IRS Form 6765, also known as the Credit for Increasing Research Activities, is used to calculate and claim the federal research credit. Businesses that conduct qualifying research may use this form to determine their eligible credit, make certain elections, and, when eligible, elect to claim part of the credit against payroll taxes.
If you're wondering how to complete IRS Form 6765, the first step is to identify your qualifying research activities and gather documentation for qualified research expenses (QREs). The current IRS instructions should always be reviewed because requirements can vary by tax year and taxpayer situation.
What Is IRS Form 6765?
Form 6765 is used to figure and claim the federal credit for increasing research activities. It can also be used to make the reduced-credit election under Section 280C and to elect the payroll-tax-credit treatment available to certain qualified small businesses.
The form may involve expenses such as:
Qualified research wages
Qualified supplies
Certain contract research expenses
Certain computer rental or lease expenses
Other qualifying research-related amounts
Not every research or development expense automatically qualifies. The underlying activity and expense must meet the applicable requirements.
Who May Need to Complete Form 6765?
Businesses that conduct qualifying research activities and claim the federal research credit may need to complete Form 6765.
Potential research activities can occur in industries such as:
Software development
Engineering
Manufacturing
Technology
Product development
Process improvement
Experimental design
Product testing
Industry alone does not determine eligibility. The specific research activities and expenses must be evaluated under the applicable tax rules.
Partnerships and S corporations have specific filing requirements for Form 6765, while certain other taxpayers may report the credit directly through Form 3800 when their only source of the credit is a pass-through entity.
What Information Do You Need Before Completing Form 6765?
Gather your records before starting the form.
Useful documentation may include:
Payroll Records
Collect wage information for employees who performed qualified research services.
Research Documentation
Keep records describing the technical objectives, experimentation, development, testing, and research performed.
Supply Records
Gather invoices and accounting records for supplies used in qualifying research.
Contractor Records
If outside contractors performed research, collect contracts, invoices, payment records, and project documentation.
Accounting Records
General ledgers, financial reports, project accounting records, and other supporting documents can help establish how QREs were calculated.
How to Complete IRS Form 6765 Step by Step
The exact sections you complete depend on your tax situation. The following provides a general overview of the current form and instructions.
Step 1: Identify the Taxpayer
Enter the taxpayer information requested on Form 6765.
Make sure the name and identifying information correspond with the applicable federal tax return.
Step 2: Answer the Section 280C Question
At the top of Form 6765, Item A asks whether you're electing the reduced credit under Section 280C.
The current IRS instructions state that taxpayers must check Yes to elect the reduced credit or No not to elect it on an original timely filed return, including extensions. The election generally cannot be made or changed on an amended return.
Because this election can affect the tax treatment of the credit, review the current instructions before making your choice.
Step 3: Determine Whether Controlled-Group Rules Apply
Item B asks whether the taxpayer is a member of a controlled group or business under common control.
If the answer is yes, additional information and an attachment may be required.
The IRS instructions explain that controlled-group members have specific requirements for reporting QREs and calculating the group's credit.
Don't skip this question if your business is part of a related group of entities.
Step 4: Identify Qualified Research Activities
Before calculating the credit, determine which activities actually qualify as research.
The IRS's research-credit rules generally require qualifying research to satisfy a four-part test involving:
A permitted purpose
Elimination of uncertainty
A process of experimentation
A technological basis
The test should be applied to the relevant business component rather than assuming that every activity performed by a research department qualifies.
Activities specifically excluded under the applicable rules should not be treated as qualified research.
Step 5: Calculate Qualified Research Wages
Qualified wages can be an important component of QREs.
Review employee payroll records and determine which wages relate to qualified research services.
For example, an employee might spend part of their time developing and testing a new product and the rest of their time performing administrative work.
The calculation should reflect the portion attributable to qualifying research rather than automatically including the employee's entire compensation.
Maintain records showing how the allocation was determined.
Step 6: Calculate Qualified Supplies
Next, identify supplies that meet the requirements for qualified research.
Examples may include materials consumed during experimentation, development, or testing.
Don't automatically include every item purchased by an engineering or research department.
Review each expense and retain documentation showing its connection to qualifying research.
Step 7: Review Contract Research Expenses
Businesses sometimes pay outside organizations or individuals to conduct research.
Certain contract research payments may qualify, subject to applicable requirements.
Keep:
Contracts
Invoices
Payment records
Project descriptions
Research reports
Technical documentation
These records can help establish what research was performed and how the expense relates to the credit.
Step 8: Choose the Applicable Credit Calculation
Form 6765 provides different methods for calculating the research credit.
The current instructions include:
Section A — Regular Credit
Section B — Alternative Simplified Credit (ASC)
The IRS explains that eligible taxpayers may want to calculate the credit under both available methods before determining which applicable method provides the appropriate result.
Regular Credit
Section A is used when applying the regular research-credit calculation.
Alternative Simplified Credit
Section B is used when the taxpayer elects or has previously elected the Alternative Simplified Credit and is not revoking that election.
The ASC election has specific rules regarding when it is made and whether it can be revoked for a later year.
Step 9: Complete Section C
Section C is used to determine the current-year research credit after the applicable calculations have been completed.
The resulting credit may then be reported according to the taxpayer's entity type and applicable tax-return requirements.
Different rules can apply to corporations, partnerships, S corporations, estates, trusts, and other taxpayers.
Step 10: Review the Payroll Tax Credit Election
Certain qualified small businesses may elect to use a portion of their research credit against payroll tax.
