Chances are, your construction business hires subcontractors, rather than employees, to perform some of the work. These arrangements obviously save your company a lot of time, money and headaches. Take a look at some of the recordkeeping and financial differences:
As you may know, contractors have multiple accounting methods to choose from. But some are off-limits to certain contractors. As your construction company endures the ups and downs of a bumpy industry, it's worth your while to review your options.
It might be advantageous from a tax standpoint to run a business through multiple entities. For example, a construction company might form a separate company to own and lease its trucks and equipment back to its related entities. Or a corporation might transfer appreciated property to an affiliated corporation in order to limit risk in case it is sued.
However, the IRS may look twice at an operation if it includes multiple business entities -- especially if recordkeeping and filing requirements aren't handled properly. One construction firm in Georgia discovered that lesson the hard way when it took deductions that actually belonged to one of its corporate affiliates.
Buying another construction firm can be an attractive way to grow your company's revenue base. A merger or an acquisition can allow you to:
- Add a new subcontracting specialty,
- Acquire an experienced labor force to reach new markets, and
- Deepen your penetration into the market your firm already serves.
Thanks to changes included in the Tax Cuts and Jobs Act, many more businesses can now use the simpler and more-flexible cash method of accounting for federal income tax purposes. The new law also includes some other tax accounting changes that are good news for small businesses. Like many TCJA changes that apply to businesses, these provisions are permanent. Here's what you need to know.
Federal tax reform through the Tax Cuts and Jobs Act significantly expands bonus depreciation under Section 168(k) of the Internal Revenue Code for both regular tax and alternative minimum tax purposes. Now, the IRS has released proposed regulations that clarify the requirements that businesses must satisfy to claim bonus depreciation deductions.
Although the regs are only proposed at this point, the IRS will allow taxpayers to rely on them for property placed in service after September 27, 2017, for tax years ending on or after September 28, 2017.
The tax laws and accounting policies for construction and real estate development companies are unique and particular. If your accountant doesn’t have the industry experience, you’re likely missing out on some significant tax savings.
Everyone struggles to keep up when business really takes off. Projects come all at once. You may hire additional field workers to meet the demand. Payroll is stretched because payments which come in on your new projects lag months behind the large sums you lay out weekly to pay your workers.
This type of project financing concern is not yours alone. All construction contractors face this type of project financing snafu to some degree. The basic problem is your firm gets paid months after you need the money to run your projects.
There is something you can do to counteract the project financing snafu. The following are four great ways your firm can keep your bank balances high during busy season.
Did you incur costs during the building and construction or purchase of your facility? You can likely accelerate some deductions with a cost segregation study, an engineering-based analysis of the costs associated with the acquisition, construction, or renovation of a building.
The IRS continues to zero in on what it calls the "tax gap" — the amount between the taxes that are voluntarily paid and the amount the tax agency believes is actually due.
To this end, the IRS has issued a series of documents to provide better understanding of the tax code. One example is specifically directed at the construction industry.
The tax agency emphasizes instances where taxpayers failed to report, or under-reported, income from construction activities. This applies to individual workers as well as contractors and subcontractors. Following are the highlights: