it works
- Tickets and related metadata are pulled from your source systems and clustered into a complete list of qualified and non-qualified projects.
- Project hierarchy — epics, initiatives, etc. — plus deep-learning models that group similar tickets by language and content.
- Numerical representations match tickets to projects consistently and without interview bias.
Rich data ingestion and QA
- Ingest ticket titles, descriptions, dates, assignees, teams, and hierarchy.
- Normalize user information, team assignments, and project involvement.
- Clean duplicates and noise; validate to confirm tickets are accounted for and evaluated at the appropriate level of granularity.
R&D Projects
Auto-clustered
- ✓ Finance Web UI/UX Homepage Capitalizable
- ✓ Enterprise Finance Cloud Capitalizable
- − Miscellaneous Work Not Capitalizable
Step 02
The four-part test,
applied uniformly.
Each project is evaluated against IRS §41’s four-part test using project summaries and ticket-level details. Decisions are made consistently — the same evidence produces the same answer every time.
1
Technical in nature
Checks ticket content and code activity to determine whether substantially all project activities are technical.
2
Qualified purpose
Tests project purpose against tax rules. Internal-use software projects receive additional scrutiny; mixed-signal projects are flagged for export review.
3
Technical uncertainty
Identifies documented technical uncertainties and the work performed to resolve them.
4
Process of experimentation
Looks for iterative development, testing, experimentation, and systematic approaches to resolving uncertainties.
Projects with ambiguous status are surfaced for human review, with all decisions recorded in the audit trail.
PROJECT · R&D DETAILS
Step 03
Allocation tied to
actual work.
Instead of estimates, surveys, or time sheets, Neo.Tax uses ticket data to allocate R&D effort bottom-up from actual work. Title-based and self-reported approaches are intentionally avoided.
The approach
- Relies on contemporaneous records.
- Applies a consistent, repeatable methodology.
- Maintains a traceable line from raw tickets to final R&D allocation.
EMPLOYEES · ALLOCATION TRAIL
Step 04
Effort calculation
in two passes.
1
Effort for each task
- Use start, progress, review, and completion timestamps.
- Adjust for task type and complexity.
- Normalize for individual work patterns and different working styles.
2
Effort by project
- Aggregate effort across all tickets within a project.
- Compute each project’s share of total effort.
- Apply R&D qualification flags to determine the project’s qualified percentage.
The resulting R&D percent is the value shown in the R&D Report — Expenses by Project (Credit) sheet and the Wages page in the application.
i
Verification
Auditors can reproduce project percentages using a standard pivot table on the Tickets-by-Project export and expect only minor rounding differences.
Worked example
Following a single
engineer through the model.
JS
Jason Smith
Software Engineer · FY 2024
R&D Allocation
95%
PROJECTS WORKED IN FY 2024
We matched all tickets Jason worked on to a project and evaluated each project against the four-part test. Tickets that fell into qualified projects rolled into his R&D Effort Day count; tickets in non-qualified projects didn’t.
For each Effort Day, we then pulled data from the source system to create a date-stamped audit trail and calculated his Effort by counting active tickets on each day. We then applied his Effort percentage by project — ramping up scope, ranking ticket activity — and arrived at 95%.
ACTIVE TICKETS ON QUALIFIED PROJECTS
Raw timestamps
Adjusted (active days)
Frequently asked
Questions auditors ask first.
- How can I verify the calculation?
- All steps are transparent. Task-level efforts are visible in the Ticketing view, and project-level allocations can be reproduced from exports. The R&D percentage is the sum of qualified project percentages.
- What about people with very different ticket volumes?
- Normalization accounts for ticket volume and size. Someone with many small tickets and someone with a few large feature tickets receive allocations driven by worked effort, not ticket count.
- What about different job titles?
- The base model treats qualified technical work consistently based on task complexity and timing. Role-based adjustments can be layered on later if needed.
See the methodology applied to your data.
A 30-minute walkthrough on your own engineering activity. No surveys required.
Schedule a Demo