Form 6765:

Claiming the R&D Tax Credit

What Is IRS Form 6765?

Form 6765 is used for businesses claiming the Research and Development Tax Credit, also known as the R&D Tax Credit. This tax credit was created to incentivize U.S.-based research and development activity.

The R&D tax credit increases cash flow for businesses, offers federal and state dollar-for-dollar income tax reduction, enables businesses to claim credits for open tax years that date back up to 4 years, and reduces tax rates overall.

There is no limitation on the amount of R&D tax credits that can be claimed each year.

Activities That Qualify For The R&D Tax Credit Research

Creating improved products, processes, formulas, software, and techniques

Automating or improving internal manufacturing processes

Designing tools, jigs, fixtures, and molds

Integrating new equipment

Development of data center, big data, and data mining tools

Integration of APIs and other technologies

Development of financial or pricing models

Hiring outside consultants to perform any of the listed activities

Manufacturing new or improved products

Developing prototypes, first articles, models

Evaluation of alternative materials

Development of firmware

Network hardware and software development and optimization

Developing simulators

Development of risk management systems

What Qualifies As Supplies On Form 6765?

Qualified Research Expenses (QREs) include taxable wages, supplies used in qualified activities, contract research costs, and certain payments to cloud service providers. Specifically, supplies count as tangible materials directly used in order to perform the qualified research activities. This can include component parts, molds, dies, tooling, raw materials, reagents, chemicals, and other consumable supplies.

Supplies cannot include travel, rental expenses, and meals, among other things. At Source Advisors, our team can inform you which supplies can be included on Form 6765 as they pertain to your industry.

Who Can Apply

Companies of all sizes and across many industries meet the federal government’s test for qualified innovation activities and can claim Research and Development (R&D) Tax Credits. However, many companies are not aware they qualify. There are thousands of companies that are leaving money on the table and not taking advantage of significant federal and state R&D tax credits. Additionally, R&D tax credit guidelines for software development have been relaxed, opening up the door for companies who have not taken advantage of (or maximized) their R&D tax credits in the past.

These R&D tax credit industries now include manufacturing, software, engineering, financial services, and many others.

If you’re improving or enhancing products and processes to remain relevant and profitable, you are qualified for R&D tax credits.

Federal Form 6765 Example

Below is an example of the completed IRS Form 6765.

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How Long Can I Carry Forward a Credit From Form 6765?

A credit from Form 6765 can be carried forward and unused for up to 20 years. After 20 years the credit will expire. This is known as a carryforward credit, which can be applied to future tax years.

How To File Form 6765: Source Advisors Can Help

Filing Form 6765 for the R&D tax credit is time-consuming and can be very complicated. But with our consultative approach to the Research and Development tax credit, we can help you effectively complete Form 6765 and claim the credit.

At Source Advisors, our team invests time in understanding each client’s history, current business direction, and future growth objectives. Each year, we re-evaluate a company’s ability to accept the tax credit and provide ongoing recommendations to improve the R&D tax credit process. We proudly support a recurring service to more than 92% of our clients.

Need help with Form 6765 on your tax return?