There is a three step tax compliance process to utilize the 2016 Federal-Level R&D Tax Credit to offset Federal Payroll Taxes for Start-Up Companies as follows:

1) File Form 6765 entitled “Credit for Increasing Research Activities” to make an annual election to specify the amount of R&D Tax Credits that will be applied to the employer-portion of Social Security tax;

2) File Form 8974 entitled “Qualified Small Business Payroll Tax Credit for Increasing Research Activities” to report the amount of R&D Tax Credits elected on Form 6765 to offset Social Security tax. This form will be filed with Form 941 each quarter that the credit is applied to the Social Security tax liability; and

3) File Form 941 entitled “Employers Federal Quarterly Tax Return” to include the amount reported on Form 8974 each quarter.

Please consult my published article at www.taxconnections.com/taxblog/a-practical-guide-to-the-enhanced-rd-tax-credit-program-for-eligible-small-businesses-and-eligible-start-ups/#.WGRuIFMrKos and contact me directly with any inquires at www.taxconnections.com/profile/12259077?name=Peter-J-Scalise