Sec 174 of the tax code

[Интеррапт]

увидел на linkedin

I've noticed tech layoffs have been persistent since the tail end of 2022.
Did you know that is LIKELY when companies found out that Sec 174 of the tax code would officially become law?

Lots of factors at play, obviously, but when you learn about how businesses operate and how they allocate funds to position themselves long term... you can start to see the bigger picture.

Blair, Sec 174? That’s gibberish to me, what is that?

Allow me to insert this overview from Gergely Orosz

"The amendment to S174 means employing software engineers can no longer be accounted as a direct cost in the year they are paid – unlike the norm, globally. Here’s a simplified example of the change from the final tax year before the change.

Take an imaginary bootstrapped software business called “Acme Corp.” This company generates $1,000,000 of revenue per year running a SaaS service. It employs five engineers, and pays each $200,000. That is $1,000,000 paid in labor costs. For simplicity, we omit other costs like servers and hosting, even though those costs can also fall under the new R&D rules, and have to be amortized. So, how much taxable profit does this company make?

In 2021, the answer would be zero profit. In 2022, the answer was $900,000 in profits (!!) This is because from 2022, software engineer labor costs must be amortized over five years.

What happens to a small, bootstrapped company without $189,000 in cash floating around with which to pay this tax?

There are two options:
·     Take out a loan at a relatively high interest rate (likely at around 10% or so.) I’ve heard of small businesses needing to use personal loans to pay tax.

·     Layoff a Software Engineer on $200,000 per year and use this saving to pay the bill!”

Its truly an interesting read, link in the comments!

[Uzito]

Приведенный пример про стартап мне кажется гигантским набросом.

Какого хрена бы payroll не вычитается из revenue?

Если мухлевали и проводили эту зарплату как капитальную инвестицию, которую в тот же год списывали, то тогда да, проблема.

[alex_127]

Мысль о том что всех инженеров надо было вообще не брать и быть в шоколаде - не донесена.