While the outlook for the construction industry has been shaky after years of recession, job growth is finally on the rise, intensifying the demand for skilled workers. In early 2017, Associated Builders and Contractors reported the “best month for construction job creation since March 2007,” and as the weather warms, the business growth only escalates.
As a small business owner, navigating the shark-filled waters of the Internal Revenue Service can be difficult and present an array of challenges. While the health forecast of construction companies looks good overall, tax agencies frequently see small contractors as prime targets for additional revenue. Two facets of challenges can prove easy snares for tax trouble:
Frequent Employment Errors:
– Misclassifying independent contractors
– Underpaying unemployment taxes - Underpaying Worker’s Compensation insurance - Recruiting undocumented people who lack legal permission to work
Any of these employment factors can lead to an audit by the IRS, your local state workforce investment board, or insurance companies. Auditors will check to ensure that all of your employees appear in your tax calculations. If you’ve hired illegal aliens—a group that a 2014 Pew Research study suggests occupies 15% of construction jobs—you may not be withholding tax correctly, or at all. Independent contractors, too, can be tricky, because the IRS’s definition of an independent contractor may not match the state’s interpretation. In Virginia, for example, a contractor should be registered as a business in order to be considered truly independent, and he should have his own federal employer identification number (EIN).
Frequent Bookkeeping Errors:
– Lack of readily-available accounting information - Misclassification of transactions - Lack of source documents supporting expenses
The IRS is very clear in stating that “everyone in business must keep records,” and it is every business owner’s responsibility to ensure that they can provide all necessary paperwork in the event of a request. Because many contractors save major accounting for the end of the year, these records can be spotty, and organization can be a confusing area if you are not meticulous.
NBAC strives to eliminate the confusion surrounding accounting and taxation at the level that works best for small businesses, whether you’re an individual entrepreneur or a growing company. Provided everyone has a budget, you can solve accounting challenges by utilizing software formatted for your construction firm, such as Xero. This software allows the option to work on your own or with the professional assistance of our skilled specialists, if you prefer a more hands-free approach to your accounting.
Our CPA services also explore your employee paperwork to verify that all employees have a valid W-9 tax form on file prior to receiving paychecks. Forms like this and others protect the company in case of trouble employees who neglect filing or paying their own income taxes. While you can find these forms online, a CPA can also provide them for you, hassle-free. If you step inside NBAC office our skilled employees will be on hand to answer your questions and walk you through any complex paperwork when it comes time to file.
The benefits of working with a CPA are vast. If you are unsure of your state contractor laws or need verification of a particular contractor, ask our professionals. If you need help navigating state lines and variable legislation, our experts will have answers. If you need someone to handle your payroll for you, our skilled staff is available to make the accounting process of your business smooth and painless.
Construction is hard labor on its own merit; operating your business does not need to present any further challenges.