Section 174 Compliance Services for Software, AI, and Engineering Companies
The Section 174 capitalization rules fundamentally changed how companies treat research and development expenses for tax purposes.
We help engineering-driven companies identify, document, calculate, and maintain compliance with Section 174 requirements while minimizing risk and reducing operational burden.
What Is Section 174 Compliance?
Section 174 compliance refers to the process of identifying, documenting, capitalizing, and amortizing research and experimental expenditures in accordance with current IRS requirements.
Beginning with tax years after December 31, 2021, companies are generally required to capitalize and amortize qualifying research expenditures instead of deducting them immediately.
For many companies, this has created entirely new compliance responsibilities.
These responsibilities often include:
- Identifying Section 174 expenses
- Allocating engineering payroll
- Tracking contractor costs
- Maintaining supporting documentation
- Preparing amortization schedules
- Coordinating with tax advisors and CPAs
Why Section 174 Compliance Matters
For many companies, Section 174 compliance has become one of the largest tax-related operational challenges affecting engineering organizations.
Failure to properly comply may result in:
- Incorrect tax filings
- Increased audit risk
- Misstated taxable income
- Lost tax planning opportunities
- Future filing corrections and amendments
For growing companies, building a repeatable compliance process early often creates substantial long-term value.
Who Is Affected by Section 174?
Many companies are surprised to discover they are affected.
Industries commonly impacted include:
- SaaS companies
- Software development businesses
- Artificial intelligence startups
- Engineering firms
- Manufacturing companies
- Aerospace companies
- Renewable energy companies
- Construction technology firms
The common factor is not industry.
The common factor is technical development activity.
Driving Growth Through Strategic Clarity
Common Section 174 Expenses
Engineering Payroll
Contractor Costs
Internal Software Development
Product Development Costs
Research Activities
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Section 174 Compliance Challenges
Identifying Qualified Activities
Engineering teams often perform a mixture of qualifying and non-qualifying activities.
Time Allocation
Many employees contribute to multiple projects simultaneously.
Documentation
Most companies lack contemporaneous documentation systems for R&D activities.
Remote Teams
Distributed engineering organizations create allocation complexity.
Changing Guidance
The rules continue to evolve through IRS guidance and legislative discussions.
Why Companies Choose Us
At our company, every project begins with a deep understanding of your unique needs. We believe that a successful partnership is built on transparent communication, collaborative innovation, and a methodical approach that transforms challenges into measurable results.
CPA-Led Expertise
Engineering Focus
Flat Fee Pricing
Defensibility First
High-Touch Engagement
Flat fee vs. contingency pricing
Two common ways R&D credit studies get priced — and why the structure you choose affects far more than the invoice.
| Category | Flat fee model | Contingency model |
|---|---|---|
| Pricing predictability | Yes | No |
| Fee increases with credit size | No | Yes |
| Alignment around defensibility | High | Variable |
| Long-term cost efficiency | High | Lower |
| Upfront cost | Higher | Lower |
Most federal studies are completed for a flat fee of approximately $10,000, allowing clients to retain the full value of increasing credits as they scale.
Detailed breakdown of qualifying expenditures.
Domestic and foreign schedules prepared for tax filing purposes.
Documentation supporting assumptions and allocation methodologies.
Collaboration with internal finance teams and external tax advisors.
FAQ
Is Section 174 compliance mandatory?
Yes. For companies with qualifying expenditures, compliance is generally required.
Are software developers included?
Yes. Software development activities frequently fall within Section 174.
Does remote work change the rules?
No, but employee location can affect allocation calculations.
Can startups be affected?
Absolutely. Early-stage technology companies are often heavily impacted.
Is Section 174 expected to be repealed?
There have been multiple legislative discussions, but companies should currently plan based on existing law.
Can you help if our CPA handles our tax return?
Yes. We regularly work alongside external CPA firms and internal accounting teams.
Expert Strategies, Industry Trends & Real Results
Find Out Whether Your Company Qualifies
Schedule a discovery call to determine eligibility and receive a preliminary estimate of your opportunity.