Form 8974

What Is Form 8974

IRS form 8974, officially titled "Qualified Small Business Payroll Tax Credit for Increasing Research Activities," is a tax form eligible small businesses use to determine and claim the payroll tax credit for increasing research activities. This credit incentivizes companies to engage in research and development (R&D) within the United States by offering a payroll tax offset.

How To Fill Out Form 8974 Instruction

Step 1: Identifying Information

Employer Identification Number (EIN): Fill in your 9-digit EIN.

Name: Provide the legal name of your business (not your trade name).

Step 2: Report for This Quarter

Select the box corresponding to the quarter for which you report this credit.

Step 3: The Credit Reporting Target

If you are filing forms 941, 941-PR, or 941-SS, specify the calendar year.

Part 1: Tell Us About Your Income Tax Return

For each row 1 through 5, provide the following details about your income tax return where you included form 6765.

Part 2: Determine the Credit That You Can Use This Period

Once the form is complete, review it to ensure all information is accurate and consistent with your other tax records. Then, attach the completed form 8974 to your payroll tax return (e.g., form 941 or similar) when filing.

Who Qualifies For Form 8974

• Businesses with less than $5 million in gross receipts for the tax year and no gross receipts for any tax year preceding the 5-tax-year period ending with the current tax year.
• Companies that have wages subject to FICA taxes and have conducted qualified research activities, following the definitions in IRC Section 41.
• By adhering to the outlined qualifications, small businesses can leverage this credit to reduce their payroll tax burden, facilitating further investment towards innovation and growth within their industries.