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Thousands of small businesses are struggling because of R&D amortization

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Re: Thousands of small businesses are struggling because of R&D amortization

#151

Post by dang »

Related. Others?

Section 174 removed in new Senate tax agreement - https://news.ycombinator.com/item?id=39013863 - Jan 2024 (3 comments)

Ask HN: IRS section 174 – cause of layoffs? - https://news.ycombinator.com/item?id=38957651 - Jan 2024 (21 comments)

Will US companies hire fewer engineers due to Section 174? - https://news.ycombinator.com/item?id=38931860 - Jan 2024 (38 comments)

Will US companies hire fewer engineers due to Section 174? - https://news.ycombinator.com/item?id=38870429 - Jan 2024 (19 comments)

IRS tax code change in Section 174: R&D is an expense - https://news.ycombinator.com/item?id=38642461 - Dec 2023 (23 comments)

Guidance on Amortization of Research or Exp. Expenditures Under Section 174 [pdf] - https://news.ycombinator.com/item?id=38637540 - Dec 2023 (2 comments)

Tell HN: People laid off in my company due to IRS Section 174 changes - https://news.ycombinator.com/item?id=38633668 - Dec 2023 (6 comments)

Tell HN: Submit comments to IRS re tax treatment of software dev expenses - https://news.ycombinator.com/item?id=38120388 - Nov 2023 (227 comments)

Tell HN: New IRS guidance on software development for Section 174 amortization - https://news.ycombinator.com/item?id=37494601 - Sept 2023 (3 comments)

Software firms across US facing tax bills that threaten survival - https://news.ycombinator.com/item?id=35614313 - April 2023 (985 comments)

Ask HN: How are you handling Section 174 changes for bootstrapped companies? - https://news.ycombinator.com/item?id=34627712 - Feb 2023 (187 comments)

Re: Thousands of small businesses are struggling because of R&D amortization

#152

Post by renewiltord »

atherton33 wrote: post #95
brianwawok wrote: post #84

Earlier quoted context omitted.

I amortize a server because you buy it now, it does work, then is eventually obsolete and you toss it. Does a developer keep doing work for me after he quits/dies?

The code you hired the developer to write/maintain should keep working for you after he quits/dies. Or you made a real bad investment.

With a startup you're running a search function. The code you hired the developer to write often does stop working because you've been forced to pivot as you search for product-market fit.

Re: Thousands of small businesses are struggling because of R&D amortization

#153

Post by VohuMana »

slotrans wrote: post #139

Possibly the most unpopular argument of all: do not comply. Change your employees job titles and/or tax classifications if you have to. Whatever it takes to say "these are salaries, not R&D". If you're big enough they'll notice, but for a 10-person company the risk of a bad audit beats certain bankruptcy.

Maybe unpopular but I assume this is just what is going to happen. I remember awhile back when I was visiting Ireland one of the tours mentioned that modern whiskey and beer in Ireland came about because of taxes. I wish I could remember more details but the story went along the lines of each time a new tax on some type of alcohol happened the producers would reclassify their beverage or change the method which produced it to avoid the new taxes.

I assume this will be the same in the US, software R&D is now some other title with less taxes. When the small companies do it the IRS isn’t going to care but then big ones will do it and the tax law cat and mouse game will continue.

Re: Thousands of small businesses are struggling because of R&D amortization

#154

Post by massysett »

Dalewyn wrote: post #109
telesilla wrote: post #39

Take action and sign up for the Small Software Business Owners Association newsletter and petitions to the government: https://ssballiance.org/ Michele Hansen is doing an incredible job here and should be recognized for it. Latest news was sent yesterday: Republicans and Democrats finally struck a tax deal that includes a partial fix for Section 174. It includes expanding the Child Tax Credit, a key Democratic priori…

>a script to follow Going on a tangent here, but I always hated this idea of reading off a script to try and lobby politicians. If I were the politician, I would ignore all such communiques as indoctrinated spam.

