On Jun. 12, 2025, the NYCPA C-Corporation Tax Committee hosted a one-hour CPE to unpack the IRS’s comprehensive redesign of Form 6765, Credit for Increasing Research Activities, better known as the R&D Tax Credit form. Against a backdrop of rising innovation spending and intensified audit scrutiny, this four-page form now demands richer narrative disclosures, granular cost allocations, and expanded controlled-group reporting. Practitioners who grasp these changes early will position their clients to claim credits confidently while minimizing audit risk.

A Four-Decade Innovation Incentive in Brief

Since its 1981 debut under the Economic Recovery Tax Act, the R&D credit has evolved from a stopgap stimulus to a permanent pillar of US innovation policy. Originally, only research “new to the world” qualified, effectively excluding internal process improvements and software development. The 2003 modification to “new to the taxpayer” broadened eligibility to include incremental enhancements and proprietary software. The PATH Act of 2015 made the credit permanent and introduced a $250,000 payroll tax offset for qualifying small businesses—an amount doubled to $500,000 by the Inflation Reduction Act of 2022. Over its lifetime, the credit has spurred R&D investment across pharmaceuticals, software, manufacturing, and beyond, catalyzing advances that might otherwise have stalled for cash-strapped innovators.

Why the IRS Revamped the Form

Despite its benefits, the R&D credit has attracted its share of improper claims—so much so that it landed on the IRS’s “Dirty Dozen” list of tax scams in 2018. To combat overstatements and streamline audits, the 2024 Form 6765 introduces four interlocking enhancements:

1. Narrative Project Descriptions. Filers must now provide concise summaries of each research initiative's objectives, methods, and outcomes, tying narratives directly to expense categories. This “story behind the numbers” equips IRS examiners with context before diving into worksheets.
   
   
2. Component-Level Cost Reporting. Taxpayers can identify up to 50 business components (e.g., new product lines, software modules, manufacturing processes) and allocate at least 80 percent of Qualified Research Expenses (QRE) among them. This is by far the biggest change to the form, requiring a level of detail not previously mandated.
   
   
3. Detailed Wage Breakouts. Payroll entries are no longer monolithic. Wages must be segregated into direct research, supervisory, and support functions—mirroring the IRS’s audit-level classifications.
   
   
4. Controlled-Group Disclosure. A new checkbox and attachment require members of a controlled group to list each entity’s EIN, NAICS code, and proportional share of QREs.
   
   

By embedding these requirements into the form itself, the IRS front-loads critical data collection, reducing ambiguous filings and enabling early identification of high-risk claims.

Form Layout and New Section Walk-Through

Where the pre-2024 Form 6765 spanned two pages, the updated version extends to four, reorganizing fields into seven core sections that guide preparers through a logical, step-by-step workflow.

Note that all sections are required for tax year 2024 except for Section G, which is optional for all taxpayers in 2024.

• Top Matter (Item A & B). The Section 280C election now appears as a standalone checkbox alongside a controlled-group indicator. Practitioners must attach detailed schedules for each group member, ensuring no overlooked entities.
  
  
• Sections A & B: Credit Calculations. The Regular Credit and Alternative Simplified Credit worksheets are decoupled from raw Qualified Research Expenditure (QRE) inputs. Instead, totals flow from the consolidated summary in Section F.
  
  
• Section E: Other Information. New lines solicit officer wages included in QREs, acquisitions or dispositions affecting R&D activities, and whether ASC 730 accounting applies for large taxpayers (≥$10 million of audited research assets). The corporation determines who qualifies as an officer under the state's laws in which the company was incorporated. The Form 6765 Instructions do not clarify whether officer wages are only required to be completed by corporations, as the instructions reference “the corporation” and “corporate officers” and refer taxpayers to the state law of incorporation to define “officers.” This uncertainty here may require additional guidance from the IRS regarding pass-through entities (e.g., LLCs, S-Corps) filling out the form.
  
  
• Section F: Qualified Research Expense Summary. All QRE categories—wages, supplies, computer leases, contract research—are tallied here before funneling into Sections A or B. This centralization removes duplication and clarifies inputs.
  
  
• Section G: Business Component Reporting. Instead of a lump-sum report of qualified research expenses, companies are required to allocate the costs across up to 50 components, specifying names, types (e.g., product, process, all other), and, for software developers, designations such as Internal Use Software (IUS) or Dual-Function Software (DFS). Wages, supplies, computing, and contract research are each broken out by business components.

This revised layout emphasizes completeness and narrative context, positioning preparers to catch omissions before filing.

Phased Implementation: One-Year Grace for Small Business Filers

Acknowledging the recordkeeping burden—especially for early-stage companies—the IRS built in a staggered rollout for tax years beginning after Dec. 31, 2023. Controlled-group reporting (Item B), Sections E and F, and the Section 280C election are mandatory for 2024 and beyond. Section G (component reporting) is optional for 2024 and for 2025 it’s only required if the filer’s total QREs do not exceed $1.5 million and gross receipts are $50 million or less, or if the filer elects the payroll tax offset. Full compliance with all sections becomes compulsory for 2025 filings unless the taxpayer qualifies for the exception to reporting of Section G. This phased approach offers smaller businesses a one-year runway to update accounting systems and internal controls.

Practical Steps for Practitioners

1. Evaluate and Upgrade Recordkeeping. Work with clients to implement project-cost tracking within ERP or accounting systems. Ensure payroll software can tag hours to research activities, supervisory oversight, and support roles.
   
   
2. Reconcile Prior Year Claims. Compare 2023 credit filings against the new narrative and component requirements. For significant discrepancies, consider filing amended returns to solidify positions before the next audit cycle.
   
   
3. Revise Engagement Letters. Update scopes to reflect expanded preparer responsibilities—drafting narratives, mapping components, compiling controlled-group disclosures—and factor these tasks into fee arrangements.
   
   
4. Coordinate with R&D Consultants. Many clients engage third-party firms for technical cost studies. Institute protocols to verify that their deliverables align with Form 6765 sections, include required schedules, and reconcile to general ledger accounts.
   
   
5. Educate Clients on Ongoing Compliance. Recommend periodic internal reviews of project accounting, record retention policies (retain detailed time logs and expense substantiation for at least seven years), and controlled-group communication protocols.
   
   
6. Monitor State Conformity. While New York and most states historically mirror federal R&D credit rules, legislative sessions this year may introduce analogous reporting enhancements. Stay abreast of state-level guidance to prevent unexpected adjustments.
   
   

Looking Ahead

The overhaul of Form 6765 represents a paradigm shift toward transparency, precision, and front-loaded compliance. Narrative project descriptions counteract boilerplate filings, component breakdowns reveal where innovation dollars flow, and refined wage reporting aligns tax claims with audit criteria. Practitioners who embrace these changes by upgrading systems, refining workflows, and guiding clients through a phased transition will help innovators of all sizes navigate the R&D incentive landscape with confidence.

Jay Persaud, CPA, is a tax manager at Shay CPA P.C., where he leverages his deep expertise in tax planning, financial reporting, and regulatory compliance to help clients navigate complex accounting and tax challenges. With a keen eye for detail and a commitment to accuracy, Jay works closely with small and mid-sized businesses across diverse industries—conducting R&D credit studies, reviewing tax returns, and developing customized strategies that align with each client’s unique goals and growth objectives. Beyond his technical proficiency, Jay is recognized for his collaborative approach and clear communication style. He holds a master’s degree in taxation from Baruch College and is an adjunct instructor at CUNY City Tech. His passion for accounting and tax underscores his dedication to both his professional development as well as fostering the next generation of accounting talent.