Federal Tax Alert: The IRS Updates Transition Period for the R&D Tax Credit

On Friday, September 30th, the IRS announced that the transition period during which taxpayers are provided 45 days to cure a R&D tax credit claim for refund under Sec. 41 of the Code prior to the IRS’s final determination on the claim has been extended through January 10th of 2024.

Taxpayers are still required to provide Form 6765 with all of the following data at the time of the filing of the amended tax returns including:

• A listing of the business components to which the R&D tax credit claim relates
• A listing of the R&D activities performed at the business component levels
• A listing of the individuals who conducted R&D by business component
• All the information each individual sought to discover by business component
• The total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year.

The IRS will be better able to determine upfront whether to pay the refund immediately or further review the claim. In the event the IRS determined there is missing information, a taxpayer will have 45 days to cure the claim with a possible resubmittal before the IRS makes their final determination. If a claim is accepted, there will still be three open statute years for the IRS to conduct a full audit and possible disallowance at a later time. To that end, it is critical to ensure compliance with all the rules and regulations under Sec. 41 of the Code have been satisfied to avoid paid preparer penalties.

Veritax Advisors Insights: Taxpayers considering filing a R&D tax credit claim for refund should contact us today to determine if your fact pattern aligns with the scope of the federal program requirements to capture this valuable tax credit.