If the proposed changes to IRS Form 6765 are implemented for the 2024 tax year, claiming R&D tax credits in the United States will require more detailed information and preparation from your team.
First introduced in September 2023, these updates shift the responsibility to claimants to provide more granular reporting. The goal: help IRS agents quickly determine if your R&D activities truly qualify—while ideally speeding up the approval process.
Claimants are already adapting to the higher standard of proof introduced in 2021, when the IRS rolled out new requirements for more detailed tax credit applications. This includes submitting a “written statement” instead of just “producing documents,” and breaking down expenses by each qualifying business component.
The changes proposed in September 2023 go even further, with updates to Form 6765 such as:
- A more detailed Section E, featuring 5 new questions about “miscellaneous” business functions,
- A new Section F, requiring both quantitative and qualitative data for each qualifying business component (as required under Section 41 of the Internal Revenue Code),
- And moving the “reduced credit” election and “controlled groups or businesses under common control” questions from line 17 and line 34 (respectively) to the very top of Form 6765 (above Section A).
While these changes aren’t yet official, the IRS is expected to begin enforcing them as early as the 2024 tax year, or by 2025 at the latest.
No matter the timeline, it’s essential for claimants to know what’s coming. Here’s a breakdown of the key changes—and how your team can start preparing now to maximize your claim and avoid missing out.
More granularity for a (hopefully) smoother approval
By moving the “reduced credit” and “controlled groups or businesses under common control” questions to the top of Form 6765, the IRS can immediately see if you’re electing the reduced credit under IRC 280C.
The new Section E and its five questions are designed to itemize your expenditures, giving IRS agents a clearer picture of your actual R&D costs and results. For example, you’ll now need to include “officer’s wages” as part of qualified service wages, and list any new “categories of expenditures” in your qualified research expenses.
Section F brings the most significant updates to Form 6765, requiring claimants to provide detailed qualitative and quantitative data for every business component included in your claim.
For example, you’ll need to specify the type of business component (product, process, computer software, technique, formula, or invention), and give a thorough description of your experimentation process. This means outlining all alternatives you considered, stating whether the business component is new or improved, and breaking down wage expenses for each component (direct, supervision, or support).
Take a proactive approach to preparing your R&D tax credit claim
While the changes to Form 6765 are extensive, the objective is clear: Give the IRS more detailed information. As a result, teams have had to rethink their entire approach to preparing R&D tax credit claims—and will need to keep evolving as new standards are introduced.
For example, your team will need to be more rigorous with time tracking, making sure you have a clear link between your investments (like payroll for engineers) and the outcomes (R&D activities that qualify for the credit).
You’ll also need to take a more active role in documenting and reporting your R&D activities, providing the level of detail the IRS will expect. Contemporaneous documentation of all activities and results will be essential—not just a nice-to-have—and will require input from multiple departments across your business.
By bringing together your workflow, payroll, and financial data into a single R&D intelligence system, Boast helps innovative companies actively track their investments and results. This ensures your contemporaneous data is properly aligned with your QREs, resulting in a strong R&D tax credit claim.
While some teams may see these higher standards as a hurdle, Boast helps you turn this increased diligence into an opportunity—not just to claim more tax credits, but to optimize your entire process. By connecting activities and costs to outcomes, Boast gives you a complete view of your R&D that no other platform can match.
Want to see how Boast can help you maximize your R&D tax claim and streamline your processes? Talk to an expert today.
IRS Form 6765 FAQ
- What are the proposed changes to IRS Form 6765 for claiming R&D tax credits? The proposed changes require claimants to provide more detailed reporting. This includes a more comprehensive Section E with new questions about business functions, a new Section F for qualitative and quantitative data on qualifying business components, and moving the “reduced credit” and “controlled groups” questions to the top of the form.
- Why are these changes being introduced? The goal is to give the IRS more detailed information about the R&D activities being claimed, so agents can better determine if those activities truly qualify. Ideally, this added clarity will also speed up the approval process.
- How can teams prepare for these changes? Teams will need to be more rigorous with time tracking and contemporaneous documentation of R&D activities and results. This means clearly tracking investments (like payroll for engineers) tied to credit-eligible activities, and keeping detailed records of the experimentation process, alternatives considered, and categorized wage expenses for each business component.
- What are the benefits of a more detailed approach to R&D tax credit claims? While these changes require more effort, a detailed and proactive approach helps teams maximize their claims by capturing all eligible expenses and activities. It also allows for better alignment between R&D investments and results, optimizing processes and providing teams with a holistic view of their organization’s R&D activities.
- How can Boast help with the new requirements? Boast’s platform allows businesses to actively track their R&D investments and outcomes, aligning relevant data with their qualified research expenses (QREs) to deliver a robust R&D tax credit claim. By integrating workflow, payroll, and financial data, Boast provides a comprehensive system for R&D intelligence and contemporaneous documentation, enabling teams to meet the IRS’s higher standards while optimizing their processes.
