Form 6765 Section G: what you have to report starting in tax year 2026

For tax years beginning after 2025, Form 6765 stops being a form about totals and becomes a form about projects. Section G asks you to break your research credit down business component by business component, and to split wages three ways within each one. Most companies do not currently track their R&D in a shape that can answer it.

The deadline is less distant than it reads. Section G is mandatory for tax years beginning after 2025 — so a calendar-year filer reports it for tax year 2026, filed in 2027. That is the year you are living through now. The records you are failing to keep this month are the ones that form will ask about.

What Section G actually asks for

Section G is a table. Each row is one business component, and for each you report:

Columns 50 through 52 are the ones that catch people. The statute has always distinguished between performing qualified research, directly supervising it, and directly supporting it — but until now you reported one wage number and kept the breakdown in your workpapers. Section G puts it on the form.

How many components you have to list

Not necessarily all of them. The instructions set a dual limit:

Components are listed in descending order by QRE. You work down the list until you have covered 80% of total QREs or hit fifty rows, whichever comes first. Whatever is left over gets consolidated into a single line called Aggregate Business Components, with the totals but not the per-component detail.

For most companies with a focused R&D programme, 80% of QREs lives in a handful of components and the fifty-row cap never binds. It matters for large filers with sprawling project portfolios.

Who is exempt

Two groups do not have to complete Section G.

Qualified small businesses claiming the reduced payroll tax credit under section 41(h) are exempt outright.

Small taxpayers are exempt if they meet both of these tests and are filing on an original return:

• Total QREs at the controlled-group level of $1.5 million or less, and
• Average annual gross receipts for the prior three tax years of $50 million or less, determined at the controlled-group level.

Note also that the small-taxpayer exemption applies to original returns. An amended return claiming the credit carries its own requirements, which are covered in a separate guide.

The timeline, precisely

The deferral is worth understanding, because it is the reason so few people have noticed. The IRS originally expected to require Section G for 2025 and pushed it back one year after comment. The practical effect is a year of grace that has mostly been spent not preparing.

It is also worth noting what “optional” has meant in the meantime. The IRS has been explicit that it values this information and will ask for it in examination whether or not the form requires it. A 2025 filer who skips Section G has not avoided the question; they have deferred it to a less convenient moment.

What to do about it now

The reporting change is not hard. The record-keeping change is, because it has to happen during the year, not at filing time.

Decide what your business components are, and name them

A business component is a product, process, computer software, technique, formula or invention held for sale, lease or licence, or used in your trade or business. It is not a department, a cost centre or a budget line. If your engineering team thinks in terms of “the platform” and your accounting system thinks in terms of “R&D — Engineering,” neither is a component. Pick names your engineers recognise and your finance team can map to.

Track time against those components, not against cost centres

This is the real work. Section G wants wages per component, and within each component split into actual conduct, direct supervision and direct support. If your time tracking rolls up to a single R&D bucket, no amount of year-end effort reconstructs that split credibly. Project codes, applied during the year, are what make this answerable.

Classify roles once, consistently

The three wage categories map reasonably well onto roles. Engineers doing the work are actual conduct. A manager running design reviews and directing the experiments is direct supervision. A technician building test rigs, or a writer documenting results, is direct support. First-line judgement calls should be made once and applied consistently rather than argued case by case at filing time.

Keep supplies and contract research traceable to a component

Supplies consumed in research and amounts paid to contractors both have to land on a component row. An invoice that says “engineering services” with no project reference is an invoice you will be allocating by guesswork.

This is information, not tax advice. It summarises published IRS material and Treasury regulations as of October 2026, and those change. Whether any particular activity qualifies for the credit depends on facts this page cannot know. Have a qualified CPA or tax counsel review any position before you file it.