This article details how an Owner, Partner, or Outside Collaborator can submit the forms needed to claim an R&D tax credit, and have it applied when filing Form 941.
R&D tax credits are government tax allowances designed to encourage business innovation. Under the One, Big, Beautiful Bill, research and development expenses can be deducted more quickly than before. In some cases, expenses can be claimed retroactively. Small businesses ($31 million or less in yearly sales) can claim R&D costs going back to January 1, 2022.
Examples of expenses that may qualify
- Employee wages for R&D work
- Materials and supplies used in development
- Fees paid to outside contractors for R&D projects
- Testing new product designs or improving existing ones
- Developing internal-use software
- Engineering or technical problem-solving
IMPORTANT
If you or your client has expenses like those listed above, consult a tax professional specializing in R&D credits to ensure all expenses qualify before filing Form 8974.
How to claim R&D tax credits
- Keep good records. Document what the business was trying to accomplish, how the work was done, and what was spent.
- Identify qualifying activities and calculate costs, including employee wages, supplies, and contractor fees.
- Work with a tax professional who has experience with R&D credits, to make sure all expenses listed are eligible for R&D tax credits.
- Complete IRS Form 6765, and submit it along with the company tax return. Keep a digital copy of this form. You'll need to send a copy to us during the following steps.
Once Form 6765 has been filed and approved by the IRS:
- Complete Form 8974.
- Submit a support request, and attach a copy of the completed Form 8974, along with a copy of the approved Form 6765.
- Once we have the completed Form 8974, we can apply the credit to your Form 941.
- We'll send you a copy of the R&D return we file.
- Once the IRS has processed the Form 941, you'll receive a tax refund for the amount claimed for the period.