In February, the IRS released a significantly revised version of Form 6765 and its instructions, doubling the form's length and introducing numerous procedural requirements that affect how your clients claim the R&D tax credit. If your clients engage in engineering for others or conduct internal R&D, these changes are especially relevant—and they're likely coming to you for guidance.

Some of your clients may already be worried that these changes could disqualify them or that claims will be rejected based on formatting or procedural grounds. The reality is that while the IRS is accepting feedback on the new instructions until June 30, 2025, these new requirements are already in effect, and they necessitate a more proactive, detail-oriented approach than ever before.

Even if your clients are used to managing their credit calculations internally or through a third-party provider focused solely on the numbers, the new Form 6765 introduces additional documentation burdens and compliance risks. It's not that the qualification criteria have changed—the R&D tax credit remains a valuable opportunity. What's changed is the level of substantiation required before filing.

Ultimately, the IRS is signaling that it wants cleaner, better-documented claims, not fewer claims. Well-prepared clients will still benefit from the credit, and those working with proactive CPAs will be in the best position to do so.

What’s Changed for 2024 Filings?

Section E - New Data Points Required with Filing

Section E requires additional details designed to help the IRS triage returns and identify potential issues. These include:

• Total officer compensation (not just QREs)

• Number of business components

• ASC 730 directive usage

• Acquisitions or dispositions during the tax year

• New QRE categories that were not claimed in prior years

While these disclosures don’t affect the credit calculation, they must be submitted with the return. Missing information could result in claims being disallowed without an audit or notice.

Sampling Plans Must Be Attached (If Used)

If a client uses statistical sampling to estimate QREs, the IRS requires a written sampling plan to be attached to the filing. This plan must conform to Revenue Procedure 2011-42 and Revenue Procedure 2004-29, both of which outline technical requirements for statistical validity. Many taxpayers may not be aware of issues like the “lower bound” requirement or may not be documenting their methodology in a way that satisfies procedural rules—using statistical software will not provide the procedural substantiation the IRS requires. Without a compliant plan, the IRS may reject all or part of the claim.

Controlled Group Reporting is More Complex

For clients in a controlled group, QREs must now be broken out by entity, and a separate Form 6765 with an attachment must be filed for each group member. Each entity’s allocation of credit, EIN, NAICS code, and relevant disclosures must be reported, whether or not they file consolidated returns.

Section G: Effective for 2025 Returns

The compliance burden increases further in 2025. Section G introduces project-level reporting for the top 50 projects (or those comprising 80% of total QREs). Clients will need to:

• Classify each component as a product or process

• Indicate if software was involved

• Describe the “information sought to be discovered”

• Break down wages by function: direct research, supervision, support

• Report supply, computer, and contractor costs per project

Information Sought to Discover

Perhaps the most challenging task of Section G is describing the information sought to be discovered for each project. Those without sufficient experience with the IRS may not feel confident in wording what they do so that the IRS will recognize the validity of their claim.  The stakes are high as the IRS will likely use these answers to disqualify the entire claim or a portion of the claim without going through an audit, forcing the taxpayer to either surrender the claim or pursue an appeal.

This section also includes controlled group allocations and additional reporting on EINs and business activity codes. Even businesses exempt from Section G (based on QREs <$1.5M and gross receipts <$50M, or payroll credit election under §41(h)) may still need to produce this information during an audit, or sooner, as part of pre-processing 45-day letters, which some taxpayers are already receiving.

Time Tracking and Estimation Methods

Project-level wage breakdowns are more straightforward for clients with formal time tracking systems in place. For those without time tracking, estimation methodologies must be developed and properly documented to meet IRS expectations. CPAs advising these clients should help evaluate whether current practices are defensible and whether third-party assistance may be needed to support the estimation process.

How CPAs Can Support Clients

Clients will look to their CPAs to help answer questions like:

• Do our current processes meet the new documentation standards?

• Can we adequately describe our R&D activities in the way that the IRS will accept?

• Should we continue claiming the credit at the same level, or reduce exposure?

• What’s our plan if we receive a 45-day letter?

This is a key opportunity for CPAs to provide value by helping clients assess whether their documentation and internal processes are sufficient, and when it might be time to involve R&D credit specialists.

The Hidden Costs of a DIY Credit Study

For clients who have historically managed their R&D credit in-house or through minimal-support providers, the new form changes the equation. They now face:

• Increased documentation expectations across finance and technical teams

• Compressed timelines for preparing and reviewing substantiation

• Greater risk of procedural denial without the opportunity to correct

• More scrutiny around narrative descriptions and methodology

As a CPA, you don’t need to manage every aspect of the study yourself, but understanding where the pressure points are will allow you to guide your clients toward the right solution, whether that means upgrading their internal process or engaging an external resource.

Moving Forward

The IRS is not limiting who qualifies for the credit—it is simply requiring businesses to prove eligibility with more detail and precision upfront. Helping your clients prepare now will ensure they remain compliant, avoid unnecessary audit exposure, and continue receiving the credit they’ve earned.

If your clients are unsure how these new requirements apply or whether their current approach still works, now is the time to help them examine them more closely.

Author Information

Jenna Tugaoen is a tax attorney at Sycamore Growth Group, an Ohio-based tax advisory firm specializing in assisting businesses to attain and substantiate public economic incentives such as R&D and energy credits.

James Bean, CPA, is a senior researcher and R&D tax controversy specialist at Sycamore Growth Group.

Rick Kleban is the founder and president of Sycamore Growth Group, an Ohio-based firm specializing in securing economic incentives that maximize cash flow and minimize risk.