I have good news for
contractors concerning long term construction contracts.The 2017 Tax Act can save you money and
reduce your accounting hassles. As long as your business does less than $25
million in gross receipts and the contract duration is over a year in length,
you will be able to use cash accounting as opposed to the percentage of
completion method you are currently forced to embrace.In the past, long term construction contracts
had to be reported using the percentage of completion method.This method was very cumbersome to employ,
since it required the contractor to even out the reporting of income over the
life of the contract, regardless of the income collected. To use this method, all
contractors were required to keep detailed accounting records of each period
during the contract.
Ben Franklin said it best when he coined the phrase, "In this world nothing can said to be certain, except death and taxes." But as all business owners know, while death calls but once, there are many different kinds of taxes they are expected to pay at different times of the year. While income taxes are paid but once a year, business owners are required to frequently pay sales tax on many of the things they sell, as well as a number of things
they buy.The second kind of sales tax
is referred to as Use Tax.
In my previous blog, Do the Right Thing & Save
20%, I covered the new tax laws in effect that allow many businesses to
capitalize on deductions that apply to overflow income (business income minus
your salary). The only rub is this deduction specifically excludes
professionals. That’s the bad news. The good news is in today’s blog I will
reveal how realtors, accountants, doctors, dentists, CPAs, engineers and any
other business owners that provide a service may still have an opportunity to
capitalize on this 20% deduction.