{"id":10066,"date":"2022-03-11T20:07:14","date_gmt":"2022-03-11T20:07:14","guid":{"rendered":"https:\/\/taxops.com\/?p=10066"},"modified":"2022-03-11T20:47:28","modified_gmt":"2022-03-11T20:47:28","slug":"major-changes-in-%c2%a7174-amortization-hit-q1-estimates-in-2022","status":"publish","type":"post","link":"https:\/\/taxops.com\/major-changes-in-%c2%a7174-amortization-hit-q1-estimates-in-2022\/","title":{"rendered":"Major Changes in \u00a7174 Amortization Hit Q1 Estimates in 2022"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-1024x536.png\" alt=\"\" class=\"wp-image-10070 lazyload\" data-srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-1024x536.png 1024w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-300x157.png 300w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-768x402.png 768w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-1080x565.png 1080w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-980x513.png 980w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-480x251.png 480w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><noscript><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-1024x536.png\" alt=\"\" class=\"wp-image-10070 lazyload\" srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-1024x536.png 1024w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-300x157.png 300w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-768x402.png 768w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-1080x565.png 1080w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-980x513.png 980w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022-480x251.png 480w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/noscript><\/figure>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p><em><em>Beginning January 1, 2022, all companies\u2014from multi-billion-dollar corporations to small business owners\u2014must capitalize all IRC \u00a7174 expenses, spreading the amortization of those expenses either five or 15 years.<\/em><\/em> <em>These changes hit Q1 estimates. <\/em><\/p><\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">By <a href=\"https:\/\/taxops.com\/team\/davinia-lyon\/\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"Davinia Lyon, partner corporate and international tax\">Davinia Lyon<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Tax Cuts and Jobs Act (TCJA) of 2017 had a revenue-raising provision to begin amortizing \u00a7174 deductions beginning in 2022, including software development costs. Beginning January 1, 2022, all companies\u2014from multi-billion-dollar corporations to small business owners\u2014must capitalize all IRC \u00a7174 expenses, spreading the amortization of those expenses either five or 15 years.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This Congressional change primarily impacts:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Businesses making use of \u00a7174 expense deductions<\/li><li>Businesses claiming R&amp;D credits<\/li><li>Companies preparing income tax provisions<\/li><li>Companies who make quarterly estimated tax payments<\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Make sure you are claiming the credits you can, and should, under the law. Read more on the changes and reach out to your TaxOps adviser for more guidance. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>\u00a7174 expenses in 2022<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The previous law allowed taxpayers to plan whether they wanted to use deductions in the current year or defer them based on facts and circumstances. Additional provisions allowed taxpayers to amortize over 10 years expenses that might otherwise be tagged as deductible under \u00a7174(a). Under the new law, \u00a7174 will take items incurred in the current year and spread them over five years.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u00a7174 costs are more expansive than R&amp;D costs. Wages, supplies, outside contract and leased computer costs are eligible for research tax credits. The items to be capitalized under \u00a7174, however, include: computer expenses, office expenses, professional fees (including contract labor and temporary help), R&amp;D travel expenses, rent, R&amp;D, salaries and benefits, utilities and miscellaneous expenses.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This change requires business taxpayers to evaluate their expenses and start to track those expenses, in some cases for the first time. To prepare for 2022 changes in \u00a7174 deductions, work with your TaxOps adviser directly.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Provisions, NOLs and taxable income<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Capitalization could cause a loss entity to be taxable or increase taxable income for a profitable entity. For companies generating NOLs, \u00a7174 cost capitalization will reduce the NOL generated and possibly result in cash taxes due.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Entities who have generated taxable losses and have therefore put off calculating an R&amp;D credit due to those losses, may want to consider calculating these credits. An R&amp;D credit may offset the potential cash taxes resulting from the capitalized \u00a7174 expenses.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Act Now<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Taxpayers have lost current year deductibility in 2022 and need to reflect the impact on Q1 financial statements. Amortization has a midyear start, creating a significant impact in 2022.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These changes could impact a company\u2019s first quarter estimates so there is a need to assess the implications of these changes sooner rather than later.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>Contact your TaxOps adviser for assistance in considering and implementing best practices for moving forward with \u00a7174 capitalization in 2022 and beyond.&nbsp;<\/p><\/blockquote>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/taxops.com\/contact\/\" target=\"_blank\" rel=\"noreferrer noopener\">Get in Touch<\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:62px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Latest Tax News<\/h3>\n\n\n<ul class=\"wp-block-latest-posts__list wp-block-latest-posts\"><li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/auditor-independence-in-the-age-of-private-equity\/\">Auditor Independence in the Age of Private Equity: What CFOs Need to Know<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/r-d-credits-for-software-companies\/\">R&amp;D Credits for Software Companies: Scrum Teams, Qualifiers, and Section 174 After OBBBA<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/section-174-decoupling-what-tax-pros-need-to-know-state-by-state\/\">Section 174 Decoupling: What Tax Pros Need To Know State By State<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/sean-espy-new-partner\/\">TaxOps Welcomes Sean Espy as Partner, Tax Minimization<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/state-nexus-demystified-navigating-tax-compliance-after-wayfair-episode-1-2\/\">Your Tax Footprint Is Probably Bigger Than You Think: What Finance Leaders Need to Know About State Nexus<\/a><\/li>\n<\/ul>\n\n\n<div style=\"height:62px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Beginning January 1, 2022, all companies\u2014from multi-billion-dollar corporations to small business owners\u2014must capitalize all IRC \u00a7174 expenses, spreading the amortization of those expenses either five or 15 years. These changes hit Q1 estimates. By Davinia Lyon The Tax Cuts and Jobs Act (TCJA) of 2017 had a revenue-raising provision to begin amortizing \u00a7174 deductions beginning [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":10070,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","spt_transcript":"","footnotes":""},"categories":[230,228,226],"tags":[252,823,694,778,734,126,771,39,471,767,302,783,769],"class_list":["post-10066","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-asc-740","category-federal-tax","category-tax-news","tag-accountant","tag-amortization","tag-asc-740-2","tag-capitalization","tag-corporations","tag-cpa","tag-disclosures","tag-entity","tag-finance-professionals","tag-financial-statements","tag-reporting","tag-section-174","tag-tax-position"],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/taxops.com\/wp-content\/uploads\/2022\/03\/Major-Changes-in-\u00a7174-Amortization-Hit-Q1-Estimates-in-2022.png","_links":{"self":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/10066","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/comments?post=10066"}],"version-history":[{"count":6,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/10066\/revisions"}],"predecessor-version":[{"id":10074,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/10066\/revisions\/10074"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/media\/10070"}],"wp:attachment":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/media?parent=10066"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/categories?post=10066"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/tags?post=10066"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}