United States: Reviews and audits | Research Credit Integrity Alliance

This page describes how the IRS selects and reviews returns and refund claims that include the federal research credit. It sets out what the IRS and the statute say. It does not describe the outcome of any particular review.

How returns are selected

The IRS describes several ways it selects returns for audit:1

Random selection and computer screening. Some returns are selected solely on a statistical formula that compares a return against norms for similar returns. The IRS develops these norms from audits of a statistically valid random sample of returns under its National Research Program.
Related examinations. A return may be selected when it involves issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected.

The IRS also says that amended returns go through a screening process and may be selected for audit, and that a refund is not necessarily a trigger for an audit.1 An audit begins with a letter: the IRS states that it notifies taxpayers by mail and will not start an audit by telephone. Audits are carried out by mail or by interview, either at an IRS office or at the taxpayer's premises or representative's office.1

Review of research credit refund claims

Research credit refund claims go through an additional check for validity before any review of the merits. The IRS states that it reviews each research credit refund claim to decide whether it is valid.2

Stage	What the IRS says happens
Who reviews validity	For taxpayers not under examination, campus employees review the claim for the required information, with a group of subject matter experts and Division Counsel. For taxpayers under examination, the field examiner does so.2
What is checked	Whether the claim includes the required information on business components, research activities and expense totals.2
If information is missing	During the transition period, which the IRS says runs through 10 January 2027, Letter 6426C or 6428 is sent, allowing 45 days to perfect the claim. Otherwise the entire claim is rejected.2
Timing	The IRS will make every attempt to determine research credit refund claims within 6 months of receipt.2
Large refunds	The validity procedures are the same for claims above the Joint Committee threshold.2

The IRS has explained why it introduced these requirements. In its words, it receives "thousands of IRC Section 41 research credit claims for refund in the hundreds of millions of dollars" each year, and these claims "are currently examined in a substantial number of cases and consume significant resources for both the IRS and taxpayers". The information lets it decide whether a claim should be paid immediately or reviewed further.3

A claim that passes the validity check may still be examined on its merits. Names of individuals and the information they sought to discover, which are no longer required when the claim is filed, may be requested if the claim is selected for examination.4

Large refunds and the Joint Committee on Taxation

No refund or credit of income tax above $2,000,000, or $5,000,000 for a C corporation, may be made until 30 days after the Treasury has sent a report on it to the Joint Committee on Taxation. The report gives the name of the recipient, the amount and a summary of the facts and the decision.5

Large business compliance campaigns

The IRS Large Business and International division (LB&I) runs compliance campaigns on selected issues. Its Research Issues campaign addressed research credit and research and experimental expenditure issues, which the IRS described as "some of the most prevalent tax issues within Large Business and International, utilizing significant examination and taxpayer resources". The treatment streams included issue-based examinations, form updates and requests for guidance.6 On the IRS page last updated on 28 September 2026, the Research Issues campaign is listed among campaigns not currently active.6

How an examination proceeds

To check the correctness of a return, the IRS may examine any books, papers, records or other data that may be relevant, and may summon the taxpayer, its officers or employees, or others to appear and give testimony.7 The IRS gives the taxpayer a written request for the specific documents it wants to see.1

The IRS's audit techniques guide on qualified research tells examiners that the burden is on the taxpayer to establish that all the requirements of section 41(d)(1) have been met. It suggests the examiner start by requesting a list of each qualifying project or activity with a full description and the business component it relates to, and use interviews to supplement and corroborate the records.8 The guide carries a publication date of June 2005 and says it is current only through that date.8

A taxpayer claiming the credit must keep records in sufficiently usable form and detail to substantiate that the expenditures claimed are eligible.9

How long the IRS has

In general, tax must be assessed within 3 years after the return was filed.10 Longer periods apply in some cases. Tax may be assessed at any time where a return is false or fraudulent with the intent to evade tax. The period is 6 years where the taxpayer omits from gross income an amount that is more than 25 percent of the gross income stated in the return. The period can also be extended by written agreement between the IRS and the taxpayer made before it expires.10 If the IRS makes an erroneous refund, the United States can sue to recover it within 2 years after the refund was made, or within 5 years if any part of the refund was induced by fraud or misrepresentation of a material fact.1112 A taxpayer generally has 3 years from the time the return was filed, or 2 years from the time the tax was paid, whichever is later, to file a claim for refund.13 What happens when a business disagrees with the result of a review is covered on United States: Disputes and appeals.

Sources

Internal Revenue Service, IRS audits, sections on selection methods, notification, how audits are conducted and records (page last reviewed or updated 17 February 2026). https://www.irs.gov/businesses/small-businesses-self-employed/irs-audits (accessed 11 October 2026). Back
Internal Revenue Service, Research credit claims (Section 41) on amended returns frequently asked questions, introduction and questions 3 to 7 and 16 (page last reviewed or updated 1 October 2026). https://www.irs.gov/businesses/corporations/research-credit-claims-section-41-on-amended-returns-frequently-asked-questions (accessed 11 October 2026). Back
Internal Revenue Service, Required information for a valid research credit claim for refund, paragraphs 2 and 3 (page last reviewed or updated 27 September 2026). https://www.irs.gov/businesses/required-information-for-a-valid-research-credit-claim-for-refund (accessed 11 October 2026). Back
Internal Revenue Service, Research credit claims (Section 41) on amended returns frequently asked questions, question 21 (page last reviewed or updated 1 October 2026). https://www.irs.gov/businesses/corporations/research-credit-claims-section-41-on-amended-returns-frequently-asked-questions (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6405, Reports of refunds and credits, subsection (a), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap65-subchapA-sec6405.htm (accessed 11 October 2026). Back
Internal Revenue Service, LB&I not currently active campaigns, "Research issues" (page last reviewed or updated 28 September 2026). https://www.irs.gov/businesses/corporations/lbi-not-currently-active-campaigns (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 7602, Examination of books and witnesses, subsection (a), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap78-subchapA-sec7602.htm (accessed 11 October 2026). Back
Internal Revenue Service, Audit techniques guide: Credit for Increasing Research Activities (i.e. Research Tax Credit) IRC 41, Qualified research activities, publication note and chapter 5 (publication date June 2005). https://www.irs.gov/businesses/audit-techniques-guide-credit-for-increasing-research-activities-ie-research-tax-credit-irc-ss-41-qualified-research-activities (accessed 11 October 2026). Back
Treasury Department and Internal Revenue Service, 26 CFR 1.41-4, Qualified research for expenditures paid or incurred in taxable years ending on or after December 31, 2003, paragraph (d). https://www.ecfr.gov/current/title-26/section-1.41-4 (accessed 11 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6501, Limitations on assessment and collection, subsections (a), (c)(1), (c)(4) and (e)(1)(A), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap66-subchapA-sec6501.htm (accessed 17 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 7405, Action for recovery of erroneous refunds, subsections (a), (b) and (d), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap76-subchapA-sec7405.htm (accessed 17 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6532, Periods of limitation on suits, subsection (b), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap66-subchapD-sec6532.htm (accessed 17 October 2026). Back
Office of the Law Revision Counsel, 26 U.S.C. 6511, Limitations on credit or refund, subsection (a), United States Code 2024 edition published by the Government Publishing Office. https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleF-chap66-subchapB-sec6511.htm (accessed 11 October 2026). Back