Research and Development (R&D) tax credits can be claimed for specific types of expenses incurred during your financial year. The government provides these incentives to support innovative businesses that take risks in their pursuit of new ideas.
If your company is new to these incentives, you may have missed out on claiming credits for past projects and expenses. Luckily, there is still time to explore these opportunities.
Related: R&D vs. R&E: Differences Explained
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When Do You Need to File Your R&D Tax Credit Claim?
To claim the R&D tax credit, you must file Form 6765 with your federal income tax return — the credit amount is based on your business’s qualified expenses incurred throughout the tax year. However, if you’re a qualified small business using the R&D credit to offset quarterly payroll taxes, things get a little more complicated.
Qualified small business owners must file Form 6765 with their tax return, but they’ll also have to use Form 8974 to claim the payroll tax credit. Then, they must submit that form along with their payroll tax return (Form 941, for example, which is filed quarterly).
Never miss a deadline or leave money on the table — Claim your R&D tax credit with TaxRobot.
What About Claiming the Credit for Previous Tax Years?
Fortunately, you can claim R&D credits retroactively by filing an amended return for any open tax year — typically three years. However, this time frame can be longer for companies that experienced losses over that period.
To claim a refund for the R&D tax credit, you’ll need to file an amended tax return using IRS Form 6765. It’s important to note that the IRS has become stricter about refund claims related to the R&D credit on amended tax returns since January 10, 2022. To make a successful claim, you must:
- Clearly specify all the business products and processes (business components) relevant to the credit claim for the specific tax year.
- For each business component, detail all research activities conducted, including the individuals involved in each activity and the information they aimed to discover.
- Provide the total qualified employee wage expenses, qualified supply expenses, and qualified contract research expenses for the claim year. You can use Form 6765 to do this.
When filing the refund claim, you must include all of the above information. In addition, you need to sign a declaration confirming the accuracy of this information under penalty of perjury — the signature on your amended tax return typically serves this purpose.
Meeting these criteria establishes the validity of your refund claim, but it does not guarantee automatic approval of the credit. Instead, it lays the groundwork for the IRS to evaluate your claim thoroughly. Be meticulous in providing accurate details to enhance the chances of a successful refund claim.
Related: R&D Credits for Software Companies
The IRS Grace Period for This Transition Is Almost Over
The new requirements we discussed above make claiming the R&D tax credit a little more difficult. Originally, the IRS provided a grace period until January 10, 2022, after which taxpayers would have 30 days to make changes to their claim before the IRS would make a final determination.
On January 5, 2022, the IRS changed that timeframe from 30 days to 45 days. Then, on September 30, 2022, they extended the grace period to January 10, 2024. After that deadline, taxpayers will no longer have 45 days to make changes to and perfect their research credit claim before the IRS decides to accept or deny it.
With deadlines approaching and new R&D tax credit regulations, filing your claim correctly is more confusing than ever. Enter TaxRobot — Get the maximum refund your business qualifies for without the hassle.