Update: Claiming research & development (“R&D”) credits on amended tax returns
Amid confusion and push back from national accounting firms, Cheryl Teifer, Director of Field Operations Engineering of the IRS Large Business and International Division, provided guidance on Nov. 30, 2021 regarding a recently issued Chief Counsel memorandum. The memorandum, dated Sept. 17, set forth additional taxpayer requirements for research credit refund claims to be considered valid. It is intended to improve tax administration and reduce the number of disputes over research claims.
Tiefer clarified that the additional requirements for research credit refund claims only apply to amended returns. These changes are not applicable for credits reported on original returns, adjustments to credit carryforwards, or carryback claims. These new requirements will be necessary as of Jan. 10, 2022. Starting Jan. 10 there will be a one-year transition period during which taxpayers will have 30 days to perfect a research credit claim for refund prior to the IRS’ final determination on the claim, according to a press release.
These changes are applicable for all taxpayers filing refund claims on amended returns. After Jan. 9, 2022, refund claims must provide sufficient facts to apprise the IRS of the basis of the claim. Taxpayers will be required to provide the following information at the time a Section 41 research credit claim is filed for refund with the IRS:
- Identify all the business components to which the Section 41 research credit claim relates for the claim year
- For each business component, identify all research activities performed, name the individuals who performed each research activity, and include the information each individual sought to discover
- Provide the total qualified expenses for the claim year
Scott Hamilton, CPA, Partner, National Tax – R&D
310.843.9700
Jessie Cahill, CPA, Partner, National Tax – R&D
646.625.5784
Scott Ibbotson, JD, Manager, National Tax – R&D
737.218.7865
Related Services
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.