Introduction
On October 1, 2025, the IRS announced a delay in its implementation of major changes to Form 6765 (Credit for Increasing Research Activities), extending the effective date to March 31, 2026 (IR-2025-99).
Most notably, the requirement to complete Section G (Business Component Reporting), which demands detailed reporting of research activities and related expenses, remains optional for 2025 and will become mandatory in 2026 for most filers.
This extension gives taxpayers and advisors more time to strengthen documentation processes, internal controls, and cross-team coordination, all of which will be critical for sustaining R&D credit eligibility under the IRS’s heightened transparency and reporting standards.
Key Highlights
1. Section G Remains Optional for 2025
- Applies to tax year 2025 (returns filed in 2026).
- Section G requires taxpayers to report:
- Type of business component (product, process, software, or other)
- QREs by category (wages, supplies, contract research, computer rentals)
- Brief descriptions of related research activities
- Type of business component (product, process, software, or other)
➡️ By keeping Section G optional, the IRS is signaling flexibility, giving companies time to upgrade documentation and internal tracking before the requirement becomes binding.
2. Section G Becomes Mandatory in 2026 (With Limited Exceptions)
- Starting with tax year 2026, most filers must complete Section G.
- Exceptions apply for smaller taxpayers:
- Qualified Small Businesses (QSBs) under IRC § 41(h)(3) applying the credit against payroll taxes
- Small taxpayers within controlled groups under IRC § 448(c):
- QREs ≤ $1.5 million
- Gross receipts ≤ $50 million
- QREs ≤ $1.5 million
- Qualified Small Businesses (QSBs) under IRC § 41(h)(3) applying the credit against payroll taxes
➡️ The IRS will issue final instructions in January 2026, confirming thresholds and possible additional relief.
3. Extended Transition Period for Refund Claims
- Taxpayers still have 45 days to perfect a research credit refund claim after IRS notification.
- This grace period is now extended through January 10, 2027, reducing the risk of losing credits due to incomplete or late documentation.
Quick Reference Table
What Businesses Should Do Now
- Prepare Early – Begin tracking QREs at the business-component level in 2025.
- Coordinate Across Teams – Align tax, finance, and engineering to capture complete and accurate R&D data.
- Check Eligibility – Determine if your company qualifies as a QSB or meets §448(c) thresholds.
- Document Rigorously – Keep detailed records for each project and related expenses.
- Engage Proactively – Submit comments to the IRS before March 31, 2026 to shape final guidance.
💡 For deeper practical guidance, check Strike’s R&D Tax Credit Guide.
FAQs
What is optional on Form 6765 for 2025?
Section G (Business Component Reporting) is optional for all filers in tax year 2025.
When does Section G become mandatory?
Beginning with tax year 2026, except for QSBs and small taxpayers under §448(c).
How long is the research credit transition period for refund claims?
Through January 10, 2027, taxpayers have 45 days to perfect a refund claim after IRS notification.
What are QREs under Form 6765?
Qualified Research Expenses include wages, supplies, contract research, and computer rental costs directly tied to eligible R&D activities.
Conclusion
The IRS’s delay buys time but not much. Companies that begin adapting now will be well-positioned to meet the 2026 mandatory reporting standards without risking compliance gaps or lost credits.
At Strike Tax Advisory, our team specializes exclusively in R&D credit compliance, documentation, and defense, helping clients navigate complex IRS updates with confidence.
Disclaimer
This article summarizes IRS guidance as of October 2025, including the October 1 announcement (IR-2025-99). It is intended for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for advice specific to your organization.
