IRS Lengthens Transition Period for New R&D Tax Credit Reporting Requirements

Recent guidance from the IRS states that it will be extending the transition period for more detailed R&D tax credit reporting requirements related to amending tax returns within open statute years for credit claims for refund. Companies will now have through January 10, 2024 and are granted 45 days to perfect an R&D tax credit claim with reporting deficiencies prior to the IRS’ final determination on the claim.

As of January 10, 2022, taxpayers filing a valid R&D tax credit claim for refund under IRC Section 41 must provide, at the very least the following pieces of documentation:

• Identify all business components to which it relates for the claim year;
  • For each component identify, all research activities performed, all individuals who performed each research activity, all information each individual was trying to discover
• Total qualified employee wage and expenses, total supply qualified expenses and total qualified contract research expenses for the claim year, which can be done on Form 6765.

The guidance and new reporting requirements have been implemented in the hope of providing clearer information to those interested in claiming the tax credit and reducing the number of disputes over such claims. By requiring further documentation, there is hope that the IRS will be better equipped to identify if an R&D credit claim for refund should be paid immediately or if further review is needed.

A declaration signed under penalty of perjury verifying that the facts and circumstances provided are accurate is now required. In most cases, the signature on Forms 1040X or 1120X will serve this function.

The R&D Credit has been through a lot of changes and updates, so many it could be difficult to keep up. Join our R&D tax credit specialists for a webinar discussing the latest changes to the credit.