The Internal Revenue Service is giving companies and tax professionals another year to fix up their claims for the research and development tax credit.
The agency said Friday it is extending for one more year, through Jan. 10, 2024, the transition period during which taxpayers are given 45 days to “perfect” a research credit claim for refund before the IRS makes a final determination on the validity of the claim.
Last year, the IRS Office of Chief Counsel issued a memorandum imposing new requirements for backing up claims for tax refunds for research and development tax credits. In an effort to discourage companies from submitting dubious claims for tax breaks for R&D work they never carried out, the IRS started asking for more detailed information about all the business components for which the research credit claims relate for that year, and for each business component, companies will need to identify all the research activities they’ve performed and name the individuals who performed each research activity, along with the information each individual sought to discover.
The new documentation requirements provoked a backlash from many tax professionals and clients, along with requests for more clarification. In January, the IRS extended the deadline for “perfecting” the refund claims, expanding the transition period from 30 to 45 days to provide more evidence to back up tax refund claims involving the research credit, while also issuing new guidance.
For claims that include a research credit claim filed during the the transition period from Jan. 10, 2022, through Jan. 9, 2023, taxpayers were given 45 days to perfect the claim that is filed on a timely basis but does not provide the five essential pieces of information:
On Friday, the IRS extended that deadline for a year until Jan. 10, 2024.
By: Accounting Today