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How does one determine whether work done by an employee is classified as R&D or as an immediate expense? If a programmer is building an app that isn't yet offered as a product, is that R&D? If a programmer is maintaining an app that is offered as a product, is that NOT R&D?
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> Precisely. They didn’t think of their work as R&D because it was not R&D. Frankly, they should have seen this coming Don't you have this backwards, or do I? Software development is now going to be treated as R&D, which means that costs have to be amortized. That's not an tax advantage, it's a disadvantage. All the other businesses you list get to expense their labour costs. But we agree, software dev should not be…
MasterYoda900 has it backwards. However, my CPA said software engineer salaries are only categorized as R&D before the product is launched. So this only affects new startups pre-launch... if my CPA is correct.
Am I correct that if this does not get fixed, it's a huge boon for dev agencies as paying them is an immediate expense for the startup, while paying in-house devs is not?
From my reading, that would be an expense directly related to the development of the software, which also must be amortized. What I haven't figured out is what the Dev agency has to do. They don't own the software being developed. Unless they have in-house libraries they develop... And how does this work for open source projects that have corporate support to be developed on during company time? If you amortized the…
FWIW, Gergely Orosz provided some helpful background on Twitter and in his newsletter: https://twitter.com/GergelyOrosz/status/1735030983173230944 https://newsletter.pragmaticengineer.com/p/the-pulse-75
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Especially since it seems like you can spread it out over 15 years, 3 times as long, if you have overseas devs. >These costs have to be capitalized and amortized over 5 years – or 15 if labor is done outside of the US. I’m not an accountant so maybe I’m reading that wrong, but if so that’s insane.
You MUST spread it over 15 years, which is brutal for most companies and will mean no longer hiring any foreign R&D or software development contractors.
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You MUST spread it over 15 years, which is brutal for most companies and will mean no longer hiring any foreign R&D or software development contractors.
Why is spreading something out over 15 years harder than spreading it out over 5?
You essentially pay taxes now on income, and can’t deduct costs for 5 or 15 years. So it’s kind of like pre-paying taxes and not getting the money back for 5/15 years. Say that you need to go borrow cash to cover the shortfall. Is it cheaper to borrow money for 5 or 15 years?
? Was there a change in the tax code? Then why not provide some links, it isn't secret then? Why wouldn't people be able to talk about it. What is brave about discussing a tax policy? There was not context given about what it is, what is is causing.
This is a much better article: basically these companies are paying for the tax cut Republicans gave the to the top bracket in 2017: > In 2017, then-President, Donald Trump, signed the 2017 Tax Cuts & Jobs act, which overhauled tax codes and reduced tax – for example, it reduced the top tax bracket from 39.6% to 37%. To make the bill pass strict budgetary rules, the Senate used a process called reconciliation: adding…
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You're getting down voted for sounding partisan I suspect, but regardless of the politics, you're absolutely right. That bill was a huge change across the US tax system.
Yeah, it’s an election year so even a literal statement of fact is going to be downvoted by some people. Hopefully at some point they’ll have an epiphany about whether they should self-identify with a party so strongly when an accurate descriptions of its actions feels like an attack, but I’m not as optimistic about that as I used to be.
You’re over simplifying and singling out your pet political issue in an effort to sway opinion to your political leaning. If you had just said it was due to those tax cuts you likely wouldn’t have been downvoted.
Am I correct that if this does not get fixed, it's a huge boon for dev agencies as paying them is an immediate expense for the startup, while paying in-house devs is not?
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But it is difficult to fire them which is a big problem for tech companies where hiring and firing are common
I hear this a lot and it's difficult to reconcile with my experience. Every US company I've worked at (and that's always been in at-will states) has not made it easy to get rid of people. Even people with woefully bad records of losing money every year and having multiple harassment complaints filed against them were kept for nearly a decade . With one exception (I personally got fired from a tiny startup because I r…