General Contractors & Builders
Tax and accounting for general contractors and builders, where the accounting method decision alone can move real money, and job-level books decide whether the margins are real.
Construction Runs on Different Rules
General contracting is not like other businesses. Projects span months or years. Money comes in draws tied to milestones. Retainage sits on the books waiting for final approval. Subcontractors do most of the labor. Equipment wears out. And the IRS has specific rules for how all of this gets reported that don’t apply to the insurance agency down the street.
Most contractors have a tax preparer who files what you hand them and a bookkeeper who records what happened. What most contractors don’t have is someone watching whether the accounting setup is costing them money or someone making sure the job-level numbers actually reflect reality. That gap is where real money disappears.
The Accounting Method Decision
The Accounting Method Decision
Contractors under a certain revenue threshold have choices about when income gets recognized. Cash basis, accrual, or percentage of completion. The wrong method for your situation means paying tax on money you haven’t collected yet or losing planning flexibility. This is an election, not a default, and it should be made deliberately.
Job-Level Visibility
Job-Level Visibility
A profitable company can have unprofitable jobs hiding inside it. Without job costing discipline, you might be bidding the wrong work, underpricing certain project types, or subsidizing losses you don’t even know exist. We set up books that show margins by job, not just in aggregate.
Revenue Timing Is the Whole Game
Construction accounting is fundamentally about timing. When does a draw become income? How do you handle costs on jobs that aren’t finished? What happens to the ten percent the owner is holding until final punch list? These questions have answers in the tax code, but the answers depend on your revenue, your accounting method, and decisions that need to be made before the year ends.
We work with contractors to make sure these timing questions are handled correctly and strategically. Under current rules, contractors meeting certain gross receipts thresholds may have options that larger contractors don’t. These thresholds and rules change, so we verify current law and apply it to your specific situation.
Work in Process
Work in Process
Jobs in progress at year end need proper treatment. Costs incurred but not yet billed, draws requested but not yet received. WIP accounting done right gives you an accurate picture of where each project stands and keeps your tax position defensible. Done wrong, it creates surprises at filing time.
Retainage
Retainage
That five or ten percent held back until final completion sits in limbo. When is it income? When can you deduct the costs associated with earning it? The treatment depends on your accounting method and the contract terms. We track retainage properly so it shows up in the right year.
Equipment, Subcontractors, and the Paper Trail
Contractors carry real equipment and rely heavily on subs. Both create tax planning opportunities and compliance obligations that many contractors handle poorly. Excavators, trucks, and trailers can often be expensed under current rules rather than depreciated over years, but the rules have limits and phaseouts that change. We evaluate each purchase against current law.
Subcontractor documentation is where contractors get in trouble. Every sub needs a W-9 on file before you pay them. Every sub paid over the threshold needs a 1099 at year end. Miss these and you face penalties that add up fast. More importantly, poor documentation invites questions about worker classification that you don’t want to answer in an audit.
Expensing Versus Depreciation
Expensing Versus Depreciation
Current law allows significant equipment purchases to be expensed in the year you buy them, subject to limits. But bonus depreciation percentages are scheduled to phase down, and Section 179 limits apply. We run the numbers on each purchase to determine the best treatment for your situation and the current rules.
1099 Discipline
1099 Discipline
We track payments to every unincorporated sub and vendor throughout the year. W-9s get collected before payments go out. 1099s get filed on time. This is not glamorous work, but it keeps you out of penalty territory and shows the IRS you run a clean operation.
Entity Structure and Year-Round Planning
As your company grows, entity structure starts to matter. Sole proprietor, LLC, S corporation. Each has different implications for self-employment tax, liability, and how owner compensation gets handled. The right structure depends on your income level, how you pay yourself, and where the business is headed. We work through the arithmetic with you and revisit it as the numbers change.
For Alabama contractors, we also handle the compliance filings that come with the territory. Business personal property tax returns on your equipment. Business license renewals that vary by municipality. These deadlines get tracked and handled so you can focus on running jobs. If you work with specialty trades like HVAC, plumbing, roofing, or landscaping, we serve those contractors too and understand how the pieces fit together.
The Four Roles
The Four Roles
Every contractor needs a tax preparer, a tax advisor, a bookkeeper, and someone watching the whole picture like a controller or CFO. Most have the first and third. The advisor and controller roles are where decisions get made that actually move the numbers. We cover all four through our bookkeeping, tax planning, and advisory work.
Book a Consultation
Book a Consultation
If you are a general contractor or builder who wants books that show real job margins, tax planning that accounts for construction’s timing rules, and someone who understands the documentation burden you carry, we should talk. Reach out to schedule a consultation and we will look at your situation together.
Planning-First Tax & Accounting
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We begin with a clear understanding of your business, then define the engagement and establish pricing from the outset.