321–330 of 369 posts
Wish us luck, because we’re going to need it.
[1] https://www2.deloitte.com/content/dam/Deloitte/us/Documents/...
To be fair, accelerated R&D amortization (immediate full expensing in the year the expense was incurred) is a tax loophole . Essentially, the default tax treatment of expenses is basically to take the expense same as you would treat it under GAAP, but some people (I am one of them BTW) think that we should put a finger on the scales for the case of legitimate R&D. Now though I happen to think accelerating it is a goo…
I don’t understand why businesses can’t just say that their engineering department is a cost center (COGS) instead of classifying engineer salaries as R&D expenditures. I guess one downside would be not qualifying for the R&D tax credit. The majority of software engineering is the equivalent of janitorial work… keeping servers online, fixing bugs, maintaining services, upgrading and refactoring code, etc. It’s diffic…
If it’s not classified as R&D then you just treat it as a normal expense and you aren’t impacted by this rule.
Am I reading this incorrectly?
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.
> Yes, Switzerland pays you to run a startup. It sounds like they're just taxing you less, not paying you anything.
Earlier quoted context omitted.
> 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).
Offshore centers are cost centers Most important projects are done at the HQ
Earlier quoted context omitted.
Before the 2017 change you could and should have if they were not engaged in actual R&D. But people used to lump them into R&D anyway because of the preferential tax treatment (you also used to get special treatment for NOL, which you can't any more). Software development doesn't generally follow GAAP's model because unless you're IBM or Oracle the same people sometimes fix bugs and sometimes develop new features. Th…
I own a company with millions in payroll expense. All of payroll is lumped into 1 line item when submitted to the IRS. (I’m only somewhat simplifying for sake of argument) We would have to go out of our way to split out R&D. When you win $500 at a casino, do you go out of your way to claim the gain on your taxes? Absolutely not. Are you supposed to? Absolutely, but you don’t. And the IRS doesn’t much care. I feel lik…
If you make up your own accounting rules and it seems to work for you, well, more power to you.
I like to have a clear understanding of where my business is going and the GAAP rules are pretty reasonable and align with other companies and what they do.
Earlier quoted context omitted.
I own a company with millions in payroll expense. All of payroll is lumped into 1 line item when submitted to the IRS. (I’m only somewhat simplifying for sake of argument) We would have to go out of our way to split out R&D. When you win $500 at a casino, do you go out of your way to claim the gain on your taxes? Absolutely not. Are you supposed to? Absolutely, but you don’t. And the IRS doesn’t much care. I feel lik…
Do you not keep your books according to GAAP either? If you make up your own accounting rules and it seems to work for you, well, more power to you. I like to have a clear understanding of where my business is going and the GAAP rules are pretty reasonable and align with other companies and what they do.
It’s interesting that HN is more concerned about the rules changes than the person filing our company’s taxes (or our CFO). This is a topic that is basically glossed over as a non-event between us and those professionals.
(Unlike the wayfair ruling which sent everyone, including our accountants, up in arms about sales tax and how to decide nexus)
Maybe I have a bad accountant and CFO? Or HN is extrapolating this to mean more than it does.
In many cases for bootstrap ones it makes them not financially viable - 100%+ effective tax rate would do that if you optimize for early profitability.
Even for VC backed ones, those taxes just eat into your runway. I know a bunch of companies that opt for some weird international setup to try and avoid the effects but it’s really not what you should do in early days…
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…
>It's not enough. I was geared up to start a business this year; this, specifically, has put the brakes on it. Bro what? Were you starting the business specifically to get these deductions? (I’m genuinely curious, sounds like a fun regulatory arbitrage.)