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IRS Expands Timeline to Backup R&D Credit Claims

January 10, 2022

Attention businesses with research and experimental expenses…you will want to read up on new IRS guidance regarding the timeframe for perfecting research credit claims.

Last October the IRS issued new requirements, which begin January 10, 2022, which set forth what information taxpayers must include for research credit refund claims in order for the R&D tax credit claim to be considered valid. Recently, the IRS has released updated guidance that will impact the timeframe for perfecting research credit claims.

Recent R&D changes

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Here are the highlights:

Per the October IRS memorandum, in order for a R&D tax credit claim to be considered valid taxpayers must:

  • Pinpoint all the business components to which the Section 41 research credit claim relates for that year.
  • Identify all research activities performed (for each business component) and name the individuals who performed each research activity, as well as the information each individual sought to discover.
  • Specify the total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year (using Form 6765, Credit for Increasing Research Activities).

What’s new in January 2022?

The deadline to provide additional or missing information for those claims has been expanded.

Companies originally had a one-year transition period during which taxpayers would have 30 days to perfect a research credit claim for refund prior to the IRS' final determination. The IRS announced recently that the timeframe for perfecting the claim has been increased to 45 days in response to requests from both industry and accounting experts.

Updated FAQs

Be sure to check out updated FAQs on the R&D credit, which can be found here:

R&D tax credits can be a vital part of an overall plan to reduce your liabilities and increase your cash flow and a good quality study should already contain much of the information required, but the IRS’ response to calls for more time to meet the increased IRS security is a welcome announcement. Do not hesitate to contact any member of our KLR service team for assistance.

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