This track is for finance managers, tax leads and accountants preparing a United States research credit claim in-house. Three things change the program's shape. There is no pre-registration: the claim is Form 6765, filed with the income tax return. The credit is not refundable. And qualified research expenses (QREs) are only wages, supplies and 65% of contract research costs, with two elections that must be made on a timely filed original return.
How the United States rules change the program
| Module | What is different in the United States | Country page |
|---|---|---|
| Scheme mechanics | An income tax credit under section 41, not refundable. Regular credit of 20% of QREs above a base amount, or alternative simplified credit of 14% of QREs above 50% of the average for the previous three years. | United States overview |
| Cost capture | Wages, supplies and 65% of contract research costs, plus amounts paid for the right to use computers in the conduct of qualified research. | Qualified research expenses |
| Staff time apportionment | Qualified services means engaging in qualified research or its direct supervision or direct support. Wages means wages under section 3401(a), the amount subject to income tax withholding. | Eligible expenditure |
| Contractors and overseas costs | 65% of amounts paid for qualified research performed for you, and only to the extent the research is conducted within the United States. | Eligible expenditure |
| Grants and subsidised expenditure | Research is funded if payment is not contingent on the success of the research, or if the taxpayer does not retain substantial rights, and only to the extent of the funding. | Funded research exclusion |
| Calculations | Regular or alternative simplified method, then whether to elect the reduced credit under section 280C(c), with rates of 15.8% and 11.06%. | ASC vs regular method |
| Working with technical teams | Each business component must pass all four parts of the test in section 41(d). For tax years beginning after 2025, Section G of Form 6765 asks for information about each business component, with some exceptions. | Four-part test |
| Filing and deadlines | Form 6765 with the income tax return. The payroll tax election and the section 280C(c) election must be on a timely filed original return, including extensions. | Deadlines |
| Reviews and audits | Examiners are directed to test contemporaneous documentation, the basis of wage allocations and the consistency between technical narratives and financial records. | Reviews and audits |
Forms and deadlines
| Form or step | Timing | Country page |
|---|---|---|
| Form 6765 | With the income tax return. A claim for credit or refund must be filed within three years from the time the return was filed or two years from the time the tax was paid, whichever is later. | Form 6765 |
| Form 3800 | With the return; the research credit is a component of the general business credit and subject to the section 38 limitation. | How to claim |
| Payroll tax election and Form 8974 | Election on a timely filed original return, including extensions, for up to US$500,000 a year. Form 8974 goes with the employment tax return for the first calendar quarter beginning after the date the income tax return is filed. | Payroll tax offset |
| Return due dates | C corporations: the 15th day of the fourth month after year end. Partnerships and S corporations: the 15th day of the third month. A six-month extension is available. | Deadlines |
| Examination window | The general period for assessment is three years after the return is filed. A carryforward credit can be examined in the year it is used even if the originating year is closed. | Reviews and audits |
Key rules to know
Wages and who counts. If substantially all, meaning 80 percent or more, of an employee's services are qualified services, all of the wages are treated as qualified wages. Direct supervision means immediate supervision of qualified research and does not include supervision by a higher-level manager; direct support does not include general administrative services.
Contractors need a contract, risk and rights. A contract research expense requires an agreement entered into prior to the performance of the research, under which the taxpayer bears the expense even if the research is not successful and retains substantial rights in the results. Payments to a staffing firm for workers who are not the taxpayer's employees are generally treated as contract research expenses, subject to the 65 percent limit, rather than wages.
The credit reduces the deduction unless you elect otherwise. Section 280C(c) reduces the research expense deduction by the amount of the research credit unless the reduced credit election is made, and the election is irrevocable for that year. Section G is optional for a qualified small business making the payroll tax election and for a taxpayer with total QREs of 1.5 million US dollars or less and gross receipts of 50 million US dollars or less.
Worked example
Illustrative example. Larkspur Controls Inc., a hypothetical C corporation with a calendar year, develops two new control modules in 2026.
| Cost | Amount | Treatment | QRE |
|---|---|---|---|
| Engineering wages allocated to the two business components | US$800,000 | Qualified services, section 3401(a) wages | US$800,000 |
| Prototype materials consumed in testing | US$50,000 | Supplies | US$50,000 |
| US test laboratory, agreement signed before the work | US$200,000 | Contract research, 65% | US$130,000 |
| Cloud compute for simulation | US$20,000 | Right to use computers | US$20,000 |
| Employer payroll taxes, rent and laptops | US$190,000 | Outside the credit | 0 |
| Total QREs | US$1,000,000 |
Larkspur's QREs for the previous three years averaged US$600,000. Under the alternative simplified credit the base is 50% of that average, US$300,000, so the credit is 14% of US$700,000, or US$98,000. With the reduced credit elected under section 280C(c) the rate is 11.06%, giving US$77,420, and the research expense deduction is not reduced; without the election the credit stays at US$98,000 but the deduction falls by US$98,000.
The team also tests the regular method. Larkspur is a start-up company for this purpose, so its fixed-base percentage is 3 percent; applied to average annual gross receipts of US$10,000,000 for the four preceding years that gives US$300,000, but the base amount may not be less than 50 percent of the current year QREs, so the base is US$500,000. The regular credit is 20% of US$500,000, or US$100,000; with the reduced credit election, 15.8%, or US$79,000. Both the method and the election are fixed on the original return, in Section A or B and Section C of Form 6765.
Related country guide pages
Self-check questions
Answer each question, then open it to compare.
Which three categories of cost make up qualified research expenses, and what fraction of a contract research payment counts?
Your company had QREs of US$1,000,000 this year and averaged US$600,000 over the previous three years. What is the alternative simplified credit before any section 280C(c) election?
Which two elections can only be made on a timely filed original return, including extensions?
How is the wage figure for the research credit defined, and when can an employee's whole salary be treated as qualified wages?
A customer pays your company a fixed fee for development work whether or not it succeeds, and keeps all rights in the results. Can the wages on that work be QREs?
What does the IRS Audit Techniques Guide direct examiners to test, and why does that shape how a finance team keeps records?
Official sources
- Instructions for Form 6765, Credit for Increasing Research ActivitiesInternal Revenue Service
- About Form 6765Internal Revenue Service
- About Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research ActivitiesInternal Revenue Service
- 26 U.S. Code section 41, Credit for increasing research activitiesLegal Information Institute, Cornell Law School
- Treasury Regulation section 1.41-2, Qualified research expenseseCFR
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Educational content only, not tax advice. See the disclaimer.