Understanding Significant Changes to the R&D Tax Credit Form

Understanding Significant Changes to the R&D Tax Credit Form

Posted by Jeffrey Feingold on 01.16.25

The rules surrounding R&D tax credits can be complicated and are continuously changing at the federal and state level. The IRS has recently proposed a change to Form 6765 - the form used to claim the R&D tax credit. This proposed change would introduce a new layer of complexity and require detailed project information to verify claims. IRS Federal Form 6765 is essential for claiming the Research and Development (R&D) Tax Credit, a vital incentive designed to encourage innovation and technological advancement in the United States. As businesses continue to evolve and compete in a global market, the R&D Tax Credit provides a significant opportunity for companies to offset some of the costs associated with their research and development activities. Starting with the tax year 2024, the form will reflect updated guidelines and specific criteria that taxpayers must adhere to in order to qualify for the credit, ensuring that businesses have a clear framework for claiming this benefit.

To qualify for the R&D Tax Credit, companies must demonstrate that their activities meet the Four-Part Test established by the IRS. This test assesses whether the projects are aimed at developing or improving products, processes, or software. Beginning in 2024, the IRS encourages all businesses to meticulously document their R&D efforts to substantiate

claims made on Form 6765. This includes maintaining records on the purpose of each project, the technological uncertainties faced, and the systematic process of experimentation employed, which is crucial for justifying the credit in the event of an audit.

The form itself will include sections designed to capture information about both qualified research expenses (QREs) and the specific projects that contributed to these expenses. Qualified research expenses typically cover wages for employees directly engaged in R&D activities, supplies used in research, and certain contract research costs. By having a well-structured way to report these expenditures, Form 6765 aims to streamline the process for businesses and enhance their experience when filing their tax returns. The IRS will also incorporate updates that reflect the changing landscape of technology and innovation.

Another important aspect of Form 6765 is the potential for carry forward and the carry back of unused credits. Taxpayers may find themselves in a situation where their R&D credit exceed their tax liabilities in a given year. The ability to apply these unused credits to future tax years hile still adhering to the limitations set forth by the IRS provides valuable flexibility for businesses engaged in ongoi2ng research efforts. For the 2024 tax year and beyond, it's essential that companies consult with tax professionals to effectively strategize their R&D credits for maximum benefit.

IRS Federal Form 6765 is poised to play a pivotal role in the R&D Tax Credit process starting from the tax year 2024. Companies looking to leverage this incentive must stay informed about the specific requirements and procedural updates outlined by the IRS. Diligent record-keeping and comprehensive reporting on R&D activities will be essential for successfully claiming these tax credits. As innovation remains a cornerstone of economic growth in the U.S., the R&D Tax Credit serves as a crucial tool for businesses aiming to enhance their competitive edge through research and development.

Tax Point Advisors applies our national expertise to your projects by being more hands on and cost-effective than many of our competitors. Tax Point Advisors has helped hundreds of companies successfully claim federal and state tax benefits. On top of that, our accounting experts support your application and provide professional guidance throughout the process.

Tax Point Advisors provides R&D tax credit study services and other specialty tax services to CPA firms and their clients throughout the U.S. To learn more, please contact us at (800) 260-4138.


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