Significant changes are coming to how businesses report their Research and Development (R&D) tax credits. The Internal Revenue Service has recently released draft revisions to Form 6765, marking the most substantial revision in the form’s history. Here’s what business owners and financial managers need to understand about these changes.
New Reporting Requirements for 2024
For tax years beginning before 2025, businesses will face new disclosure requirements in Section E of the form. Companies must now report the total count of business components that generated qualified research expenses (QREs). Additionally, they need to specify how much of their QREs came from officer wages, with corporate officers defined according to state incorporation laws. The IRS also requires businesses to confirm whether their current claim aligns with previous filings and to indicate if they’re using the ASC 730 directive for any portion of their claim.
Section G Implementation Required in 2025
While Section G reporting remains optional for the 2024 tax year, it becomes mandatory for tax years starting after 2024. This section introduces exceedingly detailed reporting requirements, transforming what was historically a “numbers-only” form into one requiring substantial qualitative information.
Businesses will need to provide comprehensive details about their research activities. This includes a detailed breakdown of their most significant research projects, specifically those representing either the top 80% of QREs or their top 50 business components. They’ll also need to categorize qualified wages into three specific areas: direct research performance, supervision, and support activities. For businesses using statistical sampling methods or filing amended returns, additional documentation requirements apply.
These changes represent a fundamental shift in R&D credit documentation, requiring businesses to frontload much of the information that previously was only needed during an audit. Financial leaders should begin preparing now for these enhanced requirements, even though Section G won’t be mandatory until 2025.
Comments are Welcome
The IRS is currently accepting feedback on these changes through June 30, 2025, particularly regarding controlled group reporting, the ASC 730 directive, business component details, and statistical sampling methods. This feedback period presents an opportunity for businesses to help shape the final implementation of these requirements.
But, even with feedback from the impacted business community, the expanded reporting requirements will likely extend the time needed to prepare R&D credit claims. Businesses should anticipate dedicating additional resources to gathering and analyzing the required information. This may particularly affect companies with multiple research projects or those using statistical sampling methods.
Early preparation will be key to ensuring compliance with these enhanced reporting obligations. It is important that you consult with a tax advisor early to develop a strategic approach to these new requirements. For additional information on these new IRS requirements and other tax issues, please contact Gray, Gray & Gray at 781.407.0300.