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.
The look-back is a complex area of tax law that can cause compliance errors and missed opportunities. Filed on IRS Form 8697 “Interest Computation Under the Look-Back Method for Completed Long-Term Contracts), the look-back is a hypothetical recalculation of a contractor’s taxable income based on the actual performance of its completed jobs.
When it comes to taxes, a deduction taken today is more valuable than one taken tomorrow. Accelerated tax deductions mean increased cash flow. A cost segregation study allows builders to tap into these savings for their own properties and facilities, or to provide a value-added service to their clients.
As the year comes to a close, it’s tax time! How a construction contracting company is positioned and what tax planning techniques were implemented, if any, are key in filing for year-end. While it’s no secret IRS regulations are complex in the area of construction, there are several accounting methods contractors can choose from when calculating taxable income.
A lot of deductions, credits and nuances exist in the tax code, but one that often goes unnoticed is the Section 199 deduction for income attributable to domestic production activities. Also referred to as the “domestic manufacturing deduction,” “U.S. production activities deduction” or “domestic production deduction,” the Section 199 deduction was enacted via the American Jobs Creation Act of 2004, and potentially can reduce a company’s effective federal tax rate from 35 percent to 31.85 percent.
Legislation to permanently repeal the federal estate tax, better known as the “death tax”—which imposes a tax rate as high as 40 percent on family businesses, farms and ranches upon the death of an owner—is pending in the U.S. Senate.