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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

#81

Post by mjwhansen »

welder wrote: post #23
itsoktocry wrote: post #9

Earlier quoted context omitted.

> 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.

Your CPA might be referring to rules for R&D tax credits, which covers a much, much more narrow scope of business activities. R&D credits cannot offset the impact of the amortization rules.

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

#82

Post by troft »

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…

[dead]

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

#83

Post by MattRix »

edgyquant wrote: post #70
MattRix wrote: post #68

Earlier quoted context omitted.

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?

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 profit, which is still bad, but not nearly as bad.

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

#84

Post by brianwawok »

spacecadet wrote: post #67
p_l wrote: post #34

Earlier quoted context omitted.

Salaries being amortized never made sense

Please explain then. Because if you spend $2m on an idea, layoff half the company, pivot to a new idea, rehire. You think it's fair on the rest of us you get to write that risk off? This. Is. Why. People. Hate. Tech.

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?

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

#85

Post by mjwhansen »

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…

Thanks for linking to SBBAlliance and for the kind words! But seriously, thank me when it’s fixed. (Counting chickens before they’ve hatched, etc etc)

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

#86

Post by saiya-jin »

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

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

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

#87

Post by brianwawok »

nickjj wrote: post #48
welder wrote: post #23

Earlier quoted context omitted.

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.

> However, my CPA said software engineer salaries are only categorized as R&D before the product is launched I wonder how this one will pan out. Let's say you build out a landing page with a way for folks to input their email address which demonstrates interest in your product. You've released it and people can sign up. Did it launch? You could make case it did and now you're iterating on the product from here on out…

If you are a one man startup it doesn’t apply. This would only matter for employee salary.

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

#88

Post by michaelbuckbee »

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…

Huuuuge thanks to Michele for leading the charge on this.

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

#89

Post by spacecadet »

brianwawok wrote: post #84
spacecadet wrote: post #67

Earlier quoted context omitted.

Please explain then. Because if you spend $2m on an idea, layoff half the company, pivot to a new idea, rehire. You think it's fair on the rest of us you get to write that risk off? This. Is. Why. People. Hate. Tech.

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?

[flagged]

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

#90

Post by geraldwhen »

MattRix wrote: post #71
djoldman wrote: post #52

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?

Well the “good” thing about this law is that it also classifies ALL software development (and any supporting activities!) as R&D. And yes that’s as absurd as it sounds, but it’s true.

This is a good thing. Prior to this, I had to make up a paper explaining why my team was R&D with help from an outside consulting group annually.

It was always a sham. We were building product.

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