Are You a Contractor Using the Wrong Construction Tax Accounting Method?

Tax Accounting of Construction Contractors

Are you a contractor using the wrong construction tax accounting method?  Are you a contractor with annual gross revenues of $10 million or less and you have not chosen the cash method of accounting as your general tax accounting method and the completed-contract method of accounting for the tax accounting of your long-term construction contracts?

If you have not, why not?  The cash method of accounting recognizes taxable income upon its receipt, not upon it being earned.  Typically there is a time lag between the two, offering you the opportunity for deferral of your taxes.

Similarly, the completed-contract method of accounting allows you to defer recognition of taxable income on any long-term contracts until their completion rather than over the course of their completion.

So if you are not employing both of these methods of tax accounting and you are a small contractor with revenues of less than $10 million per year, ask yourself, why?

For more information on taxation and accounting of construction contractors, please see the article, Taxation of Construction Contractors:  Tax Accounting Methods of Contractors.

William Brighenti, Certified Public Accountant, Certified QuickBooks ProAdvisor

Accountants CPA Hartford, LLC

About William Brighenti

William Brighenti is a Certified Public Accountant, Certified QuickBooks ProAdvisor, and Certified Business Valuation Analyst. Bill began his career in public accounting in 1979. Since then he has worked at various public accounting firms throughout Connecticut. Bill received a Master of Science in Professional Accounting degree from the University of Hartford, after attending the University of Connecticut and Central Connecticut State University for his Bachelor of Arts and Master of Arts degrees. He subsequently attended Purdue University for doctoral studies in Accounting and Quantitative Methods in Business. Bill has instructed graduate and undergraduate courses in Accounting, Auditing, and other subjects at the University of Hartford, Central Connecticut State University, Hartford State Technical College, and Purdue University. He also taught GMAT and CPA Exam Review Classes at the Stanley H. Kaplan Educational Center and at Person-Wolinsky, and is certified to teach trade-related subjects at Connecticut Vocational Technical Schools. His articles on tax and accounting have been published in several professional journals throughout the country as well as on several accounting websites. William was born and raised in New Britain, Connecticut, and served on the City's Board of Finance and Taxation as well as its City Plan Commission. In addition to the blog, Accounting and Taxes Simplified, Bill writes a blog, "The Barefoot Accountant", for the Accounting Web, a Sift Media publication.
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