The Internal Revenue Service (IRS) has released a preview of proposed changes to Form 6765, Credit for Increasing Research Activities. Also known as the R&D Tax Credit, the below highlights the proposed changes and how they could potentially impact taxpayers.Â
The IRS is currently reviewing all feedback on the proposed changes and if approved, the changes will take effect January 2024.Â
Proposed Changes to Form 6765
The purpose of the proposed changes is to provide taxpayers with a consistent tax reporting format for claiming the R&D tax credit, making the form more effective, and improving the information received for tax administration personnel. These include:
Adding Two New Sections
Two of the proposed changes include adding a new Section E with five questions seeking miscellaneous information and a new Section F for reporting quantitative and qualitative information for each business component, required under Section 41 of the Internal Revenue Code.Â
The IRS is also requesting feedback on whether Section F should be optional for certain taxpayers, including those:
- With qualified research expenditures less than a certain dollar amount at a controlled group level,
- With a Research Credit less than a certain dollar amount at a controlled group level, or
- That are a Qualified Small Business for the Payroll Tax Credit.
If Section F is optional for certain taxpayers, it will not affect the requirement to maintain books and records and to provide Section F information in similar format. Additionally, it would not apply to amended returns for the credit.
Moving Information on the Form
The IRS proposes moving the “reduced credit” election question and the “controlled groups or businesses under common control” question from line 17 and line 34 to the top of Form 6765. This could make it easier for taxpayers to answer specific questions.Â
Get Help Claiming the R&D Tax CreditÂ
The Research & Development Tax Credit can help a wide variety of businesses offset and reduce their income tax liability, in addition to providing many other benefits. At Source Advisors, our team of tax professionals can assess your company’s federal R&D tax credit opportunity and determine any state R&D tax credit availability. Most states offer R&D tax credits as well with many of them being more lucrative than the federal credit. Our team of experienced CPAs, attorneys, engineers, and technology experts helps companies save money and create cash flow with R&D tax credits that can then help drive overall growth.Â
