Preparing Revised Form 6765 for the R&D Credit: Completing New Sections E, F, and G, Withstanding IRS Challenges

Stated simply, the R&D tax credit, codified under Section 41 of the Internal Revenue Code, is a credit for increasing research activities. The credit incentivizes businesses to develop new or improved products, processes, formulas, techniques, inventions, or software. The regular R&D credit equals 20 percent of the smaller of current QREs (qualified research expenses) that exceed a threshold amount or 50 percent of the current year QREs. In addition to the regular credit method, there is an alternative simplified credit method. Choosing the most beneficial method is critical. The calculated amount based on the method chosen may reduce a company's federal income tax liability dollar for dollar.

In response to improperly filed claims and to target questionable claims, the IRS expanded the information required to be submitted when filing for an R&D tax credit. Newly added Section E – Other Information, requires taxpayers to respond to five questions, the first asking "the number of business components generating the QRE." Section F – Qualified Research Expenses Summary, includes a summary of QREs by cost types. The most comprehensive and troublesome addition is Section G – Business Component Information. Section G requires listing 80 percent of the total QREs for business components in descending order. Perhaps due to its complexity, Section G reporting is optional for 2024 but required for 2025.

Eligible businesses can use the R&D credit to offset up to $500,000 of payroll liabilities. With either a federal income tax offset or payroll liability offset, completing Form 6765, Credit for Increasing Research Activities, properly is key.

Listen as our panel of tax credit experts explains the R&D credit and provides step-by-step calculations, including completion of the newly revised Form 6765.

1. Form 6765, Credit for Increasing Research Activities: Introduction
2. Form 6765 Revisions
   1. Section E
   2. Section F
   3. Section G
3. Qualifying activities and expenses
4. Calculating the credit
   1. Regular credit
   2. Alternative simplified credit
5. Payroll liability offset, Form 8974
6. IRS challenges
7. Preparing the form
8. Examples and illustrations
9. State credits
10. Best practices

The panel will review these and other critical issues:

• Illustrative examples including preparation of new Form 6765, Credit for Increasing Research Activities
• When a business should consider claiming the reduced credit under Section 280C
• Which R&D tax credit computation method to consider
• Meeting current IRS criteria for properly applying for the R&D credit

Learning Objectives

After completing this course, you will be able to:

• Identify key changes made to Form 6765
• Determine the steps for properly completing Form 6765, Credit for Increasing Research Activities
• Decide on the appropriate method for calculating the R&D credit
• Ascertain when the reduced credit could be the better option for a business

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and their respective partners and shareholders.

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).