TaxBandits Knowledge Base

What is Form 8974?

IRS Form 8974 is used to determine the qualified small business payroll tax credit for increasing research and development activities, which can be claimed on an employment tax return. Small businesses or startups can use Form 8974 to calculate the credit for specific forms (941, 943, or 944).

Only employers who have made an election on Form 6765, Credit for Increasing Research Activities, are eligible to file Form 8974. After electing to claim payroll tax credits on Form 6765, file Form 8974 along with your Form 941, 943, or 944 to claim the qualified small business payroll tax credit for research activities. Without making an election on Form 6765, you cannot request the tax credit, even if Form 8974 is attached to your employment tax return.

For Quarterly Employment Tax Return Filers:

When filing Form 941, you can claim the small business payroll tax credit for research and development purposes. The credit can only be claimed for quarters that begin after the income tax return in which you made the election on Form 6765. You are allowed to claim this credit starting from that quarter onward.
TaxBandits allows you to file Form 8974 along with Form 941 if you're a qualified small business claiming the payroll tax credit for research and development activities (reported in Box 11a).

For Annual Federal Tax Return Filers:

When filing Form 943 or 944, you can claim the small business payroll tax credit for research and development for elections made on Form 6765. The credit can only be claimed for the same tax year and cannot be carried over to a different year.