When it comes to maximizing your business tax strategy, the Research and Development (R&D) Tax Credit is one of the most underutilized tools available. At the heart of claiming this valuable credit lies IRS Form 6765. But what exactly is this form, who should use it, and how can it significantly benefit your business?
What is IRS Form 6765?
IRS Form 6765, officially titled Credit for Increasing Research Activities, is used by businesses to calculate and claim the federal R&D tax credit. This credit is designed to incentivize companies that invest in innovation and technological advancement within the United States.
The form is divided into four parts:
- Part A: Regular Credit Calculation
- Part B: Alternative Simplified Credit (ASC) Calculation
- Part C: Electing and Reporting the Credit
- Part D: Qualified Small Business Payroll Tax Election
Each part is used depending on the taxpayer’s chosen method of calculation and business size or type.
Who Should Use Form 6765?
You should consider filing Form 6765 if your business has invested in developing or improving:
- Products
- Processes
- Software
- Techniques
- Formulas
- Inventions
This applies across many industries including manufacturing, engineering, software development, architecture, biotech, and even construction.
Importantly, your activities do not have to succeed to qualify—the attempt to innovate is often enough.
To qualify, activities must meet the IRS’s Four-Part Test:
- Permitted Purpose – The activity must aim to create or improve a product or process.
- Technological in Nature – It must rely on hard sciences (e.g., engineering, physics, computer science).
- Elimination of Uncertainty – It must involve an attempt to resolve uncertainty about development or capability.
- Process of Experimentation – It must involve testing and evaluation.
Key Benefits of Filing Form 6765
- Significant Tax Savings
The R&D credit can reduce your federal tax liability by tens or even hundreds of thousands of dollars, depending on your level of qualifying expenses. The credit is calculated based on eligible wages, supplies, and contract research expenses.
- Offset Payroll Taxes for Startups
Startups and small businesses with gross receipts under $5 million can use the credit to offset up to $500,000 per year in payroll taxes, even if they are not yet profitable. This is done via Part D of Form 6765.
- Dollar-for-Dollar Reduction
Unlike deductions, which reduce taxable income, the R&D credit directly reduces the amount of tax you owe—a dollar-for-dollar benefit.
- Applicable Across Industries
Many assume R&D is only for labs and tech companies, but a wide range of industries can qualify, including construction, agriculture, food production, and more.
- Carryforward Opportunities
Unused credits can often be carried forward up to 20 years, providing future tax relief.
Final Thoughts
Filing IRS Form 6765 is one of the smartest ways businesses can reinvest in their growth. Whether you’re designing a new software platform, improving a manufacturing process, or streamlining workflows with custom technology, the federal government wants to reward your innovation.
If your business has never claimed the R&D credit—or hasn’t in years—it’s worth reviewing past activities. You may be sitting on unclaimed benefits that can significantly improve your bottom line.
Need help navigating Form 6765? Partnering with our experienced R&D tax credit specialists at CSSI ensures your claim is maximized and fully compliant, minimizing risk and maximizing reward. Contact us today!
