Form 6765 Instructions explain how to claim the federal Research and Development (R&D) tax credit, what expenses qualify, and how to file correctly for tax years including 2024 and 2025.

Table of contents

1. What is Form 6765 and who files it
2. Key sections and how to complete them
3. What counts as qualified research expenses (QREs)
4. Elections available on Form 6765 (ASC and payroll tax credit)
5. New reporting items and Section G update (2025 changes)
6. Best practices, documentation checklist, and common mistakes
7. How BooksMerge helps and contact info
8. Conclusion and next steps
9. FAQ

What is Form 6765 and who files it

Form 6765 is the official IRS form used to calculate and claim the Credit for Increasing Research Activities, widely known as the R&D tax credit. Businesses of various types—including corporations, partnerships, and S corporations—use this form to reduce their tax liability or, in certain cases, to elect a payroll tax offset. Properly completing the form is essential, which is why following the Form 6765 Instructions carefully can prevent costly errors and ensure that all eligible research expenses are correctly claimed. Taxpayers who are not corporations may also use the form to figure their credits or make special elections, making it a critical tool for maximizing R&D tax benefits. Following the instructions step by step not only keeps your filings IRS-compliant but also streamlines audits and minimizes the risk of rejected claims.

Key sections and how to complete them

Form 6765 is organized into sections that guide you from basic calculations to elections and supplemental information.

High level steps

• Section A — Regular credit: Use if you compute the traditional credit.
• Section B — Alternative simplified credit (ASC): A simpler calculation often used by small businesses.
• Section C — Elections: Elect reduced credit under section 280C or payroll tax election when applicable.
• Section F & G — Summaries and business component reporting: Summarize QREs and, depending on the year and rules, provide component-level detail. 

Practical tip: Start in Section B if your R&D spending is straightforward. The ASC often saves time and reduces audit complexity for startups and small firms.

What counts as qualified research expenses (QREs)

Qualified research expenses generally include:

• Wages for employees performing qualified research.
• Supplies used in R&D.
• Contract research payments to third parties, subject to limits.
• Basic research payments under certain contracts.

Keep contemporaneous documentation linking activities to experiments, hypotheses tested, and results. The IRS highlights that accurate categorization and supporting records are essential if you are claiming the credit. 

Elections available on Form 6765 (ASC and payroll tax credit)

Two elections commonly used:

• Alternative Simplified Credit (ASC): Eases calculation by using recent history rather than an extensive base calculation.
• Payroll tax credit election: Qualified small businesses can elect to apply part of the R&D credit against the employer portion of Social Security tax, which can be a cash-flow win for startups without income tax liability. Make sure you meet the defined eligibility thresholds before electing. 

Quick Tip: Complete IRS form list for businesses and individuals to stay compliant, claim credits, and file taxes accurately.

New reporting items and Section G update (2025 changes)

The IRS revised Form 6765 and its instructions beginning with drafts released in late 2024 and finalized guidance in 2025. Key developments to watch:

• The updated form adds business component reporting to help the IRS understand which parts of a business generated the R&D activities. Initially optional, requirement timing has shifted by IRS guidance and later announcements. 
• Timelines and phased implementation changed through 2025 and beyond; some reporting deadlines were delayed to give taxpayers time to adjust. Professional advisories (PwC, KPMG) flagged phased reporting and the need to prepare for component-level detail. If your tax year began in 2024 or 2025, check the latest IRS clarifications when preparing returns. 

Why this matters: New fields increase disclosure and may change how you document QREs and allocate expenses. Start organizing component-level records now, even if the requirement is optional for your year.

Best practices, documentation checklist, and common mistakes

Short paragraphs, big wins.

Documentation checklist

• Project descriptions with technical uncertainty and hypothesis.
• Time logs or payroll reports showing time on qualified projects.
• Invoices and receipts for supplies and contract research.
• Versioned technical documents or lab notes showing iterations and tests.

Top pitfalls

1. Vague project descriptions that do not show technical uncertainty.
2. Mixing routine work with qualified innovation without clear allocation.
3. Late or missing contemporaneous records.

Audit readiness: Keep a concise audit file that ties each dollar claimed to the supporting evidence. That file should answer: what was the technical problem, what tests were run, who did the work, and how much was spent.

How BooksMerge helps and contact info

At BooksMerge, we specialize in translating technical R&D work into IRS-ready documentation and accurate Form 6765 preparation. We help clients choose the right election (ASC or regular), build an audit-ready file, and adapt to the new reporting structure. Call us for a tailored review at +1-866-513-4656.

Also, for small-business owners looking to improve financial literacy alongside claiming credits, check our research and insight page here: financial literacy statistics. 

Conclusion and next steps

Form 6765 can unlock significant tax savings, but the form and instructions have evolved. Use the IRS instructions and the updated form as your baseline, document thoroughly, and plan for component-level reporting in upcoming years. If your company is exploring eligibility or preparing for an audit, consider professional help to translate technical work into the structured evidence the IRS expects. 

Frequently Asked Questions

Q: Who must file Form 6765?

A: Taxpayers claiming the R&D credit should file Form 6765. Partnerships and S corporations that claim the credit attach it to their returns. 

Q: Can a startup use the payroll tax election?

A: Yes, eligible qualified small businesses can elect to apply up to a portion of the credit to payroll tax. Check eligibility rules and consult your adviser. 

Q: What is Section G and is it required for my tax year?

A: Section G requests business component information. The IRS has phased the rollout and updated timelines; verify current year filing requirements since implementation timing changed. 

Q: How far back can I claim R&D credits?

A: In many cases you may amend prior returns to claim missed credits, but timing, statutes of limitations, and documentation requirements apply. Consult IRS guidance and your tax counsel. 

Q: Where can I read the official instructions?

A: Download the official IRS Instructions for Form 6765 (Rev. January 2025) from IRS.gov for the definitive guidance. 

Read Also: Form 6765 Instructions