IRS issues revised R&D tax credit instructions in time for tax season 2022

The Internal Revenue Service issued an early release draft this month of instructions for IRS Form 6765, “Credit for Increasing Research Activities,” to properly reflect legislation regarding the determination of qualified wages that impacts Lines 5 and 24 from the December 2020 revision.

Under legislation enacted in December 2020, wages for qualified services do not include:

1. Wages paid to or incurred for any employee after Dec. 31, 2020 and before July 1, 2021, if the employer uses the same wages to claim the Employee Retention Credit (“ERC”) on an employment tax return such as IRS Form 941, “Employer’s Quarterly Federal Tax Return”; and
2. Wages paid to or incurred for any employee generally after December 27, 2019 and before April 17, 2021, if the employer uses the same wages to claim the 2020 qualified disaster ERC on IRS Form 5884-A, “Employee Retention Credit for Employers Affected by Qualified Disasters.”

As a reminder, do not file draft forms and do not rely on draft forms, instructions, and/or publications for filing until THEY’RE finalized by the IRS. The draft instructions for Form 6765 can be reviewed at https://www.irs.gov/pub/irs-dft/i6765–dft.pdf. The IRS is currently accepting comments in connection to the draft instructions at https://www.irs.gov/forms-pubs/comment-on-tax-forms-and-publications. All tax filing forms and instructions are expected to be finalized by the IRS before the end of January 2022.