Typically staff answer the phone. They’re making tally marks. If the script tells the staffer what the issue is and the caller’s position so an appropriate tally can be counted, it does the job.

Re: Thousands of small businesses are struggling because of R&D amortization

#155

Post by bbojan »

IndoCanada wrote: post #42
moron4hire wrote: post #40

Earlier quoted context omitted.

They're talking about incorporating in Switzerland, which allows 135% deduction for R&D costs. Yes, Switzerland pays you to run a startup.

But it is difficult to fire them which is a big problem for tech companies where hiring and firing are common

It's very easy to fire in Switzerland. The notice periods are usually longer than in North America, but everyone having unemployment insurance where they are paid ~80% of their salary for up to 2 years makes is not such a big deal.

Re: Thousands of small businesses are struggling because of R&D amortization

#156

Post by mannyv »

PaulDavisThe1st wrote: post #133
siliconc0w wrote: post #118

You got it all wrong, sure that first commit was R&D but the rest of the year? Maintenance. Or- sure we launched the platform and that was R&D but now we're just doing data entry.

The IRS document https://www.irs.gov/pub/irs-drop/n-23-63.pdf is extremely clear on this. New features, improvements? All costs must be amortized. You can only expense bug fixes and GUI changes that don't add features.

Mock all the changes now, then file a bunch of bugs against the non-working feature. Win!

Re: Thousands of small businesses are struggling because of R&D amortization

#157

Post by bbojan »

saiya-jin wrote: post #86
IndoCanada wrote: post #42

Earlier quoted context omitted.

But it is difficult to fire them which is a big problem for tech companies where hiring and firing are common

You are mixing up EU and Switzerland, employment laws are very different (and each EU state has its own, but generally much more protective of employees than Swiss ones). One of the reasons Google has long term big center in Zurich, if grass would be greener (since cheaper it is) in say Germany or Austria they would build there

> One of the reasons Google has long term big center in Zurich, if grass would be greener (since cheaper it is) in say Germany or Austria they would build there

I don't think Google has an office in Zurich because it's cheap. It's mostly due to a lot of talent available (ETHZ, EFPL, etc).

Re: Thousands of small businesses are struggling because of R&D amortization

#158

Post by matsemann »

BenFranklin100 wrote: post #127

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.…

I don't get it. How is this not just $500k salary? How is it R&D?

Re: Thousands of small businesses are struggling because of R&D amortization

#159

Post by ecocentrik »

pclmulqdq wrote: post #91
addicted wrote: post #55

Earlier quoted context omitted.

They’re calling this a business priority for the Republicans when it was a Republican House, Senate and President that passed this measure. That’s a bit too “must make it seem bipartisan” when there is a clear partisan direction. Even when this fix is passed, it will be voted for unanimously by Democrats and only a small fraction of Republicans will vote for it. Explain again to me how that makes it a Republican prio…

You should note that these sorts of tax law changes are largely a revenue game: Someone wants to cut some other tax, so they find a place to raise taxes elsewhere without thinking about the consequences. But also, the vast majority of people employed by R&D-heavy companies are Democrats, so it's hard to impute motive one way or the other.

Independent/unaffiliated voters are now 47% of the electorate in the US so that last statement probably doesn't hold water. Are educated voters, regardless of party affiliation, more likely to vote for serious candidates that focus on issue resolution over culture signaling? Sometimes, but that no longer has much to do with party affiliation.

Re: Thousands of small businesses are struggling because of R&D amortization

#160

Post by KittenInABox »

bbojan wrote: post #155
IndoCanada wrote: post #42

Earlier quoted context omitted.

But it is difficult to fire them which is a big problem for tech companies where hiring and firing are common

It's very easy to fire in Switzerland. The notice periods are usually longer than in North America, but everyone having unemployment insurance where they are paid ~80% of their salary for up to 2 years makes is not such a big deal.

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.
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