Just found a $127 error from 2 years of misclassifying SaaS subscriptions

I was putting all my software costs under 'office expenses' when my accountant casually mentioned some should be 'software subscriptions' and now I'm amending two years of returns for a small refund. Has anyone else had a reclassification like this pay off unexpectedly?

3 comments

3 Comments

davidshah18d ago

Did you check if the reclassification triggers any R&D tax credits? Some SaaS tools for development or testing can qualify, but only if they're filed under the right code. I had a buddy who missed out on three years of credits because his accounting software lumped everything together. The IRS even let him amend after they audited another line item and caught it. Might be worth a quick look before you finalize those returns.

abby_fisher18d ago

@davidshah did the IRS flag the audit on their own or did your buddy have to ask?

blair_torres7018d agoMost Upvoted

I gotta push back on davidshah's point about R&D credits for SaaS tools. In my experience the IRS is real picky about what counts as R&D, especially for software. Most of the time those credits are for companies developing new tech or improving existing stuff in a major way, not just using cloud tools for routine business tasks. Your buddy might have gotten lucky with that amendment, but that's not the norm. Unless you're actually building or significantly modifying the software itself, it's a long shot the IRS will let those credits slide through.