Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities
Form 8974 lets a qualified small business apply its research credit against payroll taxes instead of income tax. Fill in the official IRS PDF below and download it.
This is the genuine IRS PDF, unmodified. Source: IRS official page.
What is 8974?
Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities, figures how much of the research credit elected on Form 6765 a small business can claim against its employment taxes for the quarter. The election is useful for startups that have research expenses but little or no income tax to offset.
The form tracks the credit elected on the income tax return, how much has already been used in prior quarters, and how much can be applied this quarter against the employer share of Social Security and Medicare taxes. It is attached to the employment tax return, usually Form 941, for each quarter the credit is claimed.
Who files 8974?
- Qualified small businesses that elected on Form 6765 to apply the research credit to payroll taxes
- Startups with gross receipts below the qualifying limit and a short gross receipts history
- Employers filing Form 941, 943, or 944 who have remaining elected credit to use
- Third-party payers claiming the credit on behalf of a client that made the election
How to fill out 8974
- In Part 1, list the income tax return where you elected the payroll credit on Form 6765, the election year, and the amount elected.
- Enter the credit already claimed in earlier quarters to find the amount remaining.
- In Part 2, apply the remaining credit against the employer share of Social Security tax and, to the extent allowed, Medicare tax for the quarter.
- Carry the allowed credit to the credit line of your Form 941 for the quarter.
- Download the finished PDF and file it attached to your employment tax return. Unused credit carries to the next quarter.
Quick fill 8974 on this page
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Frequently asked questions
How does a business qualify for the payroll credit election?
A qualified small business generally must have gross receipts under $5 million for the credit year and no gross receipts for any year more than five years earlier. The election is made on Form 6765 with a timely filed income tax return.
When can I start claiming the credit on payroll returns?
The credit is first available on the employment tax return for the quarter that begins after you file the income tax return making the election. Form 8974 then goes with each quarterly return until the elected amount is used up.
Which payroll taxes does the credit offset?
The credit applies against the employer share of Social Security tax and, for recent credit years, also the employer share of Medicare tax once the Social Security portion is fully offset. Check the current instructions for how the limits apply.