Form 6765, section by section

Section A: the regular credit

Lines 1 to 13

The original computation: 20% of QREs above a base amount derived from your gross receipts and R&D spending history, in some cases going back to the 1980s. Established companies with long histories use it. Most startups skip Section A entirely because the base-amount math needs history they do not have, and elect the simpler method in Section B instead. You complete one section or the other, not both.

Section B: the alternative simplified credit (ASC)

Lines 20 to 26

This is where most startups live. Line 20 takes your total QREs for the year, computed in Section F. Lines 22 and 23 take your QREs for each of the three prior years. The credit is 14% of the amount by which this year's QREs exceed half of that three-year average.

No QREs in any of the three prior years? Skip the history lines and multiply this year's QREs by 6% instead. A first-time claimant with $1,000,000 of QREs computes a $60,000 credit.

Line 26 holds the Section 280C reduced credit election. Take 79% of the credit and keep your full wage deductions, or take 100% and reduce deductions by the credit amount. See the FAQ below before touching it.

Section C: current year credit

Lines 27 to 31

Housekeeping. This section combines the Section A or B result with any pass-through credits, and routes the total to Form 3800, the general business credit form, which is how the credit reaches your income tax return. Your tax software or CPA handles this part mechanically.

Section D: the payroll tax election

Lines 33a to 36

The section unprofitable startups care about most. A qualified small business can elect to apply up to $500,000 of the credit against payroll taxes instead of income taxes, which means cash value now rather than a carryforward. Qualified small business means two things: under $5 million in gross receipts for the credit year, and no gross receipts at all before the five-year period ending with the credit year.

Check the election box on line 33a and enter the elected amount on line 34. Line 36 carries the amount to Form 8974, which attaches to your quarterly Form 941. The offset starts the quarter after you file the return making the election. The election is only available on an original, timely filed return. Miss it and the year is gone. We cover the mechanics in the payroll tax offset guide.

Section E: other information

Lines 37 to 41

Five disclosure questions, all answerable from good records: how many business components generated QREs (line 37), how much officer wage is included in your wage QREs (line 38), whether you acquired or disposed of a business during the year (line 39), whether you added new categories of expenses to your QREs this year (line 40), and whether you use the ASC 730 safe harbor, which applies to large audited companies, not startups (line 41). If you cannot answer line 37, that is a sign the documentation behind your claim needs work.

Section F: QRE summary

Lines 42 to 48

Your qualified research expenses by category: wages for direct research, direct supervision, and direct support (line 42), supplies (line 43), computer rental and cloud costs (line 44), and contract research (line 45), where a typical US contractor counts at 65% of cost. Line 48 totals them, and that total feeds Section A or Section B. This section is exactly what our QRE worksheet computes.

Section G: business component detail

Lines 49 to 56

The new part, and the reason documentation standards are rising. Section G itemizes your QREs by business component: each product, process, or piece of software, what kind of work it involved, and its wage QREs split into direct research, direct supervision, and direct support. Filers report components covering at least 80% of total QREs, up to 50 components, in descending order.

The timing matters. Section G is optional for tax years beginning before 2026, so 2025 returns filed in 2026 can skip it. It becomes mandatory for tax years beginning after 2025, with two exemptions: qualified small businesses electing the Section D payroll offset, and filers with $1.5 million or less in total QREs and $50 million or less in average gross receipts for the prior three years, claiming on an original return.

Exempt or not, Section G is the clearest statement yet of what the IRS expects you to know about your own claim. Keeping component-level records is how you answer it without a scramble. That is what the documentation template is structured around, and what Claimship builds automatically.

Common questions