The T661 form: what every part of your SR&ED claim actually asks for

Key takeaway: The T661 form is your entire SR&ED claim. Ten parts, one per-project technical narrative capped at 350, 700, and 350 words, and a filing deadline with zero extensions. Any expenditure that isn't on the form with the prescribed information by that deadline is not an SR&ED expenditure, full stop. For a CCPC earning the enhanced 35% credit on up to $6 million of qualifying spend, a sloppy T661 isn't a paperwork problem. It's the difference between a seven-figure refund and a denial letter.

The T661 form is the document the CRA reads to decide whether your R&D earns tax credits. Not your pitch deck, not your repo, not the conversation your accountant had with a reviewer. The form. Every project you claim, every dollar you spend, and every technical argument you make has to land inside its ten parts, and anything that doesn't make it onto the form by your reporting deadline is gone, permanently — the law gives the CRA no discretion to take it late.

Most founders meet the T661 form twice: once when their accountant asks alarming questions in month 17, and once when the CRA asks harder ones. This guide is the third option. Everything below comes from the CRA's own Guide to Form T661 (T4088) and its SR&ED Filing Requirements Policy, fetched and verified for this post, with line numbers so you can check our work.

What is the T661 form?

Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim, does two jobs at once. Per the CRA's T4088 guide, the SR&ED program gives you two incentives: a deduction of SR&ED expenditures against income (this year or carried forward), and an investment tax credit on qualified expenditures that can come back as a cash refund, a reduction of tax payable, or both. Unused credits carry back 3 years or forward 20. The T661 is where you establish both: the technical case that your work is SR&ED, and the financial case for how much it cost.

The form doesn't travel alone. A complete claim is the T661 (current version) plus Schedule T2SCH31 for corporations or Form T2038(IND) for individuals, which is where the credit is actually claimed, plus supporting forms where they apply: T1145, T1146, T1174, T1263. The T661 establishes the expenditures; the T2SCH31 turns them into credits on your T2. File one without the other and the Filing Requirements Policy is blunt about the outcome: a T661 without the schedule earns deductions but no credit; a schedule without the T661 earns nothing at all.

One version note before anything else. The CRA's T661 form page lists the current version as the "(26)" release, and the T4088 guide warns that filing a current-year claim on a previous version of the form can delay processing and can get expenditures denied if the prescribed information isn't in on time. If your preparer's template predates the 2026 program changes, that's a real risk, not a formality.

How is the T661 form structured?

Ten parts. Here's what each one does, per the T4088 guide:

• Part 1 – General information. Who you are: claimant name (line 010), tax year, business number, the number of projects you're claiming (line 050), and contacts for the financial (lines 100 to 110) and technical (lines 115 to 125) sides of the claim.
• Part 2 – Project information. The heart of the claim, completed once per project: identification (Section A), the technical narrative (Section B, the famous word-limited questions), and context about who did and wrote up the work (Section C).
• Part 3 – Calculation of SR&ED expenditures. Your method election (proxy or traditional), then the actual dollars: salaries, materials, contracts, third-party payments, and the pool of deductible expenditures.
• Part 4 – Qualified expenditures for ITC purposes. Where allowable expenditures become the base for the investment tax credit, and where government assistance, including provincial R&D credits, reduces that base (line 513) — after already reducing the expenditure pool back in Part 3, Section C (line 429).
• Part 5 – Prescribed proxy amount. Only if you elected the proxy method: the salary base and the 55% notional overhead amount.
• Part 6 – Project costs. A per-project cost breakdown (boxes 750 to 758) whose columns must reconcile to the totals in Part 3, for every project claimed, not just the ones you described in Part 2.
• Part 7 – Additional information. Statistics Canada data: funding sources, whether the work was basic or applied research versus experimental development, and R&D headcount in full-time equivalents.
• Part 8 – Claim checklist. The CRA's own completeness check. The T4088 guide tells you to confirm every item before filing to expedite processing.
• Part 9 – Claim preparer information. Disclosure of anyone paid to prepare or assist with the claim, including their billing arrangement and rate. Missing, incomplete, or inaccurate information here means a $1,000 penalty may be assessed, with any preparer who worked on the claim jointly liable for it.
• Part 10 – Certification. Signature of the person taking responsibility for the whole form. Filing electronically, your business number, tax year end, and access code make up the official signature.

