A Guide to the New IRS Form 6765

In February 2025, the IRS released their final version of Form 6765, Credit for Increasing Research Activities, as well their instructions for taxpayers claiming the Section 41 research credit on their 2024 federal income tax returns.

Because of the additional information taxpayers must provide on the updated Form 6765, many organizations' credit-filing processes will require significantly more time and effort to complete. For Neo.Tax’s part, we’ve been providing customers with their study deliverables on the new Form 6765 since shortly after it was finalized. Our technology was already collecting much of the new information required to complete Form 6765, so we were more ready for the change than most.

So, if you’d like to use Neo.Tax to save time, effort, and avoid the hassle, get in touch. But if you decide to file without the help of Neo.Tax's AI system, here’s what you need to know:

Why the Change?

The IRS changes to Form 6765 ask for much more granular information from the taxpayer. Now, filers must provide substantially more quantitative and qualitative information about their Qualified Expenses, including detailed information about up to 50 business components where you’ve made research expenditures. As we’ve mentioned in other posts, this appears in line with the IRS’s shift towards more contemporaneous documentation which is now much easier to access via integrated systems such as Jira and GitHub.

This new form underlines the need for businesses to utilize these new datasets. With the introduction of stricter reporting requirements, businesses and their accountants are being asked to take a proactive approach to compliance.

What’s Changed?

Alright, let’s get specific.

Before completing Section A, taxpayers must now answer two questions: 

1. Is your organization part of a controlled group or under common control? There are R&D credit limitations and aggregation rules that apply at the group level.

2. Will you be electing for the reduced 280C credit? The 280C credit allows companies to claim the R&D credit without reducing their deductible expenses by the credit amount.

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The IRS has also introduced Sections E and F which ask for more transparent reporting of expenses. 

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Section E: Other information: 

Filers must now include information on…

• Number of business components used in the credit calculation, which helps ensure compliance with the four-part R&D test
• Officer compensation included in the wage qualified research expenses
• Acquisitions and dispositions that may impact the R&D credit calculation, ensuring that changes in business structure are properly reflected
• New categories of expenditures added to the current year’s QREs to identify inconsistencies year over year in credit claims
• Use of the ASC 730 Directive, which is relevant for companies with assets over $10 million using certain financial reporting methods

Section F: Qualified research expenses summary: 

This section mandates that filers…

• Indicate whether they are required to complete Section G
• Provide a breakdown of qualified research expenses by type (e.g., wages, supplies, contract research), offering the IRS greater transparency into qualified R&D activities

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And the most significant change of all…

Most significantly, the IRS has added a Section G, which requires several categories of info about the taxpayer’s business components.

For Tax Year 2024, completion of Section G is optional for all taxpayers. But by Tax Year 2025, Section G will be required for everyone except qualified small businesses claiming the payroll credit and taxpayers with qualified research expenses of <$1.5 million and gross receipts of <$50 million (provided they are claiming the research credit on an original return).

Taxpayers will now need to report 80% of their total qualified research expenses in descending order per business component (up to 50 business components in total). Rather than claiming your total R&D expenditure, you will now need to list each qualified expense at the time of filing.

For Software Companies, Another Hurdle

Finally, there’s a change to how software development can be claimed via the R&D credit. The IRS now requires businesses to classify every software component as either: internal-use software, dual-function software, or non-internal-use software, which is developed for commercial sale or third-party interaction.

Certain exceptions to internal-use software treatment must also be documented, and businesses must provide detailed information on research activities, wage allocations, and related expenses.

What It Means For You

These changes are clearly daunting for anyone filing their R&D credit manually. Perhaps you read this far and said, “Well, I’ll send a note to my CPA but that’s their problem, not mine.” But, obviously, if you’re hiring a third-party filer and paying by the hour, expect your rate to go up significantly. 

And this also is a late change by the IRS, which means it’ll take time for human filers to familiarize themselves and master the new rules.

That’s why an AI-powered solution like Neo.Tax is such a perfect fit for tax. We integrated the changes into our system the moment they were finalized, and our model quickly mastered the new, more stringent IRS requirements. By accessing data from systems such as Jira and GitHub at the time of tax preparation, Neo.Tax’s platform can automatically extract, classify, and substantiate qualifying R&D activities. 

The specificity of the IRS rule change makes utilizing your existing data all the more essential come Tax Day. But asking a CPA to scour through millions of tickets is just not realistic. So, the burden inevitably will fall back on you. That is, unless you start using Neo.Tax…