Are you ready for changes to R&D credit reporting?

Starting in tax year 2024, the IRS has implemented a new version of Form 6765, Credit for Increasing Research Activities. These changes affect both the information that must be reported and the required accompanying documentation. The IRS is using a “phased approach” to roll out additional requirements over time.

The primary changes to Form 6765 include the implementation of:

• Section E – Other Information, effective beginning tax year 2024,
• Section F – Qualified Research Expense Summary, and
• Section G – Business Component Information, both of which will become required for tax year 2025.

Section E requires new information such as:

• The number of business components generating qualified research expenses (QREs),
• The amount of officers’ wages included in QREs,
• Acquisitions and dispositions of major portions of the business, and
• A breakdown of QREs by new categories.

This section also asks whether any of the QREs follow the ASC 730 Directive. If so, additional appendices will be required.

A major new requirement is the quantification of QREs on a business component basis. This means that research and development costs must be allocated to specific projects or components, rather than being aggregated into broad categories as previously allowed. This detailed breakdown will be reported in Section G.

If the taxpayer meets certain exemption criteria and is not required to complete Section G, then Section F must be completed instead. Section F requires categorization of QREs into specific cost types, including:

• Wages,
• Supplies,
• Contract research,
• Rental or lease of computers, and
• Basic research payments.

Section G will generally be optional for:

• Qualified small businesses electing to claim a reduced payroll tax credit, or
• Taxpayers with total QREs under $1.5 million and gross receipts under $50 million (based on a three-year average).

These changes reflect the IRS’s push for more upfront detail to enhance transparency and reduce fraudulent claims. The IRS revised Form 6765 in response to substantial public feedback on earlier versions. The goal is to improve data quality, streamline deployment of IRS resources, and reduce taxpayer burden through a more consistent and structured format.

If you have any questions regarding qualifications or changes, please reach out to Sandra Bullock or Chelsea Smith.