Technical qualification: the four-part test, per business component
The test is applied to each business component (product, process, software, technique, formula or invention) separately, which is why the mock audit runs one review per project.
- Permitted purpose: a new or improved function, performance, reliability or quality.
- Technological in nature: relying on the physical or biological sciences, engineering or computer science.
- Elimination of uncertainty about capability, method or appropriate design.
- A process of experimentation that evaluates alternatives.
Qualified research expenses
| Category | What counts | Mock-audit questions |
|---|---|---|
| Wages | W-2 wages for performing, directly supervising or directly supporting qualified research | F4, F5 |
| Supplies | Tangible property used and consumed in the research, not depreciable property | F7 |
| Contract research | 65 percent of amounts paid to a third party, where the taxpayer bears the risk and retains substantial rights | F8 |
| Computer rental | Cloud or computer time used in the research | Not scored separately |
Claim procedure
The credit is claimed on Form 6765. Section G lists the business components, and for amended refund claims additional information is required. The base amount depends on the method elected: the regular method or the Alternative Simplified Credit. Qualified small businesses may elect to apply part of the credit against payroll taxes on a timely original return.
State programs
Thirty-six states run their own research credit, usually following the federal definitions but limited to research performed in the state, with their own rates, forms, carryforward rules and sometimes pre-approval or registration. The credit database has each program's details and official source; the mock audit adds a state track only for those states.
Open the credit database