IRS makes project-level R&D tax credit reporting mandatory for 2026 returns

The IRS will require most companies to disclose project-level R&D tax credit detail on Form 6765 starting with tax year 2026 returns filed in 2027. The change raises the bar for documentation, especially for amended claims and companies that have not tracked research activity by project during the year.

Why it matters: - The IRS is shifting R&D tax credit compliance from summary reporting to project-level proof. - Companies that do not track research activity by project and role during 2026 may need to rebuild records before filing. - Amended claims face tighter rules, including a full Section G filing for tax years beginning in 2026 and later.

What happened: - Strike Tax Advisory published guidance on the IRS change affecting Form 6765. - Section G, optional for tax year 2025, becomes mandatory for most filers on tax year 2026 returns. - The IRS announced the change in IR-2025-99 on October 1, 2025. - Tax year 2026 returns will be filed in 2027.

The details: - Section G requires filers to list business components, including products, processes, software, or techniques. - The list must run in descending order of qualified research expense until it covers at least 80% of total QREs or 50 components, whichever comes first. - For each component, the form requires a name, a type, a software category when applicable, and the dollars attributed to it. - Wages must be split into direct research, direct supervision, and direct support for each component. - Supplies, computer rental or lease, and contract research must each be reported separately by component. - Any remaining amounts are rolled into one aggregate line. - Payroll systems generally show who was paid, not which project or role each hour supported. - A study that supports a defensible total QRE amount does not, by itself, fill out Section G. - Two groups can skip Section G on an original return: qualified small businesses electing the payroll tax credit, and filers with QREs of $1.5 million or less and average annual gross receipts of $50 million or less. - Those thresholds are measured at the controlled group level, so commonly owned sister entities count together. - The exemption applies only to original returns. - Any company claiming a new or increased credit on an amended return for tax years beginning in 2026 and later must complete Section G in full, including column 49(f). - Column 49(f) requires a written description of what the research was intended to discover for each business component. - Refund claims for 2023 and 2024 generally remain open under the three-year rule in Section 6511 and already require business component detail to be treated as valid claims. - Through January 10, 2027, the IRS transition rule gives amended-return filers 45 days to fix missing information after receiving a letter. - The IRS has not announced an extension of that transition period.

Between the lines: - The filing burden is rising even though the underlying credit rules under Section 41 have not changed. - Companies that wait until return prep season to assemble project-level records may find gaps they cannot close. - The new rules favor taxpayers that tag wages and research activity during the year rather than reconstructing them later. - The transition window creates a short-term opportunity for open 2023 and 2024 claims before the cure period ends.

What's next: - Companies should check whether a controlled group clears the exemption thresholds. - Companies should tag research wages by project and role for the rest of 2026. - Companies with open 2023 or 2024 claims should file before January 10, 2027. - Strike Tax Advisory says its 2026 Field Guide to R&D Tax Credits is available at the company journal. - Strike Tax Advisory also offers an R&D tax credit calculator at the calculator.

The bottom line: - For 2026 claims, the IRS wants the research story on the return, not just in the study.