IRS Finalizes 2024 R&D Credit Form 6765: A Major Shift Toward Substance — Are You Ready?
On Monday, February 10, 2025, the Internal Revenue Service (IRS) released the finalized 2024 version of Form 6765, "Credit for Increasing Research Activities," along with its accompanying instructions.
Note: There are no changes in these final published form/instructions compared to the drafts published last year, so nothing new here. It just took the Office of Management and Budget (“OMB”) some time to review before they could be approved and published.
These documents are essential for taxpayers aiming to claim the Research Credit, a significant incentive for businesses investing in research and development. Observation: These changes, particularly the upcoming Section G requirements for many taxpayers next year, mark a major shift in the federal R&D tax credit landscape.
Key Updates in the 2024 Form 6765:
Section 280C Election (Item A): The election to claim a reduced credit under Section 280C is now prominently positioned at the top of the form. Taxpayers must indicate their choice by checking "Yes" or "No" on their original timely filed return, including extensions.
Controlled Group/Common Control (Item B): A new item inquires whether the taxpayer is a member of a controlled group or business under common control. If "Yes" is selected, an attachment with specific information is required.
Introduction of Section E—Other Information: Taxpayers reporting Qualified Research Expenses (QREs) on line 48 are now required to complete Section E, providing additional details to support their claims.
ASC 730 Directive (Line 41): Eligible taxpayers choosing to follow the ASC 730 Directive must indicate their choice by checking "Yes" on line 41.
New Sections F and G:
Section F—Qualified Research Expenses Summary: This section requires taxpayers to specify if they need to complete Section G and to detail their total QREs accordingly.
Section G—Business Component Information: For tax years beginning before 2025, completing Section G is optional. However, for tax years starting after 2024, this section becomes mandatory, subject to specific guidelines.
Important Reminders:
Payroll Tax Credit: Qualified small businesses can elect to apply a portion of the research credit against their payroll tax liability, with a maximum limit of $500,000.
Research Credit Claims on Amended Returns: Taxpayers filing amended returns or administrative adjustment requests that include a Section 41 research credit must provide specific information for the claim to be valid.
These updates aim to streamline the reporting process and ensure that taxpayers provide comprehensive information when claiming the Research Credit.
For detailed guidance, taxpayers should refer to the official IRS documents:
Form 6765: https://www.irs.gov/pub/irs-pdf/f6765.pdf
Instructions for Form 6765: https://www.irs.gov/pub/irs-pdf/i6765.pdf
Staying informed about these changes is crucial for businesses engaged in research activities to maximize their eligible tax benefits.
Lastly, as the IRS continues to emphasize substance in R&D tax credit claims, particularly with the introduction of Section G, it is more critical than ever for taxpayers to ensure they meet these heightened requirements.
Key Takeaway:
Many R&D tax credit service providers lack the necessary focus on substance, putting taxpayers at risk of compliance issues. To navigate these changes confidently, businesses should partner with a reputable R&D tax credit provider that understands and adheres to these evolving requirements. There are MANY credible providers in the space, but there are MANY who fall short—making due diligence in selecting the right partner essential for peace of mind.
See what getting simple substance looks like with Better Credits. Book a call or “skip the call” here.
