Form 8974
Form 8974
What is form 8974?
Form 8974 also called Qualified Small Business Payroll Tax Credit for Increasing Research Activities, is the document used by small business organizations to determine the payroll tax credit in terms of the improvised research activities which the business concerns claim on tax returns of the employment.
It is generally observed that businesses feel concerned about research and development, and its costs to minimize but at the same time not compromising on the R&D improvement. Form 8974 is the tax return way towards offsetting research budgets in a scenario where organizations want to benefit twofold:
- Enhance research and development; and
- Save the development budgets and research expenses
Form 8974 is filled by qualified small businesses (QSBs).
Before completing and sending the form, make sure you have read the official IRS guidelines.
What is meant by the Qualified Small Business (QSB)?
A qualified small business is a business that qualifies upon the condition of “the gross receipt of the tax year under consideration be below five million dollars”. Say, the small businesses do claim the R&D Tax Credit for the sake of offsetting their research and development budgets.
What is the R&D Tax Credit?
R&D Tax Credit is the dollar-to-dollar tax credit available for businesses to compensate for the research and development budget. For example, if a business firm wants to improve a particular system of a paper-less environment and data availability, and safety of the documents, the R&D Tax credit applies in the form of both, a hi-tech change and innovative implementations, or in the form of products or processes developments and improvements
However, it is important to know whether filing for a tax credit return for increasing research activities, is beneficial for small business owners and employers, or otherwise.
How the Form 8974 is useful for small businesses?
Form 8974 is useful in the following manner:
- It is used by qualified small businesses (QSBs) for determining their amount of tax credit for increasing research activities that are claimed on:
- Form 941
- Employer’s quarterly federal tax return
- Form 941-SS
- Employer’s quarterly federal tax return – American Samoa, Guam, Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands,
- Form 941-PR
- Panila declaration federal
- Form 943
- Form 943-PR
- Form 944
- Form 944 (SP)
- This payroll tax is the credit against organizations’ part of the social security tax on wages of employees.
- Form 8974 is a must for certain employers.
Who is eligible for form 8974?
If an employer is having the status of qualified small business (QSB) and that has been mentioned on the income tax returns options for QSB payroll tax credit for increasing research activities – a tax credit for increasing the research activities electing is made on Form 6765 (file form 6765), against payroll taxes.
How to file the credit for increasing the research activities against payroll taxes?
A qualified small business (QSB) is required to opt for the tax credit for increasing the research activities against payroll taxes, such an election is made on Form 6765. Then after, Form 8974 is attached to 941, 943; and 944 for filling tax credit for increasing the research activities against payroll taxes. The mentioned here all forms are necessary to be filled and submitted.
Moreover, if there arises any need for certain rectification in the form 8974, there is a way for that as well.
How to make corrections in Form 8974?
If your HR points out that there has arisen a requirement for any changes in Form 8974, and that the rectification is a must, you being the employer need not worry at all! There are legitimate ways to do so. All you need to file the forms:
- Form 941–X
- Form 943–X
- Form 944-X
Where “X” stands for the adjustment.
Summarizing Form 8974
Form 8974 is useful for increasing research and development activities for small businesses. This is a way to file tax credit for increasing the research activities. Such an election of tax credit – though against payroll taxes - is made on Form 6765. Attach form 8974 with Form 941, Form 943; Form 944 for filing.
Forget not to write your Employer Identification Number (EIN) and Name on top of Form 8974. Such EIN and the Name be exactly as assigned to your business by the Internal Revenue Service (IRS).