A life-and-death scenario: Sm businesses forking over 100% profits to Uncle Sam(marketwatch.com)
marketwatch.com
A life-and-death scenario: Sm businesses forking over 100% profits to Uncle Sam
https://www.marketwatch.com/story/a-life-and-death-scenario-small-businesses-say-theyre-paying-more-than-100-of-profits-to-uncle-sam-after-tax-law-change-e8d86910
2 comments
TL;DR:
There's a bit more to it than that.
As a way to make those tax cuts appear paid for, they changed how R&D expenditures -- which includes software development on software that has ALREADY been commercialized -- has to be amortized.
This was a budgetary sleight-of-hand that made the tax cuts appear paid for.
Most small companies are LLCs, not Corporations, and therefore pay personal tax rates.
As a result, software and other tech companies now have phantom profits because their engineer salaries and other expenses are no longer deductions.
IRS guidance: https://www.irs.gov/pub/irs-drop/n-23-63.pdf
As a way to make those tax cuts appear paid for, they changed how R&D expenditures -- which includes software development on software that has ALREADY been commercialized -- has to be amortized.
This was a budgetary sleight-of-hand that made the tax cuts appear paid for.
Most small companies are LLCs, not Corporations, and therefore pay personal tax rates.
As a result, software and other tech companies now have phantom profits because their engineer salaries and other expenses are no longer deductions.
IRS guidance: https://www.irs.gov/pub/irs-drop/n-23-63.pdf