Blog · 15 October 2026

Form 6765 Schedule G and the §41 Research Credit: What Becomes Mandatory for 2026 Tax Years and How US CPA Firms Should Prepare

By Keshav Bansal, CA

Form 6765 Schedule G, which the IRS labels Section G—Business Component Information, becomes required for most research credit claims for tax years beginning after December 31, 2025. For US CPA firms, this means that calendar-year 2026 returns filed in 2027 will need to show the client’s §41 research credit project by project, instead of as a single total of wages, supplies and contract research. That tracking is best set up during the year, not after close.

Why the timing moved, and where it stands now

The IRS first said, in IR-2024-313 (December 20, 2024), that Section G would be mandatory starting with tax year 2025. In IR-2025-99 (October 1, 2025), it pushed that back: Section G is optional for all filers for tax year 2025, and mandatory for tax year 2026 (processing year 2027) and beyond, subject to two exceptions. The Instructions for Form 6765 (Rev. December 2025, released February 6, 2026) say the same: optional for tax years beginning before 2026, required for tax years beginning after 2025. CBIZ’s October 1, 2026 article on Schedule G calls 2026 a preparation year. Fiscal-year clients become subject to the rule with their first tax year that begins in 2026.

Who is exempt from Section G

According to the instructions, Section G is required unless one of these applies:

• Qualified small business payroll election. The client is a qualified small business under §41(h)(3) and checks the box to claim the reduced payroll tax credit.
• Small-claim exception. All three of these are true: total QREs at the controlled group level are $1.5 million or less; average annual gross receipts for the prior three tax years are $50 million or less (determined under §448(c)(3)); and the credit is claimed on an original return.

The second exception does not cover a credit first claimed on an amended return.

The 80%/Top 50 rule and what each line asks for

Filers that must complete Section G report business components covering at least 80% of total QREs, up to a maximum of 50 components, listed in descending order of QREs. The instructions generally determine the 80%/Top 50 at the controlled group level. Group members that file separate returns use their own QREs instead of the group total. Remaining components go on a single “Aggregate Business Components” line.

For each listed component, columns 49(a)–(e) ask for the EIN of the entity doing the research, its principal business activity code, a name or identifier matching the client’s books and records, the component type (product, process or “all others”) and, for software, the software type. Column 49(f), the description of the information sought to be discovered, currently applies only to amended-return claims. It is not required on a timely filed original return.

Columns 50–56 then break QREs down by component:

• Column 50: wages of people who actually conduct the research
• Column 51: wages for direct supervision, meaning first-line managers only, not the higher-level managers they report to
• Column 52: wages for direct support, such as a lab worker cleaning research equipment or a clerk compiling research data, but not payroll or general administrative staff
• Columns 53–56: total wages, supplies, rental of off-site computers, and contract research (generally 65% of amounts paid)

Clients following the ASC 730 Directive make a single Section G entry for those QREs and need no further detail if it reaches 80% of total QREs.

Back to basics: what the §41 research credit is

The research credit is a credit for increasing research activities. According to the IRS, the regular credit is generally 20% of QREs over a base amount. The alternative simplified credit is 14% of QREs over 50% of the average QREs for the three preceding years. QREs are in-house wages and supplies plus contract research. Under §41(d), each business component must pass the four-part test:

1. expenditures are treated as domestic research or experimental expenditures under §174A;
2. the research seeks information that is technological in nature;
3. that information is intended to be useful in developing a new or improved business component; and
4. substantially all of the activities are elements of a process of experimentation.

Credit versus §174A deduction: different tools for the same costs

Section 174A, added by the One Big Beautiful Bill Act, lets taxpayers deduct domestic research or experimental expenditures for tax years beginning after December 31, 2024, or elect to amortize them over at least 60 months. That deduction reduces taxable income; the §41 credit reduces tax dollar for dollar. The two interact through §280C. If the client does not elect the reduced credit on Item A of Form 6765, the §174A amount must be reduced by the credit. If it makes the election, the regular credit uses 15.8% instead of 20%. That election must be made on a timely filed original return, including extensions. For method-change mechanics on the deduction side, see our Form 3115 and Rev. Proc. 2026-32 article.

For startups with little income tax to offset, a qualified small business (gross receipts under $5 million and no gross receipts before the five-year period ending with the tax year) can elect to apply up to $500,000 of the credit against the employer’s social security tax and then Medicare tax, using Form 8974 with its payroll returns. The election must be made on a timely filed return and cannot be made on an amended return. Founder clients may also want our QSBS article.

Why this matters: the IRS sees more before an exam starts

CBIZ expects Schedule G to work as a risk-assessment tool, letting the IRS judge a claim before committing exam resources. Refund claims already face similar rules: a valid amended-return research credit claim must identify all business components, the research activities for each, and total qualified wage, supply and contract research expenses. IR-2025-99 extended the 45-day window to perfect a claim through January 10, 2027. We saw similar claim scrutiny in our Employee Retention Credit article.

A practical checklist for 2026 engagements

1. Test the exemptions early. Confirm group-level QREs, three-year average gross receipts and qualified small business status before preparation.
2. Agree on component names now. Use the project or product identifiers the client already uses in its project tracking or ERP system.
3. Split wages by role. Set up time tracking or allocation methods for direct research, first-line supervision and direct support during the year.
4. Tie supplies and contractors to projects. Code invoices to components when paid.
5. Decide the §280C election before filing. It cannot be made late.

Where Tax Brew fits

Schedule G depends on clean, project-coded books. Tax Brew provides bookkeeping, cleanup and tax prep support for US CPA firms, while your team keeps technical review and sign-off on the credit. See our services, or email info@taxbrewglobal.com.

Sources: Instructions for Form 6765 (Rev. December 2025); Form 6765 (Rev. December 2024); IRS IR-2025-99 (Oct. 1, 2025); IRS IR-2024-313 (Dec. 20, 2024); IRS, “Qualified small business payroll tax credit for increasing research activities”; IRS, “IRS sets forth required information for a valid research credit claim for refund”; IRC §41 (Cornell LII); CBIZ (Oct. 1, 2026). General information, not tax advice.