Minimizing Tax for Construction Contractors: Choosing an Accounting Method, Tax Credits, Depreciation

IRC Section 460 requires taxpayers to account for long-term contracts using the percentage-of-completion method to recognize revenues and related costs. However, there are many exceptions available that can be tax-advantageous for contractors. These exceptions include qualifying home construction and small contractors.

Reg. Section 1.460-4 contains a list of permissible methods for long-term contracts, including the completed contract method. Eligible taxpayers can defer revenue recognition until a contract is at least 95% complete. Selecting the appropriate accounting method can substantially reduce a contractor's tax liability.

In addition to accounting methods, contractors can significantly reduce their tax burden by taking advantage of existing tax credits. Construction businesses that have developed new processes or improved efficiency could qualify for the R&D credit. Qualified contractors can benefit from the 179D deduction for design work on certain government and nonprofit facilities. Tax advisers working with construction contractors need to know the tax benefits available for these builders.

Listen as our panel of qualified construction experts points out tax-saving opportunities for construction businesses.

1. Minimizing Tax for Construction Contractors - Introduction
2. Accounting methods
   1. Cash vs. accrual
   2. Small contractor exemption
3. Contract accounting methods
   1. Long-term contracts
      1. Defined
      2. Percentage-of-completion method
      3. Look-back method
      4. 10 percent deferral election
   2. Exceptions to IRC Section 460
4. Tax credits
   1. R&D
   2. 179D
   3. Other credits
5. Depreciation, bonus depreciation, and Section 179 deductions
6. Other considerations

The panel will cover these and other critical issues:

• Which taxpayers are required to utilize the percentage of completion method to recognize revenue
• When construction contractors should consider using the completed contract method
• How R&D credits offer tax savings to construction businesses
• How small businesses and home builders can benefit from and qualify for accounting method exceptions

Learning Objectives

After completing this course, you will be able to:

• Identify taxpayers who qualify for the small business exemption
• Determine potential tax credits available to construction contractors
• Decide how bonus depreciation and Section 179 expensing can be utilized to reduce tax liability
• Ascertain exceptions and eligibility to percentage of completion reporting under IRC Section 460

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of corporate taxation, including taxation of businesses, accounting methods, net operating losses and loss limitations; familiarity with net operating loss carry-backs and carry-forwards.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).