Taxing software purchases

[Xoc]

However, Web software that is developed by a designer who guarantees the product and then sells it to you gets different treatment. That software is considered to be purchased by you, not software you "developed." Result: As with other purchased software, the costs of that Web software have to be amortized over 36 months.

This is from this article: [bcentral.com ]

[rcjordan]

Here is an insider's tip: Tax professionals have seen the IRS sometimes allow expensing of relatively small-ticket software purchases. How small? To use the tax professional's favorite phrase, it depends. Expensing of software of less than $300 or $200 might be allowed, for example, for a business that has healthy gross revenues. But whether or not it is allowed is — when push comes to shove — up to the discretion of the IRS.

I set a minimum of $350. To set up and depreciate all the little business stuff one buys over time just becomes a huge compliance burden. Even if the IRS were to balk, they're not usually in the mood to go digging through mounds of transactions at that low-$$ level. You're likely to get a settlement and penalty offer that is less that the administrative costs involved to do it right. Remember, you're not avoiding taxation, you're just changing the write-off period. You'll get a slap on the hand.