October 1, 2025, will be an important date for the IRS in terms of keeping the stakeholders' eye on U.S. businesses that claimed research and development credits. The agency now extended the comment deadline for public input on the draft instructions for Form 6765, which serve to claim the Credit for Increasing Research Activities, more popularly known as the research credit or R&D tax credit.
The new Section G reporting requirement would be set up as an optional reporting element in 2025, becoming mandatory in 2026, rather than implemented at the beginning of 2025 as hitherto proposed. In addition, the IRS also issued some clarifying instructions as to how the refund process might be administered for those taxpayers claiming refunds for research credits, as well as for transition purposes.
Key Changes and 2025 Timeline for Form 6765
Here are some of the major changes and timeline to fill the Form 6765:
IRS Extends the Feedback and Comment Period
- In response to appeals from stakeholders, the IRS has extended the comment period for the draft Instructions for Form 6765 to March 31, 2026.
- Tax professionals, businesses, and industry organizations can provide input on the draft, especially concerning the proposed additional reporting requirements and compliance burden.
Why Section G is still optional for the 2025 Tax Year
- Section G will be optional for all filers in 2025 (tax returns filed in 2026) and asks for more detailed information about each component of the businesses and the related research activities.
- While the section was intended to enhance transparency, the effective date was delayed to respond to the concerns about complexity and added burden.
Mandatory Section G is now delayed to 2026 and beyond.
- For tax year 2026 (processing year 2027) and years going forward, Section G will be mandatory for all filers unless there are exceptions that apply.
Two exceptions will allow Section G to be optional in 2026:
- Qualified small business (QSB) taxpayers applying for a payroll tax credit that is less than the maximum available, and (as defined under IRC Section 41(h)(3)).
- Taxpayers with total QREs less than or equal to $1.5 million, and total gross receipts less than or equal to $50 million (calculated at the control group), with a research credit on an original return.
Research Credit Claim Transition Period Extended
- The IRS has extended the transition period, which permits taxpayers a 45-day benefit to perfect (amend or provide additional claim support) a research credit refund claim before the IRS makes a final determination.
- This important protection will remain in effect until January 10, 2027, allowing businesses adequate time to comply and to respond to potential requests for documentation.
Who Is Affected by the Latest IRS Updates?
- Both large and small companies throughout the United States in types of industry that invent or develop new product(s), process(es), or technology.
- New businesses and qualifying small businesses are looking to offset payroll taxes with the research credit.
- CPAs, tax preparers, and finance teams who handle R&D credit filings and compliance for their company or their clients.
- Any firm filing a claim for the R&D credit on Form 6765, especially those that previously commented on the new reporting obligations in the draft instructions.
What is Section G on Form 6765?
The addition of Section G to Form 6765 was made to greatly expand the disclosure requirements for taxpayers seeking the R&D tax credit. Section G includes:
- A list of all business components for which the credit is being claimed.
- A description of qualified research activities for each business component.
- Qualified employee wage expenses per claim year, for each business component, plus a list of qualified supplies expenses and contract research expenses, per claim year.
Although Section G was supposed to be required for tax year 2025, the IRS received comments about taxpayers needing more time, support, and clarity; thus, it was extended.
Why Did the IRS Extend the Feedback and Implementation Timelines?
Let us understand the reasons behind the IRS extending feedback and implementation timelines:
- Stakeholder Concerns: Multiple industry and taxpayer groups expressed that the new reporting requirements, including Section G, would create a significant administrative burden on taxpayers, especially complex organizations with many R&D functions.
- Desire for Additional Input: The IRS acknowledged that broader industry input was essential for developing instructions that would provide transparency while balancing the limitations of processing and collecting the data.
- Administrative Burden and Readiness: Allowing a further year means taxpayers, software vendors, and preparers will have time to prepare their systems and to train their staff.
- Fair and Effective Tax Administration: The IRS identified the interest in fair and effective enforcement and administration as a driving force.
New Process for Perfecting a Research Credit Refund Claim
Taxpayers wishing to seek a research credit refund for returns postmarked after June 18, 2024, need to:
- Identify all business components related to the Section 41 research credit claim.
- Describe all research provided for each component for the tax year.
- Provide the totals of qualified wage expenses, supply expenses, and contract research expenses for that tax year.
- Taxpayers will have a 45-day window to perfect claims with missing obligations. All information should be sufficient for an IRS agent to independently verify the claim.
Navigating Section G: Implications for 2025 and Beyond
Here is what businesses should do for 2025 filings:
- Section G will be optional for all filers for the 2025 tax year. Businesses should review draft instructions and decide how to collect and report data that will be mandatory moving forward.
- Begin to plan for a means to capture project-specific wages, supplies, and contract research costs.
- Work with members of industry associations and professional organizations to provide input to the IRS before the March 31, 2026, deadline.
- Train staff and expand or upgrade accounting systems to prepare for increased reporting long-term, starting in 2026.
For 2026 Filings, and Moving Forward
- Section G will be mandatory for most businesses (unless you fall under other exceptions).
- By the 2026 tax year, businesses should have methodologies in place to document information at the level of business component and project/activity.
- Qualified Small Businesses (QSBs) and QRE/gross receipts threshold will still have some flexibility.
IRS Request for Feedback: How to Participate
The IRS is seeking input from stakeholders to improve the instructions for Form 6765:
- Deadline: March 31, 2026.
How to submit feedback:
- Via email: lbi.rt.team@irs.gov subject line "Instructions for Form 6765"
- Via the Federal e-Rulemaking Portal.
- Via mail, following the guidance.
- The IRS anticipates having revised instructions available for tax year 2025 filers (returns filed in 2026) by January 2026.
- Stakeholder engagement is important, particularly for academic, technology, manufacturing, and small business stakeholders who utilize the research credit.
Extended Transition Period for Research Credit Refund Claims
Taxpayers can "perfect" claims for refunds of the research credit through January 10, 2027, by submitting or resubmitting to the IRS the missing required information within 45 days of submission, to the extent that an initial return or claim for refund did not include all required information. The safe harbor provides taxpayers the ability to amend an error or complete a filing instead of receiving a 'no' to returns filed with the IRS.
Required information includes:
- All relevant business components;
- Research activities for each business component;
- Qualified expenses in each of the categories.
Best Practices for Form 6765 Compliance
Below are the best practices to comply with Form 6765:
- Create Cost Centers at the Project Level: Identify costs in your accounting software processes to solve research projects.
- Create Timesheets: Employees involved in R&D should capture their time towards specific events and components.
- Maintain Current Documentation: Throughout the year, maintain documentation for the project's objectives, procedures, and results.
- Frequent Review of IRS Guidance: As you transition to this method, it will consume resources from your practice to monitor updates.
- Engage Specialization: R&D tax credit specialists help you file an audit-ready claim and an easier substantiation process.
The IRS has provided important relief and discretion by extending the feedback period for Form 6765 and delaying the enforcement of compliance with Section G as taxpayers become acquainted with the new R&D credit compliance process. For the 2025 tax year, businesses may submit Form 6765 without Section G while also providing feedback to organizations offering reasonably descriptive instructions and implementing clarity for future tax years.
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However, businesses will need to prepare ahead of time: enhance their R&D tracking systems, educate employees, collaborate with tax return preparers, and remain aware of any updates. If you comply with current tax filing requirements, you will be able to easily transition to changes and enjoy valuable tax credits going forward.
Contact The Fino Partners today to get more information about compliance guidelines of the IRS and stay updated on latest updates from the government.
