Research Credit Application Complex for Small Companies

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By Mike Baer

A new IRS form and modification to several other forms may be necessary before small companies or partnerships eligible for a research tax credit may apply the credit amount to employer payroll tax liabilities, an IRS official said May 6.

The credit was authorized under the Protecting Americans from Tax Hikes (PATH) Act enacted in 2015.

This manner of taking the credit is complicated because the Internal Revenue Service must match up the employment tax credit with income tax elections, said Janine Cook, deputy associate chief counsel for Tax Exempt and Government Entities in the IRS Office of Chief Counsel.

New Form 8794, Qualified Small Business Payroll Tax Credit for Increasing Research Activities, serves as the bridge between employment tax forms and Form 6765, Credit for Increasing Research Activities, Cook said at the American Bar Association Section of Taxation's May meeting in Washington.

Employment tax forms, including Form 941, Employer's Quarterly Income Tax Return, and Form 6765 may be modified to account for the credit that is taken against the employer portion of the Old Age, Survivors and Disability Insurance (OASDI) part of FICA taxes.

Employers would not be able to claim the credit until the income tax return for the prior year is filed, said Joseph Perera of Strasburger & Price LLP in San Antonio.

More clarity on definitions, such as gross receipts and how errors in form submissions are handled, is needed and taxpayers may help with suggestions, Cook said.

To contact the reporter on this story: Michael Baer in Washington at To contact the editor responsible for this story: Michael Trimarchi at

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