Form 8974 determines the amount of qualified small business payroll tax credit you will be able to claim on your employment tax return if you increase your research activities.
If you run a small business or startup that is claiming the tax credit for increased research activities through Form 6765, the IRS requires that you attach Form 8974 to your employment tax return (Forms 941, 943, or 944) to determine the actual amount of research tax credit.
If you’re a Section 3504 agent or a Certified Professional Employer Organization (CPEO) filing on behalf of your clients, you will have to attach the Form 8974 to the Schedule R (Form 941) Allocation Schedule for Aggregate Form 941.
You’ll also have to attach the Form 8974 for each client with the applicable Form 941,943 or 944 that is claiming small business payroll tax credit for increasing research activities.
TaxBandits will help you claim or carry forward credit for your research expenses in a few simple steps. We use an interview-style process to help you e-file your Form 941 and during that process, TaxBandits’ comprehensive software will automatically generate your Form 8974. Once you review both forms, TaxBandits will transmit them directly to the IRS.