SAVAGE, Minnesota, Jan. 11, 2022 (SEND2PRESS NEWSWIRE) – In 2007, the IRS made the research and development (R&D) tax credit a Level 1 issue, according to ICS Tax, LLC (ICS). Level 1 issues were those of great strategic importance that had a significant impact on one or more industries, which essentially meant that the IRS would audit taxpayers filing amended returns on those issues. To taxpayer relief, the tiered issuance process was eliminated in 2012, effectively placing the R&D tax credit in the same audit pool as other matters.
After the IRS was defeated on two refund claims stating that taxpayers’ claims lacked specificity and they had not made a claim, courts ruled that the IRS could no longer assert its own forms (Form 6765) were insufficient to constitute a claim for reimbursement. .
Following the loss of these claims, the IRS announced in a memorandum from legal counsel issued on October 15, 2021 that taxpayers claiming refunds attributable to the R&D tax credit must meet the following five requirements:
* Identify all the components of the business to which the research credit application relates for this year.
* For each business component:
– Identify all the research activities carried out;
– Identify all the people who carried out each research activity; and
– Identify all the information that each individual sought to discover.
* Indicate the Total Qualified Employee Salary Expense, Total Qualified Procurement Expense, and Total Qualified Contract Research Expense for the request year. This can be done using Form 6765, Credit for Increased Research Activity.
The new rules will take effect on January 10, 2022. The IRS has said there will be a one-year transition period and a grace period, giving taxpayers 45 days (up from 30 days on January 5) to “perfect” a reimbursement request. refund before it becomes mandatory for all refund requests.
What does “perfect” mean? If a refund request is deemed insufficient or if the information provided was insufficient, the taxpayer will have 45 days to provide the missing information. If the IRS does not receive the requested information, the entire refund request will be rejected.
By issuing these new guidelines, it brought R&D reimbursement claims back to the forefront of the IRS audit review, similar to a Level 1 issue, making R&D reimbursement claims onerous for a taxpayer. The new IRS requirements further demonstrate the need to use a qualified R&D tax credit professional to properly document all refund claims.
Authors of the press release: Lacey JS Robb, JD, LLM; Contributing author: Alexander Bagne, JD, CPA, MBA, CCSP.
About ICS Tax, LLC:
ICS Tax, LLC (ICS) is a consulting firm providing innovative tax planning strategies. ICS works with taxpayers and their tax professionals to identify credits and incentives that reduce tax liabilities and increase profitability. ICS provides service nationwide through its offices across the country.
To learn more about the R&D tax credit and other great tax ideas, visit https://ics-tax.com/.
QUOTE:
https://www.irs.gov/pub/irs-lafa/20214101f.pdf
NEWS SOURCE: ICS Tax LLC
This press release has been issued on behalf of the information source (ICS Tax LLC), which is solely responsible for its accuracy, by Send2Press® Newswire. The information is believed to be accurate but not guaranteed. Story ID: 78107 APDF-R8.2
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