global Tax IRS Waives 2 Key R&D Tax Credit Refund Claim Requirements June 18, 2024 Taxpayers…the IRS announced that it is easing the research and development (R&D) tax credit refund claims process. Here’s what you should know. The IRS has announced that as of June 18, 2024, taxpayers are no longer subject to the stringent research & development (R&D) tax credit refund process. Read on to see what they’ve eased up on. What is the research and development (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. 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. Check out our blog, IRS Extends Time to Perfect R&D Claims to 2025 for more details. What is the refund claim? An R&D credit refund refers to a tax refund that businesses can receive as a result of claiming the research and development (R&D) tax credit. Often times a business owner will realize they have not claimed all the R&D credits they are entitled to after initially filing their tax return. You can submit an amended return to claim any additional credits as long as it is filed within 3 years after the date you filed your original return or 2 years after the date you paid the tax, whichever is later. But in 2021, the IRS added stringent documentation requirements to the refund claim process. What’s new? Effective June 18, 2024, the IRS has revisited its stringent rules for claiming a refund. Taxpayers are NO LONGER REQUIRED to provide this information with their refund claim: The names of those who performed each research activityThe information each person sought to discover What is the reason for the change? The IRS has eased up on the refund claim process due to complaints about the documentation requirements. Bear in mind that the two pieces of information listed above may still be requested if your refund claim in selected for examination. Additionally, if you have already submitted a claim for a refund or you submit a new claim, you still have the opportunity to perfect that claim (the opportunity to “fix” any deficiencies before the claim is outright denied) until January 10, 2025. Taxpayers are still required to provide the following information: Specify all business components to which the claim relates for that yearSpecify all research activities performed Identify the total qualified employee wage expenses, total qualified supply expenses and total qualified contract research expenses for the claim year. “Now with the eased requirements, it is a good time to take a look at your R&D activity and make sure you are taking full advantage of the credit. An amended return is a great way to capture credits you did not capture, providing a refund on amended returns and instant tax relief in your current year. And if a credit cannot be used immediately, it can be carried forward up to 20 years.” - Deborah Pallasch
