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IRS Extends Time to Fix R&D Credit Claims

October 17, 2022

The Internal Revenue Service has announced that companies will have until January 10, 2024 to perfect their claims for the research and development (R&D) tax credit. Here are the details.

Did you submit a claim for a tax refund for the research and development (R&D) tax credit? The IRS has extended the time to perfect a R&D claim for refund prior from January 10, 2022 to January 10, 2024. We have the details here.

What is the R&D tax credit?

The Research & Development (R&D) tax credit is for businesses of any size that design, develop or improve products, processes, techniques, formulas, or software.

What does the credit apply to?

Qualified research must meet the following four criteria:

  • New or improved products, processes, or software
  • Technological in nature
  • Elimination of uncertainty
  • Process of experimentation

Eligible costs include employee wages, cost of supplies, and contract research expenses.

How much is the credit?

The R&D Tax Credit allows a federal dollar-for-dollar credit of roughly 10-16% of eligible spending for new and improved products and processes. Many states also allow credits for eligible in state spending.

What is the extension?

Last October the IRS issued new requirements, which were originally set to 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.

The guidance stipulates that 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).

The IRS has since extended this deadline for one year, until January 10, 2024.

Questions? Contact us.

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