Form 6765 Instructions Are Final: What Changed for 2025 and 2026

The IRS released its finalized Form 6765 instructions on February 5, 2026. If you’ve been following the draft versions circulating since late 2024, you won’t find major surprises. But finalization matters. It locks in the rules for 2025 returns being filed right now, and it draws a clear line for what becomes mandatory starting with tax year 2026.

If you’re currently finishing your R&D credit calculations, a few things in these instructions need your attention before you file.

Section E: Required for Every Filer This Year

The most immediately relevant change is Section E, a new section the IRS now requires for all 2025 filers. It functions as a risk-assessment profile. It gives the agency a structured snapshot of your claim before examiners look at the underlying calculations.

Section E Asks For

• Line 37: The total number of business components generating QREs. Not just the ones you’ll detail in Section G, but every component across the entire claim.
• Line 38: Total officer wages included in QREs. Officer compensation has always factored into the credit calculation, but this year you must disclose it as a separate line item for the first time. Examiners will see that number on day one.
• Line 39: Whether any QREs relate to a business acquisition or disposition during the year.
• Line 40: Whether you included any new expense categories in QREs this year that weren’t part of your prior base years. This flags year-over-year changes that could signal an expanded or shifted claim.
• Line 41: Whether you’re using the ASC 730 Directive.

The ASC 730 item deserves a moment. Large companies that record R&D as a separate line item on audited financial statements can use those figures as the basis for their credit claim, rather than rebuilding QREs from scratch. Line 41 tells the IRS you used that method, which also shapes what your Section G reporting looks like.

Why Section E Matters Before an Examiner Reads Anything

None of these questions are hard to answer if your records are organized. But they give the IRS meaningful context about your claim before an examiner reads a single project description. If your answers look unusual compared to your industry or your prior filings, that’s often enough to trigger a second look. If you added new expense categories, acquired a business, or significantly increased your officer wage allocations this year, prepare to explain those changes.

Section G: Optional This Year, Mandatory in 2026

Section G, the business component-level disclosure that has driven the most industry discussion over the past two years, stays optional for tax year 2025. Stakeholders requested more time, so the IRS extended the comment period on draft instructions through March 31, 2026. The IRS published final 2025-form instructions in February.

Section G becomes mandatory for most filers starting with tax year 2026. The exceptions are narrow. They cover qualified small businesses electing the payroll tax credit under Section 41(h)(3), and taxpayers with QREs of $1.5 million or less and gross receipts of $50 million or less at the control group level, filing an original return.

If you don’t fall into one of those categories, start building toward Section G compliance now. The form requires you to report business components in descending order of QRE cost, covering 80% of total QREs or 50 components. For each component, you must break wages into three categories: direct research, supervision, and support. You must also allocate supplies and contract research per component, and give each component a real description, not just a project code or name.

Companies that already track time and expenses at the project level have a manageable path to compliance. Companies without that infrastructure have a limited window to build it before the 2026 tax year closes. We have a detailed walkthrough of what Section G requires and how to approach the data collection if you want to get into the specifics.

Use 2025 as a Dress Rehearsal

Section G is optional this year, so a lot of companies will skip it simply because they can. That’s understandable. But it’s not necessarily the right call.

Completing Section G voluntarily for 2025 tests whether your documentation infrastructure is ready for 2026. It shows you exactly where your data has gaps: projects missing component descriptions, wage allocations that still need breaking out by activity type, contract research expenses that aren’t tied to specific components. Find those gaps in 2025, and you get a full year to fix them. Find them during the 2026 filing season instead, and you’ll be fixing them under deadline pressure while the mandatory disclosure requirement is already in effect.

There’s also a defensive benefit to completing Section G voluntarily. A well-prepared Section G signals to the IRS that you keep organized documentation and a sound methodology. That’s not a guarantee against examination, but it sends a different signal than a return that skips it.

Controlled Group Filers

One detail is easy to miss: for companies that are part of controlled groups, you report Section G at the entity level, not the group level. You base the 80%/top-50 calculation on your entity’s QREs, not the group’s aggregate. The IRS clarified this in the finalized instructions because it matters a great deal for parent-subsidiary structures, where R&D activity and expenditures spread across multiple entities.

What to Do Before You File

For 2025 returns being finalized right now: Complete Section E in full since every filer must include it. Review your officer wage disclosure carefully before it goes in. Consider completing Section G voluntarily if your data supports it. If it doesn’t, use this filing cycle to document exactly where the gaps are and assign someone to close them before the 2026 tax year ends.

For 2026 planning: If you don’t have project-level time and expense tracking, build that system this year. It’s not optional, it’s urgent. Write business component descriptions during the project, not at year-end. Back wage allocations with real data, not estimates.

Want to talk through what Section G means for your specific situation? Reach out. We would love to dig into it with you.

Jason Massie, CPA, Esq.

As the Founder and President of MASSIE R&D Tax Credits, Jason is responsible for the quality, consistency, and integrity of our services. His strategic vision and leadership drive innovation within the company, encouraging collaboration and ne...