R&D Tax Credit Filers: IRS Releases Streamlined Form 6765

The IRS has released a revised draft of Form 6765, also known as the Credit for Increasing Research Activities form.

What’s New?

The IRS listened to taxpayer feedback on the initial proposed form and made significant changes to reduce the burden of claiming the research credit. Here are the key improvements:

• Simplified Section G: Section G, which details business components, is now optional for certain filers.
  • This includes “qualified small businesses” claiming the reduced payroll tax credit.
  • Taxpayers with total qualified research expenditures (QREs) equal to or less than $1.5 million, determined at the control group level, and equal to or less than $50 million of gross receipts, as determined under section 448(c)(3) (without regard to subparagraph (A) thereof), claiming a research credit on an original filed return.
  • There are special instructions for taxpayers using the ASC 730 directive who can report ASC 730 QREs as a single line item on Section G.
• Reduced Reporting Requirements: Even for those still required to fill out Section G, the number of reported business components has been brought down. Companies will now report 80% of their total qualified research expenditures (QREs) in descending order of amount, with a maximum of 50 business components.
  • The IRS simplified reporting for individual business components in Section G. Businesses don’t have to specify if a component is new or improved, how it’s used (sale, license, lease), or provide a detailed explanation of the information they were trying to find.
• Clearer Instructions: The IRS promises additional clarification in the final instructions for terms like “officers,” “controlled group reporting,” and business component names.

What This Means for You

If your company conducts research activities, this revised form should make claiming the credit a smoother process. The reduced reporting burden, particularly for smaller businesses, is a big win. However, it’s important to note that this is still a draft form.

Here are some next steps:

• Review the Draft Form: Familiarize yourself with the changes on the IRS website IRS Form 6765.
• Stay Updated on Final Form: The final version of Form 6765, along with the official instructions, is expected to be released later this year. Keep an eye on the IRS website for updates. To ease the transition, completing Section G is optional for everyone filing in 2024 (processed in 2025). This gives both businesses and the IRS a year to get used to the new format before it becomes mandatory.
• Consult with Finvisor: While the form is simplified, research credits can be complex. Finvisor can ensure you’re claiming the credit accurately.By taking advantage of the research credit, companies can get valuable tax relief and invest more in innovation.