Proposed Changes to Form 6765: Latest Version
The Internal Revenue Service (IRS) has recently provided a sneak peek into potentially significant proposed changes to Form 6765. Officially known as the "Credit for Increasing Research Activities," IRS Form 6765 is designed to communicate the information necessary for claiming the research and development (R&D) tax credit. This highly popular program provides federal tax credits for companies that invest in innovation.
Form 6765 allows businesses to report and substantiate their eligible R&D expenses, making it a pivotal document for those seeking to leverage this valuable tax incentive. According to the IRS announcement, the recently proposed changes aim to “help the IRS accomplish some objectives of the IRS Inflation Reduction Act Strategic Operating Plan. For example, helping taxpayers meet their obligations and using enhanced data analytics to operate more efficiently and select the highest risk cases."
Why The Changes to Form 6765 Matter
The R&D tax credit provides a significant and potentially lucrative incentive for businesses investing in research and development activities. However, the program’s current reporting process has proven a challenge for both taxpayers and IRS personnel to administer due to the complex Research Credit issues. To help streamline the process, the Internal Revenue Service is proposing several substantial Form 6765 changes, which, if passed, could take effect as early as tax year 2024.
Here is a breakdown of what you should know about what the current proposed changes entail based on information from the IRS website:
New Section E for Miscellaneous Information
Form 6765 will introduce a new Section E with five questions aimed at gathering miscellaneous information. This addition will help provide a more comprehensive picture of the taxpayer's research activities.
Introduction of Section F
One of the most noteworthy changes is the introduction of a new Section F. Under Section 41 of the Internal Revenue Code, this section will require taxpayers to report quantitative and qualitative information for each business component. This data will offer a clearer understanding of the research activities conducted.
Repositioning of Key Questions
To streamline the reporting process, the IRS will move the "reduced credit" election question and the "controlled groups or businesses under common control" question from their current locations to the top of Form 6765. This change will ensure that these crucial questions are addressed early in the form.
Should Section F Be Optional For Certain Designated Taxpayers?
It’s important to note that the Internal Revenue Service is considering making Section F optional for certain taxpayers. For example, the section could be optional for expenditures or total tax credits under a specific dollar amount for controlled groups or optional for companies that qualify as a Qualified Small Business electing the Payroll Tax Credit.
IRS Seeking Feedback on Proposed Changes
The IRS has been gathering feedback from stakeholders on the proposed changes. Comments and suggestions were accepted through October 31, 2023. A response and final draft of the changes is expected soon.
Acena Consulting: Your Trusted R&D Tax Credit Partner
As always, Acena Consulting remains at the forefront of the latest potential R&D tax credit updates. Our team is committed to staying informed and proactive. We will provide an update to this blog once the final draft has been released by the IRS, including our thoughts on the changes.
For our current clients, the good news is that our existing R&D tax credit process is already well-aligned with most of the proposed changes. You can continue to rely on Acena Consulting for seamless guidance through these updates.
For business owners and financial advisors who haven't yet experienced our services, Acena Consulting is ready to help your business navigate these potential changes. Our expertise in R&D tax credits uniquely positions us to help our partners optimize ROI for this benefit, fully and compliantly. Schedule a call today with an Acena professional to learn more.
