R&D Tax Credit News

As we approach the extended filing for Tax Year 2024 and look ahead to 2025, it's crucial for businesses to understand the significant changes to Form 6765 and its impact on your R&D Tax Credit beginning in Tax Year 2025. This revised Form 6765 has introduced substantial shifts that businesses need to be aware of.

What’s New on Form 6765

Key Changes

Here's what businesses can expect:

Detailed Documentation Requirements

• New Evidence Standards: Businesses must now provide comprehensive documentation for each R&D activity, emphasizing experimentation. This includes detailed descriptions of projects, methods, and results to substantiate the R&D claims.
• Real-Time Record Keeping: It's essential for businesses to implement robust systems to record R&D activities as they occur, ensuring compliance with the Internal Revenue Service's requirements and easing potential IRS audits.

Expanded Eligibility Criteria

• Threshold Adjustments: Previously optional criteria have become mandatory. Companies exceeding the $1.5M in qualified research expenses (QREs) threshold or those with gross receipts over $50M annually must comply with the new business component detail section and updated form requirements.

New Reporting Sections

• Activity Breakdown: The updated form now includes sections that mandate the breakdown of expenses related to each qualifying research activity, requiring businesses to itemize costs meticulously.
• Additional Data Fields: Businesses are required to fill out new fields capturing specifics about employees involved in R&D activities and their respective involvement, thereby aligning with the controlled group level reporting.

Compliance and Audit Readiness

• Risk Management Focus: There's a heightened focus on audit preparedness, reflecting controlled group reporting requirements. This means businesses need to introduce internal processes to double-check claims and documentation, minimizing the taxpayer burden.

How Does This Affect Taxpayers?

These changes could require more time investment from taxpayers. The study will require more work than in previous years, and more time spent by provides typically translates to higher fees. Additionally, the investment of time can result in more headaches for taxpayers working with providers that are unprepared. The potential for increasing fees further emphasizes the need for a solution that is both efficient and seamless.

How We Help

• Tailored Guidance: Personalized advice is crucial, as many providers try to fit their clients into one bucket. This generalized approach results in 30-50% less credit on average, while increasing the risk of claims not withstanding an audit.
• Compliance Assurance: We've prepared for these changes for years and have streamlined the process to save businesses time and money, integrating section 1.41 guidance.
• Optimization: Maximizing credits through proactive tax administration strategies. We help you plan ahead and provide recommendations for ways to prepare for upcoming changes, ensuring readiness for any future tax years.

Are You Prepared?

If changes to Form 6765 have not been shared with you or your R&D Credit provider seems unprepared for these changes, our team of experts at Cherry Bekaert can help. Schedule a time with one of our experts to discuss how we’re preparing businesses now to save them time and money in the future, navigating any changes related to officers wages, development, and more project information necessary for compliance.