Most contractors can choose their tax accounting method.  Making the best choice will allow greater control over your tax liability.  There are a few options to choose from which include the percentage of completion method, the completed contract method and the cash basis method.

Under percentage of completion method, the contractor recognizes income for tax purposes in proportion to the percentage of costs incurred to total expected cost on their contracts.  This is usually the least preferable method because in certain cases the contractor can incur a tax liability before they receive payment from the customer.

The completed contract method is similar except income is not recognized for tax purposes until the contract is considered complete.  This is usually preferable to percentage of completion because the contractors does not incur a tax liability until a contract is considered complete.

Cash basis is usually the most preferable option because the contractor does not recognize income for tax purposes until the contractor receives cash from the customer.

If you are interested in selecting the best tax method for your construction business, please contact us today.  You can reach us by selecting “Get In Touch” from our menu or email bryan@bnallencpa.com.  We can discuss the options for your business and help you select the most preferable tax accounting method.