IRS Releases Key Guidance on R&E Expense Elections: What EPSA Clients Need to Know

New IRS Guidance on R&E Expenses: Revenue Procedure 2025-28

The IRS has released long-awaited guidance under Revenue Procedure 2025-28, providing clarity on how businesses should treat research and experimental (R&E) expenses. While the core rules remain unchanged, the new procedure outlines how to properly elect and report these options—along with critical deadlines that are fast approaching.

What Are Your Options for R&E Expense Treatment?

If your business incurs domestic R&E expenses, you now have two primary options for 2025:

• Deduct any remaining unamortized R&E costs in full in 2025, or
• Amortize those costs evenly across 2025 and 2026.

For small businesses (generally those with average annual gross receipts under $31 million), additional retroactive options are available for tax years 2022–2024:

• Deduct R&E costs in the year incurred, or
• Capitalize and amortize over 60+ months.

Taxpayers may also:

• Make or revoke a §280C(c)(2) election related to the R&D credit, and
• Apply retroactive accounting method changes to align prior years.

Superseding Return Relief: Key September & October Deadlines

If you’ve already filed your 2024 return without making these elections, the IRS is offering a six-month automatic extension to file a superseding return, but only if:

• Your original return was filed on time without extension, and
• The superseding return is filed solely to make elections or method changes under Rev. Proc. 2025-28.

Superseding return deadlines:

• September 15, 2025 – S corporations and partnerships
• October 15, 2025 – C corporations and sole proprietorships

Returns must be filed in the same manner as the original and clearly marked:
“REVENUE PROCEDURE 2025-28” at the top.

Why This Matters for EPSA Clients

These options offer meaningful flexibility—but they come with technical requirements and strict filing deadlines. The best approach depends on your business’s unique facts and financial strategy.

EPSA USA is here to help you:

• Determine eligibility for elections and relief
• Evaluate the best strategy for your situation
• Prepare and file any necessary amended or superseding returns

Let’s Talk

If you’d like to explore how this new IRS guidance may affect your 2024 tax filings or determine which options best suit your situation, reach out to your EPSA USA advisor today. We’re ready to walk through it with you and ensure your business is fully compliant and optimized.