Contractors need to invest in tax planning throughout the year to gain the maximum impact. While most year-end tax strategies strive to accelerate income in the current tax year and defer expenses to the next year, strategic tax planning takes into consideration many other factors, including how reducing income for tax purposes will affect a contractor’s financial statements, cash position, working capital and financial ratios.
More than almost any other industry, construction contractors need to spend time and resources planning for their income taxes before the end of their fiscal year. Contractors must be sure to retain their financial statement strength and ratios while considering possible tax methods of accounting, projected taxable income for remaining months, tax vs. book depreciation and the calculation of alternative minimum taxes and available tax credits for the entity and the pass-through owners. It is important that all these variables be considered to ensure the most favorable financial and tax objectives are achieved.
Claim the 179D Deduction for Eligible Past Construction Projects While the fate of 179D is unclear, contractors can determine their eligibility for completed projects
As Congress shifts its attention from health care back to tax reform, many are hoping for legislators to pass a new tax reform bill by the year’s end. The White House, along with the House Committee on Ways and Means and the Senate Committee on Finance, recently released a tax reform plan: Unified Framework for Fixing Our Broken Tax Code. This framework plans to lower the corporate tax rate and bring down the tax rate for pass-throughs as well.
Business owners must collect, report and submit payroll taxes as required by federal and state laws. It is important that payroll systems and processes are accurate and efficient to meet federal and state obligations. Otherwise, a corporate officer or other responsible party (as defined by the IRS) may be personally liable for payroll taxes that are not reported or deposited, even if someone else processes payroll.
Use Mileage Tracking Apps to Save More at Tax Time Apps Can Help Construction Contractors Take Full Advantage of Mileage Deductions
Contractors drive an average of 75 miles every day, according to a recent study by The Aberdeen Group. Those miles equate to more than $10,000 in tax write-offs each year However, the vast majority of miles go unreported and dollars are never claimed due to lack of awareness or failure to use tracking technology.
A contracting business is a living, breathing organism that needs to be fed. If unhealthy, that organism will put tight constraints on a contractor’s ability not only to grow, but also to make payroll and fund projects. When nurtured properly, the business will flourish, minimizing stress in an inherently high-stress industry.
Bookkeeping Best Practices for a Smooth Tax Season Construction Contractors Must Maintain Accurate Books to Understand Financial Health
As a new year begins, many contractors want to look forward to the future of their business. However, it is important to first look backward to understand how the previous year financially impacted the company.
The new presidential administration is poised to lead to a number of proposed tax and regulatory changes, many of which will impact the construction industry.
Employers Face Expedited Deadline to Send W-2 Forms Construction Contractors Must Be Aware of New Tax Deadlines
Jan. 31, 2017, is the new deadline for employers to supply W-2 forms to workers and file copies of Form W-2 with the Social Security Administration (SSA) for the 2016 tax year. This is one month earlier for paper filers and two months earlier for electronic filers. It also applies to businesses filing Forms 1099-MISC that report payments exceeding $600 for the year to independent contractors or other service providers.
Save Cash Using a Tax Deferral Strategy Construction Contractors Can Defer Taxes to Keep More Cash on Hand
Cash is essential to running day-to-day operations and improving a company’s financial position when presented to banks and other creditors, so contractors continue to search for ways to keep cash available. One of the best opportunities to keep more cash in the company is to create a tax deferral. Tax deferral strategies for contractors are often overlooked or misunderstood.
The construction industry pays the highest effective tax rate of any sector of the economy. Given that realty, contractors should be proactive in tax planning, which includes taking advantage of tax incentives and understanding the internal revenue codes specific to contractors when filing tax returns.
Shortly before recessing for the holidays this past year, Congress passed the Protecting Americans from Tax Hikes (PATH) Act of 2015, which President Obama signed into law Dec. 18, 2015, as part of Public Law 114-113.