Form 8974 (January 2017). Quarterly Small Business Payroll Tax Credit for Increasing Research Activities - irs-2025

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Form 8974 is a document used by qualified small businesses to claim a payroll tax credit for increasing research activities. It requires information about the employer's identification number, the income tax return filed, and details regarding the credit amount that can be utilized for the specified quarter. The form includes calculations to determine the eligible credit based on previous claims and current earnings.

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Click ‘Get Form’ to open it in the editor.
Begin by entering your Employer Identification Number (EIN) at the top of the form. Ensure this matches the EIN used on Form 6765.
Select the quarter for which you are claiming the credit by checking one of the boxes provided.
In Part 1, indicate which income tax return you filed that elected a qualified small business payroll tax credit on Form 6765. Check only one box corresponding to your return type.
Provide the tax period covered by your income tax return and enter the filing date.
In Part 2, calculate your credit by entering amounts from previous forms as instructed. Follow through each line carefully, ensuring accuracy in your calculations.
Finally, enter the smaller amount from line 7 or line 11 as your credit and ensure this is also noted on Form 941 (941-PR or 941-SS), line 11.

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We have answers to the most popular questions from our customers. If you can't find an answer to your question, please contact us.

How do you account for an RD tax credit?

Accounting Treatment for RDEC If youre claiming under RDEC, the accounting treatment is quite simple, as the tax relief is considered to be profit before tax. This means when you claim RD tax credits under RDEC, the financial relief that you receive is subject to taxation.

What is the incremental research activities credit?

Generally, the credit is an incremental credit equal to the sum of 20 percent of the excess (if any) of the taxpayers qualified research expenses (QREs) for the taxable year over the base amount, and 20 percent of the taxpayers basic research payments.

Who qualifies for Form 8974?

What is Form 8974? Form 8974 is used by small businesses or start-ups to determine the amount of qualified small business payroll tax credits they can claim from their employment tax return on Form 941. Only qualified small businesses that elect to claim payroll tax credits should file Form 8974.

What is the IRS Code for research and development tax credit?

26 U.S. Code 41 - Credit for increasing research activities. 20 percent of the amounts paid or incurred by the taxpayer in carrying on any trade or business of the taxpayer during the taxable year (including as contributions) to an energy research consortium for energy research. contract research expenses.

What form number is RD credit?

Use Form 6765 to: Figure and claim the credit for increasing research activities.

8974 form

Form 8974 instructions Form 6765 Form 6765 instructions Form 8974 2025 R&D tax credit examples R&D credit limitation Form 8974 2023 Form 941

How do I claim credit for increasing research activities?

Businesses can claim the RD Credit by filing IRS Form 6765, Credit for Increasing Research Activities. As part of the process, they need to identify qualifying expenses and provide adequate documentation that shows how these costs meet the requirements under Internal Revenue Code Section 41.

What is the difference between IRC 174 and IRC 41?

The distinction between these two sections has significant implications for businesses, particularly in light of recent changes. While Section 174 now requires capitalization, reducing immediate tax relief, Section 41 continues to offer tax credits for a narrower set of expenses.

How is RD tax credit claimed?

How do they work? Companies that spend money developing new products, processes or services, or enhancing existing ones, could be eligible for RD tax relief. If youre investing in innovation, you may be eligible to make an RD tax credit claim to receive either a cash payment and/or Corporation Tax reduction.