In response to commenter concerns over reporting burden, the IRS has again revised Form 6765 to streamline the optional Section G, reducing the reporting scope and simplifying information requirements.
By Mark Dunning
On June 21, the IRS issued a press release announcing the latest draft form 6765 related to the Research Credit for Increasing Research Activities, also known as the research credit. This draft has been shaped by feedback from various external stakeholders and aims to reduce the reporting burden on taxpayers. The updates introduce a consistent and predefined format to improve the qualify of information received for tax administration.
Notable changes include the optional Section G for qualified small business taxpayers who claim the reduced payroll tax credit or those with total qualified research expenditures (QREs) of $1.5 million or less and gross receipts of $50 million or less. These changes apply to taxpayers filing an original return claiming a research credit.
Based on stakeholder feedback, the reporting scope in Section G has been reduced. Taxpayers must now report 80% of total QREs in descending order, by the amount per business component, with a cap of 50 business components. Taxpayers using the ASC 730 Directive can report QRES as a single line item in section G.
Additionally, the IRS simplified the information required in Section G. The need to indicate whether a business component is new, improved, or under a sale/license/lease, as well as the narrative requirement for original returns, has been eliminated. The definitions for officer control group reporting and business component descriptive names have also been clarified and reduced.
The revised Section G will be optional for all filers in the 2024 tax year (processing year 2025) to allow for a transition period. It will become effective for the 2025 tax year (processing year 2026).
The latest revised Form 6765 is available here, with instructions to be released later.
For more guidance on handling Form 6765, reach out to your TaxOps advisor.
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