Navigating the New Form 6765: What Taxpayers Need to Know About R&D Credit Reporting

In September 2023, the Internal Revenue Service (IRS) released a preview of proposed changes to Form 6765, the research and development (R&D) credit form, and invited comments from interested parties.  

The primary objective was to promote compliance and improve transparency. Based on the feedback received, the IRS released revisions on June 21, 2024, to reduce the taxpayer burden of some reporting requirements. On December 12, 2024, the IRS finalized the changes to Form 6765 for the 2024 tax year and forward. 

The form expanded from two pages to four pages and added three new sections: Section E, Section F, and Section G. 

Key Takeaways 

• Form 6765 has expanded from two pages to four pages and now includes new Sections E, F, and G to increase transparency around R&D credit claims. 

• Section G introduces detailed business component reporting, requiring taxpayers to disclose up to 80% of total qualified research expenses (QREs), subject to certain thresholds and exceptions. 

• Section G is optional for tax years 2024 and 2025 but becomes mandatory for many taxpayers beginning in 2026. 

• Sections E and F provide the IRS with additional insight into a taxpayer’s R&D activities, QRE calculations, and potential risk factors. 

• Comprehensive documentation is more important than ever as increased reporting requirements and heightened IRS assurance activity place greater scrutiny on R&D credit claims. 

Section G: New Reporting Requirements for QREs 

Section G requires companies to include details around the business components generating the qualified research expenses (QREs). Within Section G, taxpayers must report up to 80% of total QREs, listing them in descending order by the amount of QREs per business component, with a maximum of 50 business components included. Taxpayers using the ASC 730 Directive can report those QREs on a single line item. 

Section G is optional for the 2024 and 2025 tax years and becomes effective for the 2026 tax year. Section G will remain optional going forward for taxpayers who meet either of the following sets of requirements: 

• The taxpayer is a Qualified Small Business (QSB), meaning a payroll tax credit eligible taxpayer, or 

• The taxpayer has: 

• $1.5 million or less in QREs in the current tax year (determined at the controlled group level), 

• $50 million or less in gross receipts in the current tax year (determined at the controlled group level), and 

• Is claiming the R&D credit on an original, timely filed return. 

Detailed Reporting: Business Component Information Required 

For each business component listed in Section G, taxpayers must provide the following: 

• Business component name 

• Business component type (product, process, technique, software, formula, or invention) 

• If software, the type of software (internal use software, dual function, non-IUS, exempt, and other options) 

• Information sought to be discovered (amended returns only) 

• QRE by cost category, including: 
  • Wage QRE (direct research, direct supervision, and direct support) 
  • Supply QRE 
  • Computer leasing QRE 
  • Contract research QRE 

Section E & Section F: Additional New Sections 

Section E, Other Information, supports a high-level risk review analysis. It asks questions about the taxpayer’s claim, including: 

• Number of business components 

• Officer wages included in Wage QRE 

• Acquisitions or dispositions 

• New categories of expenses in QRE 

• QREs determined following the ASC 730 Directive 

Section F, QRE Summary, includes a check box indicating whether Section G is required and a reconciliation of Section G, if applicable. 

The form also moved the Section 280C election to the top of page one and added a new check box for members of a controlled group or business under common control. 

Documentation is Key: Navigating Increased IRS Assurance Activity 

The IRS has finalized Form 6765 for the 2024 tax year and forward. 

With this focus on the R&D credit and an increase in IRS assurance activity, companies must maintain detailed, comprehensive documentation of the expenses they use to claim the credits. 

If your company’s credits are large enough and your activities are detailed, an R&D tax credit study may serve your interests. For questions, reach out to your Wolf & Company tax team to learn more. 

Zachary D. Miller

Senior Manager

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[email protected]