Navigating the New Form 6765: Claiming the R&D Tax Credit in 2025

Navigating the New Form 6765: Claiming the R&D Tax Credit in 2025

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Businesses involved in research and development activities have long benefited from the R&D tax credit, helping to offset costs associated with innovation. However, the landscape for claiming this credit is changing with the introduction of the revised Form 6765, Credit for Increasing Research Activities. Starting with the 2024 tax return, this new version demands significantly more detailed information, impacting how businesses prepare and file for this valuable tax benefit.

Key Changes to Form 6765

The IRS first introduced revisions to Form 6765 during a preview period in September 2023, seeking feedback on proposed changes. After reviewing input, the IRS released a draft version in June 2024, followed by updated drafts and instructions in December 2024. The finalized Form and Instructions have just been released by the IRS (February 2025). These revisions bring about several critical changes:

1. New Items A and B

These are two yes-no questions that appear before the calculation sections:

  • Item A asks if the company intends to elect the reduced credit under section 280C.
  • Item B asks if the company is part of a controlled group or under common control.

2. Revisions to Sections A and B

Sections A and B, which cover the Regular Credit and Alternative Simplified Credit methods, have been simplified. The detailed breakdown of qualified research expenses (QREs) has been moved to the new Section F, with only the total QREs displayed in Sections A and B.

3. Introduction of New Sections

  • Section E: Captures information about the number of business components, officer’s wages, acquisitions, new expense categories, and ASC 730 compliance.
  • Section F: Summarizes qualified research expenses by category, including wages, supplies, contract research, computer rental/lease costs, and basic research costs.
  • Section G: Requests detailed information for each business component, including names, descriptions of research objectives, and expenses.

4. New Section G’s Detailed Reporting Requirements

Section G demands a breakdown of the 80%/Top 50 business components by expense type and requires the following details:

  • Entity and company code
  • Type of business component (e.g., product, process, or software)
  • Information sought through research
  • Detailed wage expense categories (e.g., direct engagement, supervision, support)

Impact on the 2024 Tax Return (Processing Year 2025)

For the 2024 tax return, new Section G is optional, providing temporary relief from detailed reporting requirements. However, businesses must still complete Items A and B, as well as Sections E and F. This allows companies to adjust to the new requirements while preparing for mandatory compliance in the following years.

Looking Ahead: 2025 and Beyond

For the 2025 tax return and beyond, new Section G becomes mandatory for all businesses filing a research credit claim, except for:

  • Qualified Small Businesses claiming the credit against payroll tax
  • Businesses with $1,500,000 or less in total QREs and $50,000,000 or less in gross receipts

Businesses required to complete Section G must provide detailed information on each business component at the time of filing. Early preparation, understanding the draft requirements, and strategic planning are essential for a smooth transition.

Preparing for the Transition

The changes to Form 6765 introduce more complexity but also offer opportunities to optimize R&D tax credit claims through meticulous reporting. Here’s how businesses can prepare:

  1. Review the Draft Requirements: Familiarize your team with the new sections and reporting requirements.
  2. Organize Detailed Documentation: Ensure that all business components and research expenses are meticulously documented.
  3. Evaluate Exemptions: Determine if your business qualifies for any exemptions, such as the payroll tax credit option or revenue thresholds.
  4. Consult with Tax Specialists: Engage with tax professionals experienced in R&D credits to navigate the new requirements effectively.

Need Help Navigating the New Form 6765?

The transition to the new Form 6765 will require strategic planning and detailed documentation. If your business needs assistance, Swanson Reed’s R&D tax specialists are ready to guide you through the changes. Reach out today to ensure a smooth and compliant filing process for the 2024 tax return and beyond.

For more information, contact our team or consult with your Swanson Reed tax advisor to understand how these changes impact your business.

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