Fondo Core Workflow B: R&D Tax Credits

Overview

Claim R&D tax credits through Fondo. Startups with US W-2 employees doing qualifying R&D can offset up to $500,000/year in payroll taxes (FICA). Fondo's CPA team prepares the Form 6765 study.

Prerequisites

An authorized finance/tax owner, current professional guidance, complete source records, and a retention/access policy.
A reviewed scope for any calculator or export; this workflow does not determine eligibility or replace tax advice.

Instructions

Gather approved source evidence and classify activities/expenses for review without altering originals.
Use an opaque case identifier and aggregate counts for workflow tracking; keep payroll, tax, and employee records in authorized systems.
Reconcile inputs with the responsible finance professional, document assumptions and exceptions, and obtain sign-off before filing or payment actions.
Preserve an audit trail and follow the organization's retention and correction process for any discrepancy.

Output

Create a review receipt with period, case ID, source-system references, owner, open questions, professional-review status, and next action. Do not include employee, payroll, tax-return, or bank details.

Examples

Use a fictional project and aggregate cost buckets to exercise the evidence-collection checklist. Record unresolved classification questions for the finance reviewer and confirm no filing, calculation, or payroll action is generated from the test.

R&D Credit Calculation

Qualifying R&D Expenses:
  W-2 wages for R&D employees:        $480,000
  Contractor payments (65%):           $78,000
  Cloud compute (AWS/GCP):             $36,000
  Software tools for R&D:              $12,000
                                       --------
  Total Qualified Research Expenses:   $606,000

Credit Rate (Alternative Simplified):  ~6-8%
Estimated R&D Credit:                  ~$42,000

Qualifying Activities

Qualifies	Does NOT Qualify
Developing new software features	Routine maintenance/bug fixes
Improving existing algorithms	Marketing or sales activities
Building internal tools	Purchasing off-the-shelf software
API integrations requiring experimentation	Simple data entry or configuration
Machine learning model development	General management
Infrastructure automation	Accounting or legal work

Timeline

Month	Activity
Jan-Feb	Fondo collects prior year R&D data from payroll and expenses
Mar	CPA team interviews founders about qualifying activities
Apr	R&D credit study prepared, Form 6765 drafted
Apr 15	Filed with corporate tax return (or extension)
May-Jun	IRS processes credit, payroll tax offset begins

Payroll Tax Offset (Startups)

Eligibility for payroll tax offset (Section 41(h)):
  ✓ Less than $5M gross receipts in current year
  ✓ No gross receipts in any year before the 5-year period ending in current year
  ✓ Filed as election on Form 6765

Offset: Up to $250,000 per year against employer FICA (6.2%)
        Up to $250,000 per year against Medicare (1.45%)
        Total: Up to $500,000/year in payroll tax savings

Error Handling

Issue	Solution
Credit lower than expected	Review qualifying activity classifications with CPA
Missing contractor data	Upload 1099 forms to Fondo dashboard
Late filing	File extension (Form 7004) before April 15
IRS audit of R&D claim	Fondo provides audit defense documentation

Resources

Next Steps

For troubleshooting, see fondo-common-errors.

fondo-core-workflow-b