The IRS instructions state that the maximum research credit a qualified small business can apply against payroll tax liability is $500,000.
Section D is used for the qualified small business payroll tax election and payroll tax credit.
The election has specific eligibility requirements, so don't assume that every small business can use this option.
Step 11: Complete Section E When Required
Section E provides additional information about the qualified research expenses reported on the form.
The current instructions state that if QREs are reported on line 48, Section E must be completed.
The section may require information about business components and certain expense categories.
Review the applicable instructions carefully rather than completing only the basic credit calculation.
Step 12: Complete Section F
Section F is the Qualified Research Expenses Summary.
The IRS instructions explain that Section F is used to indicate whether Section G is required and to report total QREs on applicable lines.
Depending on whether Section G is required, the amounts in Section F may be taken from the relevant Section G columns or calculated directly from the taxpayer's records.
Step 13: Understand Section G
Section G is titled Business Component Information.
For tax years beginning before 2026, Section G is optional for all filers under the December 2025 instructions, subject to special rules for amended returns.
For tax years beginning after 2025, Section G becomes required subject to the applicable exceptions and reporting guidelines.
When Section G is required, taxpayers generally need to report information for business components representing at least 80% of total QREs, subject to the applicable top-50 limitation and other rules.
What Is a Business Component?
A business component can generally be a product, process, computer software, technique, formula, or invention that meets the applicable requirements.
The research-credit rules require the four-part research test to be applied separately to each business component.
Examples could include:
A newly developed software product
An improved manufacturing process
A new technical product
An experimental production method
An improved technology system
Documentation should clearly explain the research performed for each applicable business component.
What Records Should You Keep for Form 6765?
Good documentation is essential when calculating a research credit.
Consider maintaining:
Employee payroll records
Time-tracking records
Project descriptions
Research notes
Technical documents
Testing records
Prototypes
Invoices
Contractor agreements
General ledger reports
QRE calculations
Business-component information
The documentation should demonstrate both what research was performed and how the claimed expenses were calculated.
Common Mistakes When Completing IRS Form 6765
Including Every R&D Expense
Not every expense associated with research and development qualifies.
Evaluate each expense under the applicable requirements.
Using Outdated Instructions
IRS forms and instructions can change.
Always use the instructions applicable to the tax year being filed.
Claiming 100% of Employee Wages
Employees may perform both qualified and nonqualified activities.
Use appropriate records to determine the amount attributable to qualified research.
Ignoring Controlled-Group Rules
Related entities may be subject to controlled-group or common-control rules.
Review Item B carefully.
Poor Documentation
A calculation without adequate supporting records can create difficulties if the claim is questioned.
Form 6765 and 2025 Tax-Year Changes
For taxpayers working on the 2025 tax year, it's especially important to use the correct version of the instructions.
The IRS's December 2025 instructions are designed for use with the January 2025 revision of Form 6765.
The IRS also clarified aspects of the January 2025 instructions concerning qualified research expenses and group reporting.
Therefore, taxpayers should avoid relying exclusively on older Form 6765 articles or examples.
Frequently Asked Questions
How do I complete IRS Form 6765?
Start by identifying qualifying research activities and gathering records for qualified wages, supplies, contract research expenses, and other applicable costs. Then complete the sections that apply to your tax situation and use the current IRS instructions for the relevant tax year.
What is Form 6765 used for?
Form 6765 is used to calculate and claim the federal credit for increasing research activities. It can also be used for the Section 280C reduced-credit election and certain payroll-tax-credit elections.
What expenses can be included on Form 6765?
Potential QRE categories include certain research wages, supplies, contract research expenses, and qualifying computer rental or lease costs. Eligibility depends on the applicable rules.
Is Section G required on the 2025 Form 6765?
For tax years beginning before 2026, Section G is optional for all filers under the December 2025 instructions, subject to applicable amended-return rules.
Can a small business claim the research credit against payroll taxes?
Certain qualified small businesses may elect to apply a portion of the research credit against payroll taxes, subject to eligibility requirements. The current instructions state a maximum of $500,000.
Can software development qualify for Form 6765?
Certain software development activities may qualify if they satisfy the applicable research-credit requirements. Software development by itself does not automatically qualify.
Do I need documentation for Form 6765?
Yes. Maintain records that substantiate the research activities, business components, qualified expenses, calculations, and applicable elections.
Need Consultation About Form 6765?
If you're unsure how to complete IRS Form 6765, need help understanding qualified research expenses, or want to discuss the research credit before filing, you can call 1-866-513-4656 for consultation.
Before submitting your return, verify the current IRS form and instructions for your specific tax year. A qualified tax professional can also evaluate your individual circumstances and determine which rules and elections may apply.
This article is for general informational purposes only and is not tax or legal advice. Form 6765 requirements can depend on the taxpayer, entity structure, tax year, research activities, and applicable federal law.
Conclusion
Learning how to complete IRS Form 6765 starts with identifying qualifying research activities and properly documenting the expenses connected with those activities.
Review the taxpayer information, Section 280C election, controlled-group status, qualified research wages, supplies, contract research expenses, and applicable credit calculation method. Then complete the sections required for your specific circumstances.
For 2025 tax-year filings, use the current IRS guidance associated with the January 2025 revision of Form 6765 and the December 2025 instructions.
When the credit is substantial or your eligibility is uncertain, consider obtaining professional tax advice before filing.
