For companies and tax professionals alike, the IRS is granting a one-year extension to fix up their claims for the research and development tax credit. On Friday, the agency announced an extra year extension through Jan. 10, 2024, the transition period during which taxpayers are given 45 days to “perfect” a research credit claim for refund before the agency determines a final decision on the validity of the claim.
New Rules for Backing Up Claims
The IRS Office Chief of Counsel issued a memorandum last year which introduced new requirements for backing up claims for tax refunds for research and development tax credits. There has been an ongoing effort to stop companies from submitting false claims for tax breaks on R&D work that never actually took place. Recently the agency started to ask for more detailed information about business components for which the research credit claims relate for that year. These companies also must now identify all research activities they’ve performed along with the names of the individuals who performed said activity, and lastly the information the individuals were seeking to discover with the research.
Backlash From Those Affected
The new documentation requirement was met with resistance by many tax professionals as well as clients. The IRS extended the deadline for “perfecting” the refund claims by expanding the transition period from 30 to 45 days. This was done to give tax professionals and companies more time to provide evidence of the legitimacy of their claims.
Wrap Up
Hopefully, this extension is enough time for those in question to get all of their records straight and avoid any unnecessary action from the IRS. If you think this may affect you and aren’t sure what to do, contact a trusted financial advisor.