Under IRC section 174 a business can elect to deduct research and experimental expenses rather than capitalize them.
Form 6765 has several purposes:
- Calculate and claim the credit for research activities.
- Make the reduced credit election under IRC section 280C.
- For a Qualified Small Business, calculate the payroll tax credit if desired.
If a partnership or S corporation is claiming this credit, they will complete Form 6765 and pass the credit through to the partners or shareholders on Schedule K-1.
In the form, you'll select whether to complete Section A for the Regular Credit or Section B for the Alternative Simplified Credit (ASC). Once elected, the ASC continues for future years unless the Regular Credit is selected in a future year's return, provided the return is timely filed.
Partnership Return (Form 1065)
To enter the credit amount, from the Main Menu of the tax return (Form 1065) select:
- Schedule K - Distributive Share Items
- Credits and Credit Recapture
- General Business Credits
- Current Year General Business Credit
- Form 6765 (Research) - Double-click and complete the form.
S Corporation Return (Form 1120-S)
To complete Form 6765, from the Main Menu of the S corp return (Form 1120-S) select:
- Schedule K - Distributive Share Items
- Credits
- General Business Credits
- Current Year General Business Credit
- Form 6765 (Research) - Double-click and complete the form.
Note: This article provides navigational guidance for Form 6765, Credit for Increasing Research Activities in a pass-through entity return. It is not intended as tax advice.
Additional Information:
Form 6765 Instructions - Credit for Increasing Research Activities