Authored by RSM US LLP
Executive summary
The IRS requires significant documentation in research credit refund claims. There is a transition period whereby the IRS will give taxpayers 45 days to comply if the IRS deems that the taxpayer has not complied with this documentation requirements. The IRS just extended the duration of this transition period until Jan. 10, 2026
Reporting requirements
On Nov. 25, 2024, the IRS posted an update stating it would extend the research credit claim transition period an additional year to Jan. 10, 2026. This transition period grants taxpayers 45 days to perfect a research credit claim for refund before the IRS rejects or accepts it for processing. This is the second extension of this period.
In October 2021, the IRS announced it would require five points of information for any research credit claim. In June of 2024, the IRS reduced this to three points of information. (IR-2021-203, Oct. 15, 2021). For all research credit claims made after June 18, 2024, taxpayers are required to provide the following information:
- Identify all the business components to which the section 41 research credit claim relates for that year,
- Identify all research activities performed for each business component and
- Provide the total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year. This may be done using Form 6765, Credit for Increasing Research Activities
Taxpayers should continue to submit the required information with their research credit claims. While this change allows taxpayers 45 days to perfect deficient claims, the requirements for the providing the information remain in place. Additionally, with the increase in IRS enforcement in action in this space, taxpayers claiming the section 41 credit should seek to understand their documentation and record retention requirements for supporting the research credit.
Source: RSM US LLP.
Reprinted with permission from RSM US LLP.
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