When VP of Tax Karin Barratt started at Octane (Octane Lending, Inc.) in 2021, she realized the company had never claimed the R&D Tax Credit. “I was like, ‘Wow! What we’re doing here definitely qualifies,” she tells us.
As the credit could lower Octane’s effective tax rate, it seemed worth their while.
So, Karin got in contact with a firm who did a look-back credit. But as she watched the process, the whole thing began to feel flimsy. Much of the filing was based on time-consuming interviews with engineers, who were asked to estimate the percentage of their time that was spent on R&D quarters or years before. Most of the time, they guessed that 100% of their work was spent on R&D.
Last year, Octane instead used Neo.Tax to claim their R&D tax credit. The process saved time and stress for Karin and the engineers by linking directly to their contemporaneous Jira data, which delivered an audit-proof filing that took weeks instead of months.
“If you look at the engineers’ calendars, it’s crazy. They’re booked every hour. They’re too resource constrained to be doing the R&D study. And they have more important things to focus on.”
The Problem:
In the years since that first look-back credit, things had not gotten simpler for Karin. The R&D credit filing process still felt inexact, and it was extremely burdensome for the extremely busy engineering team.
“I spent the whole summer trying to make something out of nothing,” Karin explains. She would ask the engineers to export all the issues of Jira, and then try to allocate their time on an issue by issue basis. “Then I had to take all those issues from Jira and try to roll them up into business components.”
“I’m not an engineer and the engineers are so busy,” she continues. “And then at that point you're like, ‘Well, does this make sense?’ So you’re going back and taking more of the engineers’ time.”
In 2024, a Big 4 firm recommended that Octane do an R&D Study to make sure there weren’t any Uncertain Tax Positions (UTP). “I wasn’t really that happy with the first study that we did. It happened a year after the engineers had already done the work. It was not based on contemporaneous documentation,” she remembers thinking. “I was like, ‘There has to be another way to do this.’”
The Neo.Tax Solution:
So, last year, Karin got in touch with Neo.Tax, with the goal of reducing the burden on her engineering team while filing a credit that could stand up to an audit by the IRS.
Neo.Tax’s AI connected seamlessly with Octane’s Jira data and delivered an R&D Credit filing based completely on contemporaneous data. “Without contemporaneous data, everyone’s playing Russian roulette,” Karin says. “So I think it’s just super, super important.”
“Everybody puts their returns on extension. It’s summer and you’re going back to the engineers and asking them what they did the prior year,” she continues. “Who’s going to remember?”
Now, everything was automatically uploaded from the Jira data the engineers had created as they worked on the projects throughout the year. There were no more calls to ask managers to export and sort Jira data, no more followups asking for estimates, and no more back-and-forths on what does or does not qualify based on the 4-Part Test. Switching to Neo.Tax saved massive amounts of time and stress for the engineers.
“If you look at the engineers’ calendars, it’s crazy. They’re booked every hour,” Karin says. “They’re too resource constrained to be doing the R&D study. And they have more important things to focus on.”
“On a scale of 1 through 10, the burden on the engineers was an eight or a nine,” she says. “Now I really feel like it’s a three.”
A More Exact Filing For A More Exacting IRS:
What had taken a whole summer now takes a few weeks. She’d prepared herself for a time-consuming onboarding process, but Karin — who continually stresses that she’s “not a tech person” — managed to master Neo.Tax’s software in no time.
“Even with the implementation and the time spent learning how to use the software, filing this first year took at least 50% less time,” she says.
But it’s the years going forward that Karin is most excited about. The IRS has changed the R&D credit filing process, asking taxpayers to list each and every qualified business component on the new Form 6765 Section G.
“For this year’s R&D Tax Credit form, you only had to put in the number of business components. Next year, you’re going to have to actually write out each business component,” Karin says. “I don’t know how people are going to do that without software.”
With Neo.Tax, she already has a system that groups all of Octane’s Jira data into business components and explains, in clear language, why or why not each qualifies for the credit. “It connects to Jira, so it’s happening contemporaneously, and then the AI buckets everything into business components,” she says. “It makes sense and it just simplified the whole process.
“I've been through a lot of software where they promise the world and you’re never really satisfied with it,” Karin continues. “But I have to say: I really don’t have anything negative to say about Neo.Tax. I’m super, super happy.”