If you're new to the program, it's worth internalizing that the CRA treats the information in these parts as prescribed information: the stuff that must be on file by your reporting deadline for an amount to count as an SR&ED expenditure at all. That framing explains almost every hard edge in the rest of this post.

What are the T661 word limits, really?

The industry repeats "350, 700, 350" like folklore. Here's the primary source. The CRA's T4088 guide states it directly: "Lines 242, 244, and 246 have word limitations of 350, 700, and 350 respectively." Those are the three questions in Part 2, Section B, and they are the entire technical narrative of each project:

• Line 242 (maximum 350 words): What scientific or technological uncertainties did you attempt to overcome? The guide wants the knowledge base you started from and why generally available knowledge couldn't resolve the problem.
• Line 244 (maximum 700 words): What work did you perform in the tax year to overcome those uncertainties? The guide asks for chronological order and explicitly wants the systematic structure: the hypotheses, the experiments or analysis that tested them, the results, and the conclusions. Contractor work goes here too, identified as such.
• Line 246 (maximum 350 words): What scientific or technological advancements did you achieve or attempt to achieve? The guide is pointed on two things: novelty, features, or increased functionality of a product may not in itself demonstrate advancement (the guide's own words), and failure still counts, because rejecting a hypothesis eliminates a possible solution and can itself be an advancement.

Three other limits hide in the same guide, and almost nobody mentions them: line 282 gives you 15 words to describe supporting evidence that isn't on the checklist, line 960 gives a preparer 10 words to describe a non-standard billing arrangement, and Section C caps your key individuals at three names (lines 260 and 261), with qualifications that should be relevant to the work.

Fourteen hundred words per project is not much room to justify hundreds of thousands of dollars. That's by design. The guide says descriptions that are "vague, unnecessarily lengthy, or fail to address the questions in technical terms will increase the likelihood of a further review," and it recommends the narrative be written in the language and style of the people who did the work, extracted from materials generated while the work was happening. In other words: the CRA is telling you the winning move is dense, factual, engineer-written prose built from records you already have. If your team does eligible experimental work, the narrative should read like their commit history sounds.

Do you have to describe every project?

There's a real concession here, and a trap inside it. Per the T4088 guide and the Filing Requirements Policy, you may choose to submit Part 2 for only your 20 largest projects by dollar value. But you must still complete and keep a Part 2 for every project claimed, at your place of business, and every project's costs must appear in Part 6 regardless. If the CRA asks for the missing Part 2s and you can't produce them, the expenditures for those projects are disallowed.

The policy's own worked example shows how surgical this is: a claimant filed fifteen projects but included Part 2 narratives for only ten by the deadline. The CRA didn't kill the claim. It accepted the ten documented projects and permanently refused the five without narratives, because nothing can be added after the reporting deadline. Partial documentation means partial payment. The form is forgiving about volume and merciless about completeness.

Proxy or traditional: which method should you pick in Part 3?

Part 3 opens with a one-time, per-year decision at lines 160 and 162: elect the proxy method or choose the traditional method. The T4088 guide is explicit that once your T661 is filed, the selection cannot be changed for that tax year. Here's the actual difference:

• Traditional method (line 162): you identify and claim your real SR&ED overhead, item by item, on line 360, and you must be able to show each expenditure was directly related and incremental to the SR&ED. The upside is that real overhead can exceed the proxy. The downside is the tracking burden and the argument you sign up for on every line item.
• Proxy method (line 160): you skip itemized overhead entirely. Instead, Part 5 computes a prescribed proxy amount equal to 55% of your salary base, the directly-engaged SR&ED salaries from Part 3. The PPA isn't deductible from income, but it earns the investment tax credit, which is what most startups are actually optimizing for.

