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Comment by lifeisstillgood | Hacker News Reader

This seems a silly question but are you forced to label software development as "R&D" instead of just expensing it in the first year.

I mean this is an accounting trap, it seems the best way to get out of it is to use accounting.

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The law has a call out that software development costs are all R&D now. So yes according to my understanding (as one of the signers) and those who have written about this as well.

I think this is flawed in both directions. Sure when you’re primarily building new stuff maybe the cost of that should be amortized. What happens if you’re just maintaining a product though rather than actually developing new stuff? That doesn’t feel like R&D effort.

Maintenance of existing software doesn't count as R&D under this categorization. The IRS will have some helpful guidance available in June. You know, two months after the deadline.

Good luck figuring out how to do that accounting when teams are blended and all your workers are salaried.

Right now, adding features to an existing SaaS is looking a lot like maintenance work to me.

Great, now we have to ask tax accountants how long the Microservice of Theseus was officially in maintenance mode while we rewrote it.

When you say "as one of the signers" do you mean you signed the federal bill which modified this tax? i.e. you are a congressperson? Surely I'm misunderstanding you; your post history is utterly incompatible with any sitting congressperson. But I can't figure out what you meant by it.

Per the article, some 600 business owners signed a letter to congress asking for urgent relief;

> As the House legislation is introduced, a grassroots effort is gaining momentum among software developers, with nearly 600 small business owners including Landsman and Bennett signing a letter to the Hill desks of House Way and Means Committee chair Jason Smith (R-Missouri) and Senate Finance Committee chair Ron Wyden (D-Oregon) on Tuesday morning, asking for “urgent relief” and warning that failure to bring back full R&D expensing may wipe out their companies.

I assume that's what he signed.

Oh, thank you so much. RTFA...

To be fair to you, I certainly read that but didn't associate that letter to the comment until mikeyouse pointed it out. A lot happened between reading the article and reading that comment.

Yeah now that I read that it's missing context. My bad.

Yes. You could look at this as an indictment of the tax system, in that the plain language says what it says, but the IRS expects you to hire an account to make an "appropriate determination."

No small business accountant is incentivized to give you creative opinions, they're just going to go with whatever is the most popular practice. They don't give a fuck how much tax you actually pay.

The accounting standards forbid expensing things that should be capitalised, and if you go ahead and do it anyway your investors will wonder why your accounts show you have no assets.

Your CA would certainly prevent that from happening well before your investors look at your accounts.

It doesn’t matter what you label an expense. Accounting principles and regulations decide what category expenses fall into. That’s a major reason CAs exist, to ensure that your expenses are correctly categorized.

I am not an accountant, but I took 2 years of accounts, and learning to categorize expenses correctly was probably 75% of the classes.

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