The IRS recently shared it receives thousands of R&D claims for credits in the hundreds of millions of dollars from corporations, businesses, and individual taxpayers. Claims for the research credit under Section 41 of the Tax Code are examined in a substantial number of cases and take up significant time and resources for both the IRS and taxpayers.
In a recent Chief Counsel memorandum, the agency disclosed it will need more detailed information about all the business components the credit claims are related to that year. Businesses will need to identify all the research activities performed, and identify the individuals who performed each research activity, along with the information they sought to discover. This can all be done using Form 6765, Credit for Increasing Research Activities.
Regarding the statute of limitations, the IRS Chief Counsel advised there are no statutory provisions specific to research credit claims, but suggested general rule about two to three-year periods. According to the spokesperson, “The amount of the credit or refund shall not exceed the portion of the tax paid within the period immediately preceding the filing of the claim equal to three years plus any extension of time for filing the return. If no claim was filed within such three-year period, the amount of the credit or refund shall not exceed the portion of the tax paid during the two years immediately preceding the filing of the claim.”
The IRS said it would offer a grace period until January 10, 2022, before requiring the inclusion of this information with Section 41 research credit claims for refunds that have been filed on a timely basis. Keep the coast clear and allow our experienced professionals at Wessel & Company to ensure your business receives the credits you are entitled to. Give us a call at 814.536.7864 and start your tax planning today.