The IRS published the final Form 6765 and its instructions for the tax year 2024 on February 10, 2025. This form is used to claim the credit for increasing research activities. The IRS is seeking feedback on the form and instructions until June 30, 2025, to ensure that the instructions for tax year 2025 (processing year 2026) are clear and up to date.
The revised Form 6765 includes a new Section E that collects other business information, a new Section F that summarizes qualified research expenses (QREs), and a new Section G for reporting details about business components.
Jump to ↓
| Increased reporting requirements |
| Impact on compliance and administrative burden |
| Rationale and preparing for changes |
Increased reporting requirements
The changes mean that beginning with tax year 2024 (processing year 2025), businesses need to provide more detailed information when claiming the tax credit. Michelle Abel, J.D., Principal at Baker Tilly, outlined the additional reporting requirements to include:
- The number of business components generating QREs
- Wage QREs attributable to officers
- Any major acquisitions or disposals of trade or business
- New categories of expenses included in current year QREs
- Whether QREs were determined using the ASC 730 directive method
“If the taxpayer is claiming the credit on an amended return for 2024 or after, they will also need to describe the information sought to be discovered for each business component,” she added.
In addition, starting with tax year 2025 (optional for 2024), taxpayers must provide detailed information on QREs for each business component. Abel said that this includes:
- Name and type of business component
- Software type (if applicable)
- Direct, supervising, or supporting wages
- Supplies
- Rental or lease cost of computers
- Applicable amount of Contract Research (CR) expenses
Impact on compliance and administrative burden
These new requirements are expected to increase the compliance costs and administrative burden for businesses, particularly smaller organizations. “The previous Form 6765 did not require the taxpayer to provide detail related to the business component activity specific to each type of QRE or even total QRE,” Abel stated.
She explained that previously, a good documentation package (“R&D study”) would have prepared this information for an IRS exam. Now, it is required when the tax return is due. “This will require taxpayers to shift a significant amount of their documentation preparation to be completed before filing,” Abel added.
Ideally, taxpayers should complete detailed R&D calculations before filing, but some opt for high-level estimates or skip documentation, hoping to avoid an IRS exam.
Abel said that although the IRS provides some relief for Qualified Small Businesses and those with total QREs equal to or less than $1.5 million and gross receipts equal to or less than $50 million, the increased documentation requirements will still pose challenges. “We recommend always having documentation in place and establishing the nexus between qualifying activities (business components) and the QREs,” Abel advised.
Rationale and preparing for changes
While the IRS has not provided specific rationale for these changes, Abel expects that the updated Form 6765 will help the IRS gather relevant information more quickly and reduce the time required to review the form. This could ultimately improve tax administration and compliance.
With the final version of the form now issued, Abel said that businesses need to take specific steps to implement the changes. For tax years beginning on or after January 1, 2024, it is crucial for organizations to source the most recent forms for their tax returns.
Additionally, any software or technology used for tax preparation should be updated to include the latest forms before proceeding. This ensures that all filings are accurate and compliant with the new requirements.
For more information about Form 6765 and the credit for increasing research activities under Code Sec. 41 , see Payroll Guide ¶4277.
