IRS Updates R&D Tax Credit Amended Claims Requirements
Since January 10, 2022, taxpayers filing amended tax returns with claims for refund related to the R&D Tax Credit have been required to include supplemental information with the return. The requirement, associated with Chief Counsel Memorandum 20214101F, called for five items:
- Identify all the business components to which the Section 41 research credit claim relates for that year.
- For each business component, identify all research activities performed.
- Name the individuals who performed each research activity.
- Identify the information each individual sought to discover.
- Provide the total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year.
On June 18, 2024, the IRS updated this guidance and waived items 3 and 4 while still requiring that taxpayers identify each business component, the research activities performed, and the total expenses for the claim year, which can be done using Form 6765. The “News Releases” guidance for valid research credit refund claims offers the guidance as “effective for claims postmarked as of June 18, 2024,” while the FAQ Section Item 21 notes the new guidance is effective as of June 18 and therefore presumably can be considered for taxpayers yet to file amended claims.
However, the IRS provides notice that the two items that are no longer necessary to include with the amended claims may still be requested should a tax return involving the research credit be selected for examination.
This revision eases the burden on businesses that have not previously taken advantage of the ability to claim the R&D Tax Credit. For companies facing the expanded scope of IRC 174 amortization requirements for research expenses, the ability to look back to prior years and claim credits can be valuable to offset increased tax liabilities.
If you have any questions about the R&D Tax Credit qualifications or McGuire Sponsel’s approach to claims, please do not hesitate to reach out. We will continue to monitor the status of Sections 41 and 174 and provide frequent updates.
Tanner Niehaus is a Manager and CPA in the R&D Tax Credit Practice.
Tanner has expertise in qualification criteria for the R&D credit and works with clients across a variety of key industries to help them build sustainable credits.
Questions about one of your clients or interested in learning more?
Call us at +1-800-322-7776 or fill out the form below. We’ll be in touch shortly!
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