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
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