Accountants love to follow SALY (same as last year). We could write a textbook on all the psychology that leads us to follow SALY. I can imagine chapters such as absolution from responsibility, covering your self-doubt, and a plausible excuse for errors.
It seems a golden rule of accounting is “when in doubt follow SALY”. After all, the person who did this last year must have known what they were doing…right? Well, not necessarily. SALY doesn’t keep current with tax law, IRS administrative pronouncements, and technology advancements.
SPRX R&D Credit Tip – Don’t follow SALY, she’ll lead you down a path of bad habits and missed opportunity.
SALY can be attractive
I still remember my first interaction with SALY. I was a first-year tax staff working on a corporate return. I had prepared the return and submitted it for review. The Sr. Associate reviewed the return and called me over to her cubicle. She asked me where a particular return statement was. I showed her that the statement was right there in the return. She looked at the statement and said, “that doesn’t look right”. I showed her the work paper for the numbers and explained that they were correct. She wasn’t questioning the numbers she was questioning the formatting of the statement. I explained that there had been a software update and the formatting changed. She didn’t accept that and told me to manually create the schedule so that it would look the “same as last year”. She explained that the tax manager would reject the return if we didn’t closely follow SALY.
Following SALY can be an attractive option, particularly when performing an unfamiliar task. Early in my career I was frequently given a file and told to follow SALY. I spent an uncomfortable Saturday with my tax manager at the client’s office. We needed to draft the tax provision footnote. This was my first tax provision and the tax manager had forgotten to bring last year’s file. I quickly learned that the tax manager was an ardent follower of SALY. The problem was that SALY was not there that long afternoon and we had to figure it out for ourselves without the benefit of the internet.
SALY is particularly attractive when taxpayers want to save compliance costs by firing tax consultants. Tax directors have been known to follow SALY with the R&D Credit Report in hand.
SALY is no leader
SALY only faces one direction, backwards. SALY can show you what may have been correct in the past, but she cannot reliably lead you into the future. Especially with something as complex and evolving as the R&D tax credit.
Almost every year there is a material change in the R&D credit case law, administrative procedures, or regulatory interpretations. What was a best practice or accurate position last year may have changed for the current year.
A significant change in the definition and qualification of pilot models occurred a few years ago. This change allowed taxpayers to SIGNIFICANTLY increase qualified supply costs. Unfortunately, many taxpayers as well as CPAs who follow SALY failed to recognize the changes. Millions of R&D credits went unclaimed because of SALY.
Find a new guide
If you’re following SALY, walk away and find a new guide. SPRX.tax is a SaaS software provider who happens to have one of the most senior R&D credit experts on staff. We sell software, the expertise is included. We’d be happy to chat and discuss your current R&D credit process and suggest things you may be missing. See our contact information below.
At SPRX.tax we build the tools that save you time…and money