For a software company whose SR&ED cost is overwhelmingly engineers' salaries, the proxy method is usually the obvious pick: no overhead tracking, and a 55% top-up on the credit base for every directly-engaged salary dollar. That last sentence is our read of the trade-off, not CRA guidance; the guide itself just lays out both methods and lists the trade-offs.

Two salary rules catch founders specifically, both from the T4088 guide. First, a specified employee, defined to include anyone who owns 10% or more of the issued shares of any class, so founders, gets clipped twice: in Part 3 their claimable salary excludes bonuses and profit-based remuneration and is capped at five times the year's maximum pensionable earnings, and in the Part 5 salary base at most 75% of their time counts, with a further cap of 2.5 times that same pensionable-earnings figure. Second, contract expenditures for SR&ED performed on your behalf and third-party payments only carry 80% of their value into the credit base. An engineer on payroll and the same engineer invoicing as a contractor are different numbers on this form.

When is the T661 form due?

The deadline structure, per the CRA's submission page and Filing Requirements Policy: your SR&ED reporting deadline is 12 months after your income tax return's filing due date. For a corporation, the T2 is due 6 months after year end, so the T661 wall lands 18 months after year end. Individuals get 17 and a half months after year end; trusts, generally 15.

What makes this deadline different from every other one in your tax life is what the policy says next: if the prescribed forms aren't filed by the reporting deadline, the CRA "cannot by law allow any additional time to provide the prescribed information." The legislative citation is subsection 220(2.2) of the Income Tax Act, titled "No extension to file SR&ED prescribed forms." File late and you get a letter saying the claim was not accepted. There's no relief process because the law doesn't give the CRA one to run. The only soft edge: a deadline that falls on a weekend or CRA-recognized holiday rolls to the next business day.

The deadline applies to information, not just the form. An expenditure left off the T661 at the deadline can never become an SR&ED expenditure; a project narrative not filed (or kept, for the 20-largest concession) by the deadline can never be added. And the CRA recommends you file early with your return for a practical reason spelled out in the policy: claims filed at least 90 days before the reporting deadline give the CRA time to check filing requirements and tell you about deficiencies while you can still fix them. A claim filed at month 17 gets no such safety net. We covered the full deadline mechanics, and what the 2026 changes did to the cost of missing it, in the 18-month rule post.

What gets T661 claims delayed or denied?

Strip away the folklore and the CRA's own documents give you the failure list:

• Missing prescribed information. The Filing Requirements Policy says filing a form with missing information can get a claim "delayed in processing, or partially or fully denied." If the CRA spots the gap before your reporting deadline, you can fix it; after, you can't, and the onus is on you either way.
• Old form versions. The T4088 guide flags using a previous version of the T661 as a cause of delay and potential denial. The current release is the "(26)" version.
• Vague narratives. The guide's words: vague, unnecessarily lengthy, or non-technical answers to lines 242 to 246 increase the likelihood of further review. Part 2 is your one shot at the CRA's initial read; the guide says clear, concise, technically-framed answers can reduce or even eliminate the need for further information.
• No supporting evidence. Appendix 2 of the guide is unambiguous: "Work for which you have no relevant supporting evidence will likely be disallowed." Dated, contemporaneous documentation, generated as the work was being carried out, is called out as the best evidence you can hold. For software teams the guide's own evidence list includes design documents, system architecture, and source code, alongside time sheets tied to the salaries claimed.
• Filing without a return. A T661 filed by the deadline without an income tax return meets the filing requirements but sits unprocessed until the return arrives, per the policy. The claim is safe; your refund timeline isn't.

Notice what's not on the list: the CRA doesn't deny claims because your R&D failed. The guide says outright that failing to achieve your objectives can still be an advancement. Claims die on paperwork and evidence, which are the two things entirely under your control, months before filing. If you want the eligibility side of that equation, start with what counts as SR&ED or the full 2026 program guide.

How do you prepare a T661 that survives contact with the CRA?

