221–230 of 369 posts
This is a topic about which I'm very passionate. I've written my congressional representatives several times. I've posted on LinkedIn. I'm raising awareness with my close colleagues. I'm trying to beat the drum as much as I can. There is a minor win that was just advanced in the House yesterday[0] to delay US onshore amortization through 2025 via The Tax Relief for American Families and Workers Act of 2024[1]. It doe…
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Why is spreading something out over 15 years harder than spreading it out over 5?
So this year if I spend $150k on foreign research (which includes ANY software development), and then I also earn $150k in revenue: despite me having $0 in the bank, I will only be able to deduct 1/15 of that, or $10k. In other words, I’ll be taxed as if I made $140k of profit, despite me not having any actual money left over. You can see how if this was 5 years, then I could deduct 1/5 and I would be taxed on $120k…
E.g. if you pay $150K for local research, you expense $15K (10%) the first year (and 30K the subsequent year). You pay taxes on $135K of 'profit'. Let's say that's $45K (I have no idea what's realistic here.
Alternately you pay $130K for a dev from Canada, expense $4,333 (1/30) the first year, and pay tax on the remaining 'profit' of $125,666. Even after admin costs you're coming out ahead
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Zero to one is considered “R&D” and that’s what this entire thing is about.
I am aware of that part, yeah. It's a shitty change, one hundred percent, and I'm glad to see folks like Wyden trying to unwind it. At the same time, I've owned small software businesses before, and I've started/not started new ones based on whether I thought it would work out. Where I am unclear is what sorts of business plans, on day zero, would be suddenly nonviable when it was viable before, so suddenly overwhelm…
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Zero to one is considered “R&D” and that’s what this entire thing is about.
I am aware of that part, yeah. It's a shitty change, one hundred percent, and I'm glad to see folks like Wyden trying to unwind it. At the same time, I've owned small software businesses before, and I've started/not started new ones based on whether I thought it would work out. Where I am unclear is what sorts of business plans, on day zero, would be suddenly nonviable when it was viable before, so suddenly overwhelm…
To slightly simplify: it forces startups to pay taxes on profits that only exist on paper, with cash that is now much more scarce
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Can you say more about unemployment insurance? I haven't heard of this [a us worker] and honestly I also wouldn't mind being more aggressive with my career if I can guarantee ~80% of my income for 2 years should I lose a job.
You have a mandatory deduction on your salary (2.2%, a bit less effectively if you make over 150k). You need to have contributed for at least a year in the past 2 years before you're eligible. You get 70% of your salary (or 80% if you have children under 25) for two years, capped at 70% (or 80%) of 150k. There are a lot more exceptions, special cases and so on, but that's the gist of it.
Here in Virginia, the max, regardless of how much you made, is $378/wk, for a max of 12 weeks.
You can't claim it if you're also receiving a severance, and you also have to record at least 4 job applications each week, but the documentation required needs to include information like the hiring manager's full contact information, which usually means the company needs to have replied to your application within that week.
I got laid off back at the end of April last year. I got a month of severance, so I couldn't claim UC in May. In June, I was able to do some online sleuthing to figure it out for a few applications out of the dozens I was making in a week, but there were some weeks I wasn't able to scrounge together even 4. I ended up with 2 UC checks for a total of $756 gross (yes, had to pay taxes on it). I don't remember exactly how much, but I do remember I calculated it was less than 20% my original take home pay for a month.
Luckily, by the end of June I had a good line on a job and started in July. I got lucky that we could bridge a month of basically "no" income from me. I can't imagine what it would be like for a single-income family living here in one of the most expensive areas of the country.
What does this mean if you’re trying to start your own 1-person SaaS company?
As a different entity type, if you pay yourself a salary, I believe you amortize that like any other company would. But if the U.S. is anything like Canada, you can pay yourself a much lower salary, and then pay yourself through dividends as well.
This is going to wipe out a lot of small businesses, including innovative software dev startups. Here’s a simplified example of this works: Let’s say you’re a four person software dev startup. Everybody is making, say, $125K to get by. That’s $500K in salary expense which normally you can write off as expenses against revenue/funding. For this example, let’s say somehow you also generated $500K in revenue/funding, i.…
As a SMB, if your salary expense is $500k and your revenue is $500k, you are absolutely struggling, no matter the tax situation. In this case you "just" need another $100k in revenue. After all, you are throwing out theoretical revenue numbers anyway. So it just moves the needle somewhat for you to still break even. You could game it just a little if there's revenue at end of year that you can book in the following q…
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See section 5 of this IRS guidance: https://www.irs.gov/pub/irs-drop/n-23-63.pdf tldr: if they're developing new features, it has to be capitalized; if they're doing maintenance then it can be immediately expensed
This is actually great if true! Maybe companies will finally be incentivized to start fixing their bugs rather than cramming unwanted features and UI re-designs into their software products! However I doubt they'd leave such an obvious loophole. Surely the IRS's definition of R&D includes all types of software development activity.
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Zero to one is considered “R&D” and that’s what this entire thing is about.
I am aware of that part, yeah. It's a shitty change, one hundred percent, and I'm glad to see folks like Wyden trying to unwind it. At the same time, I've owned small software businesses before, and I've started/not started new ones based on whether I thought it would work out. Where I am unclear is what sorts of business plans, on day zero, would be suddenly nonviable when it was viable before, so suddenly overwhelm…
Affected small businesses suddenly need to increase revenue or cut costs by 20% just to keep their business solvent. Most small businesses do not have the structural elasticity or capital reserves to absorb that, nor do many business plans. In the very long term it notionally all evens out but most small businesses don't survive that long and these large new costs of doing business will reduce the survival rate even further.