Form 6765 Changes Help Taxpayers Meet Increased Transparency Objectives
The IRS recently finalized the new Form 6765 and corresponding instructions for 2024 tax returns. While the contemporaneous documentation requirements and the level of detailed documentation regarding research projects are not changing, Form 6765 formalizes additional information that will be required to be directly reported. These changes are effective for 2024 tax returns.
What Additional Information Is Required On Form 6765?
The changes to Form 6765 are intended to provide taxpayers with a predefined format for disclosing additional information, as well as improve what information is received by the IRS regarding the R&D tax credit. This is part of the IRS’s pursuit of facilitating increased taxpayer transparency.
New Section E:
This new section requires taxpayers to answer five questions:
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- The number of business components generating the qualifying research expenses
- The amount of an officer’s wages included in the qualified research expense
- Whether the taxpayer acquired or disposed of a major portion of a trade or business during the taxable year
- Whether the taxpayer included any new categories of expenses as current year qualifying research expenses
- Whether current year qualified research expenses follow the ASC 730 Directive
New Section F:
The new Section F is where all Qualified Research Expenses are reported.
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- Total wages for qualified services for all business components
- Total costs of supplies for all business components
- Total rental or lease cost of computers for all business components
- Total applicable amount of contract research for all business components
- Applicable amount of all basic research payments
New Section G:
The new section G, while not required for 2024, may be required beginning with 2025 tax returns. Taxpayers should begin familiarizing themselves with this section of the form, in the event this information is required to be filed with the tax return.
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- EIN of the controlled group member, if applicable, conducting the research activities on the business component
- Controlled group member’s principal business activity code, if applicable
- Each business component’s name or unique alphanumeric identifier
- The business component type
- If software related, identify whether it is internal use, non-internal use, or dual-function software
- A description, by business component, the information sought to be discovered
- Each question above would be required for each business component generating qualifying research expenses
What Changes Mean For Taxpayers
The new changes may present challenges for taxpayers. Primarily, this may mean an additional level of technical review will be required for taxpayers claiming the R&D credit. Taxpayers should review their documentation for R&D credit claims, ensure the additional information beginning in 2024 is available, and begin to prepare to provide the information that will be required with Section G. The IRS has increased its review of R&D credits over the years, so taxpayers should be prepared with the required documentation to support their R&D tax credit.
GBQ has a team dedicated to assisting clients with evaluating, documenting, and claiming the R&D credit. GBQ can prepare an R&D study for the 2024 tax year, and also assist with establishing processes and procedures to comply with the proposed changes outlined in Section G for the 2025 tax year. Contact us today to learn more or for assistance.
By Leah Rogers, CPA, Tax Manager
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