What is Form 8974?
583 views | Last modified 4/5/2021 3:17:39 AM EST

Applicable To
94X 1099 W-2 ACA W-4

The IRS Form 8974 is used to determine the qualified small business payroll tax credit amount to increase research and development activities, which can be claimed on the employment tax return. The small business or startup can use Form 8974 to determine the credit that they can use for the particular Form ( 941, 943, or 944).

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

In TaxBandits, when filing Form 941, if you claim any amount in the Box 11a, Qualified small business payroll tax credit to increase research and development activities, we will auto-generate Form 8974 for you to complete.

For Quarterly Employment Tax Return filers,

While you file Form 941, you can claim the small business payroll tax credit for research and development purposes. The quarter in which you want to claim the credit should start after filing the income tax return where you made elections on Form 6765. You are only allowed to claim this tax credit from that quarter.

For Annual Federal Tax Return filers,
 
While you file Form 943 or 944, you can claim the allowed small business payroll tax credit for research and development purposes for the elections made on Form 6765. You can only claim this credit in the same tax year, which includes that quarter and can’t be claimed for a different year.
 

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