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On the Form 8974 that you attach to your third quarter

Column (d)

2018 Form 941, you will enter on line 1, columns (a)–(d)

If the EIN used on Form 8974 isn’t the same as the EIN

the same information (your 2017 income tax return

used on Form 6765, enter the EIN that was used on Form

information) that you reported on the previously filed Form

6765. Generally, the EIN used on Form 8974 should be

8974, line 1, columns (a)–(d) (the Form 8974 that you

the same as the EIN used on Form 6765. However, if

attached to your second quarter 2018 Form 941). You will

you’re a member of a controlled group of corporations (as

enter $100,000 in column (e) (same as you did for the

defined in section 41(f)(1)(A) and (f)(5)) or a member of a

second quarter of 2018) but you now must also enter

group of trades or businesses under common control (as

$75,000 in column (f) because this is the amount of the

defined in section 41(f)(1)(B) and Regulations section

credit from column (e) that you claimed in a previous

1.41-6(a)(3)(ii)), the EIN used on Form 6765 may be

period. You will enter $25,000 in column (g), which is your

different from the EIN that you must use on Form 8974.

carryforward from the prior quarter.

The discussion under Carryforward, above, also

Column (e)

applies to Forms 943 and 944. However, the

TIP

Generally, enter the amount from Form 6765, line 44.

remaining credit from one year is carried forward

However, if you’re a member of a controlled group of

to the following year.

corporations (as defined in section 41(f)(1)(A) and (f)(5))

or a member of a group of trades or businesses under

Part 2: Determine the Credit That You

common control (as defined in section 41(f)(1)(B) and

Can Use This Period

Regulations section 1.41-6(a)(3)(ii)), enter the amount of

the credit that was allocated to your EIN. As a member,

your credit is determined on a proportionate basis to your

Line 7

share of the aggregate qualified research expenses for

Enter the amount from Part 1, line 6, column (g).

increasing research activities taken into account by the

group for the research credit.

Line 8

Enter the amount from Form 941, line 5a, column 2; Form

Column (f)

943, line 3; or Form 944, line 4a, column 2. This is the total

amount of social security tax on wages.

Enter the amount of the credit from column (e) that was

taken in a previous period or previous periods.

If you’re filing an aggregate Form 941 or 943, you

must file a Form 8974 for each client that is taking

Column (g)

the qualified small business payroll tax credit for

CAUTION

increasing research activities. Also, you can’t enter the

Subtract column (f) from column (e) and enter the result in

amount from Form 941, line 5a, column 2; or Form 943,

column (g). Add all of the amounts in column (g), lines 1–

line 3, on line 8 of any of the Forms 8974 that are attached

5, and enter the result on line 6, column (g). This is the

to the aggregate Form 941 or 943. The credit is based on

total amount of credit you have available for the current

each employer’s liability for social security tax. Therefore,

quarter (Form 941) or year (Form 943 or 944).

you must enter on line 8 of each client’s Form 8974 the

Carryforward. If the qualified small business payroll tax

amount that the client would’ve reported on Form 941,

credit for increasing research activities reported in column

line 5a, column 2; or Form 943, line 3, if the client filed its

(e) can’t be fully used in the first quarter after the income

own Form 941 or 943.

tax return is filed, you can carry forward any unused

amount to the next quarter. If, in the next quarter the

Line 9

amount carried over from the first quarter can’t be fully

Enter the amount from Form 941, line 5b, column 2; or

used because of the limit to the employer social security

Form 944, line 4b, column 2. This is the total amount of

tax on wages for that quarter (the next quarter), then you

social security tax on tips.

can carry forward any unused amount to the quarter after

the next quarter. For subsequent quarters, if the qualified

If you’re filing an aggregate Form 941, you must

small business payroll tax credit for increasing research

file a Form 8974 for each client that is taking the

activities on line 6, column (g), can’t be fully used in the

qualified small business payroll tax credit for

CAUTION

quarter, you can carry forward any unused amount to the

increasing research activities. Also, you can’t enter the

following quarter.

amount from Form 941, line 5b, column 2, on line 9 of any

Example. You elected to take $100,000 as a qualified

of the Forms 8974 that are attached to the aggregate

small business payroll tax credit for increasing research

Form 941. The credit is based on each employer’s liability

activities when you filed your 2017 income tax return on

for social security tax. Therefore, you must enter on line 9

of each client’s Form 8974 the amount that the client

March 15, 2018. On the Form 8974 that you attach to your

would’ve reported on Form 941, line 5b, column 2, if the

second quarter 2018 Form 941, you enter $100,000 in

client filed its own Form 941.

column (e), leave column (f) blank because the second

quarter of 2018 is the first time you’re using the elected

amount from your 2017 income tax return, and enter

Line 10

$100,000 in column (g). You complete lines 7–12 and

Add lines 8 and 9. Enter the result on line 10.

learn that you can only use $75,000 of the credit for the

second quarter of 2018. You have a $25,000 carryforward

to the third quarter of 2018.

-3-

Instructions for Form 8974 (Rev. 12-2017)

Instructions For Form 8974 - Qualified Small Business Payroll Tax Credit For Increasing Research Activities Page 3

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