Posted by Robert Bryant, Esq., CPA on 12.03.21
In a very recent development, the Internal Revenue Service (IRS) has clarified what kind of R & D tax credit claims the Chief Counsel Memorandum 2021410F relates.
In October, 2021, the IRS issued new filing requirements for any taxpayer filing an IRC Section 41 R & D tax credit claim. What wasn’t completely clear in the memorandum was what TYPE of R & D tax credit claim the new filing requirement affected.
As it turns out, Holly Paz, the deputy commissioner in the LB & I division of the IRS, clarified that the new 2022 IRS filing requirements for R & D tax credit claims ONLY applies to AMENDED tax returns. Meaning all timely filed tax returns (including extensions) are exempt from this new 2022 filing requirement.
To review, the Service’s October Chief Counsel Memorandum 2021410F set forth what information taxpayers must include for research credit refund claims on an amended filing. In order for an amended R & D tax credit claim to be considered valid, the taxpayer must include:
A list of all business components that relate to the claim
plus for each identified business component
describe all research activities performed
the names of all individuals who performed the qualifying activities
as well as information each individual sought to discover
further, the amendment must include qualifying costs details including qualifying:
employee wages
supply costs
contract research costs
lastly, the amendment must include a declaration signed by the taxpayer under the penalties of perjury
verifying the facts provided are accurate
While the IRS promises to provide further details related to this new filing requirement, it is important to note that the grace period for this filing requirement is January 10, 2022. Meaning, this requirement goes into effect January 11, and all amended research claims filed after that date must adhere to these new filing requirements. Once the grace period expires, there is a one-year transition period when the taxpayer has 30 days to perfect their R & D tax credit claim before the IRS makes a final determination on the amended claim.
Please contact Tax Point Advisors for any assistance with this new IRS requirement or any other questions you may have about any tax credit claims.
Rob Bryant, CPA, Esq.
Senior Vice President Tax Controversy Services & Quality Control
Tax Point Advisors