A T661 doesn't just need to be filed — it needs to hold up if the CRA selects your claim for review. Read the guide's advice backwards and it becomes a working process. The CRA wants narratives in the language of the people who did the work, built from materials generated during the work, supported by dated records it can verify. Almost every T661 that struggles was built the opposite way: written by someone who wasn't there, from memory, eighteen months after the fact, with evidence assembled retroactively to match.

So invert it. Treat the three questions on lines 242, 244, and 246 as a running log, not an essay assignment. The uncertainty question is answered the day your team discovers the documented approach doesn't work at your scale. The work question is answered by the branches, experiments, and failed attempts as they happen. The advancement question is answered when you learn something the existing knowledge base couldn't have told you, including that an approach is a dead end. Your issue tracker and repo already hold most of this; the gap is that nobody extracts and structures it while it's fresh.

That gap is the specific thing Glauq exists to close. Our AI watches the tools your team already works in and drafts the T661 project narratives continuously, from records created when the work happened, so lines 242 to 246 are built from evidence instead of recollection. Then a qualified, independent SR&ED expert reviews every claim before it's filed and stands behind it if the CRA comes asking. The automation is the how; the accountability is a named human who signs off. And because the fee is flat, not a percentage of your refund, the disclosure in Part 9 makes for boring reading, which is exactly what you want a CRA reviewer to see there.

One honest counterpoint: if you have a single small project, an engineer-founder who writes well, and clean payroll records, you can absolutely prepare the T661 form yourself with the T4088 guide open in the next tab. The form is demanding, not mystical. The case for help scales with project count, staff turnover, and how much of your evidence currently lives only in people's heads.

Frequently asked questions

What is the T661 form used for? Form T661 is the prescribed form for claiming SR&ED tax incentives in Canada. Per the T4088 guide, it establishes both the deduction of SR&ED expenditures against income and the base for the investment tax credit, which is then claimed on Schedule T2SCH31 (corporations) or Form T2038(IND) (individuals). It carries your project narratives, your expenditure calculations, and your preparer and certification disclosures across ten parts.

What are the T661 word limits? The CRA's T4088 guide states that lines 242, 244, and 246, the three project-description questions in Part 2, have word limits of 350, 700, and 350 respectively. Two minor limits also exist: 15 words for describing unlisted supporting evidence on line 282 and 10 words for describing a non-standard billing arrangement on line 960.

Do I need to file a T661 every year I claim SR&ED? Yes. The T661 covers the expenditures of one tax year and files with that year's income tax return, and the T4088 guide notes you must select your calculation method (proxy or traditional) fresh for each tax year you claim, a choice that locks once that year's form is filed. Continuing projects are claimed again each year, with line 208 indicating the project was claimed before and line 244 focused on that year's work.

Can I file the T661 form without my tax return? You can, and it preserves your claim, but it doesn't get you paid. The Filing Requirements Policy says a T661 and schedule filed with all prescribed information by the reporting deadline meets the filing requirements, but processing waits until the income tax return for the year is filed. Most corporations must file the return, and the claim with it, electronically.

What happens if part of my T661 is incomplete? The affected expenditures die; the rest survive. The Filing Requirements Policy's own example: a claimant filed fifteen projects but only ten Part 2 narratives by the deadline, and the CRA accepted the ten and permanently disallowed the five, because no information can be accepted after the reporting deadline. If the CRA finds deficiencies while the deadline is still open, you get the chance to fix them, which is the policy's practical argument for filing at least 90 days early.

Is there a penalty for mistakes on the T661? The sharpest defined penalty sits in Part 9: per the T4088 guide, missing, incomplete, or inaccurate claim preparer information means a $1,000 penalty may be assessed, shared jointly with any preparer involved — though a claim whose only defect is Part 9 is not disallowed for it. Beyond that, the cost of errors is usually not a fine but a denial: expenditures without prescribed information or supporting evidence simply aren't allowed, and after the deadline they can't be repaired.

The T661 form rewards exactly one thing: a claim assembled from real records, inside real limits, ahead of a real deadline. Get those three right and the ten parts stop being intimidating and start being a checklist.

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