The New IRS R&D Tax Credit Rules: What CPAs & CFOs Must Know

The IRS Has Made Significant Changes to R&D Form 6765 - Are You Prepared?

With the IRS updating the rules around R&D tax credits, both CPAs and CFOs face increased pressure to ensure compliance. These new rules require more documentation, stricter compliance, and detailed reporting. It's time to take action before these changes lead to costly mistakes.

What Happens If Businesses Ignore These Changes?

Increased IRS Audits & denied claims
Lost Tax Credits due to non-compliance
Higher Tax Liabilities & penalties

Section E – More Business Component Reporting

Mandatory for the 2024 tax year onward
Requires new data on business components, officer wages, and acquisitions/dispositions
Ensures accurate validation of R&D claims to prevent rejections or audits

Section G – Required for Businesses in 2025

If R&D spend exceeds $1.5M, businesses must report detailed business component data
Must categorize R&D activities (Product, Process, Software)
Helps the IRS verify compliance for larger R&D claims under increased scrutiny

Detailed Wage & Expense Breakdown Required

R&D wages must be allocated across Direct Research, Supervision, and Support roles
Supplies, computer rentals, and contract research must now be reported separately
Strengthens defensibility of Qualified Research Expenditures (QREs) under IRS scrutiny

How You Can Safeguard R&D Tax Credits and Maximize Savings

Navigating these IRS changes is critical to safeguarding your business's R&D credits and ensuring compliance. Here’s what you need to do:

Monitor R&D Spend and Documentation

Ensure that all R&D expenditures are properly tracked and documented. Inaccurate documentation can result in lost credits or audit scrutiny.

Work Closely with Your Accounting Team

Partner with professionals to evaluate how these changes impact your business. Ensure you are categorizing R&D activities correctly and that all components are reported properly.

Prepare for IRS Scrutiny

The IRS is tightening its review process. Take proactive steps to strengthen your documentation and review processes to prevent costly audits and ensure that your business benefits from the R&D tax credit.

Ensure Accurate Wage & Expense Breakdown

Ensure R&D wages and related expenses are classified properly, as the IRS will now require more detailed breakdowns.