As we are into the swing of tax season, it’s important for all business owners to stay organized and get prepared to file. With the right foresight, you can maximize your tax deductions, reduce your risk of audit, and make even better financial decisions through the rest of the year. Some companies have fairly upfront and routine tax obligations, and their steady expenses make it simple, come tax time. However, there are many businesses, like construction companies, that encounter highly-fluctuating expenses and revenue, that may have a harder time keeping on top of everything.
If you are a contractor or own a business in the skilled trades, it’s key to not only budget appropriately for these seasonal fluctuations, but also know exactly what you owe and what you can deduct, when filing your taxes. As you prepare to file this year, here are a few things to put on your checklist:
1. Look at the entire year’s finances
Tax time is a great opportunity to get a wide-angle view of your expenses and revenue. Don’t just look at the yearly salary number, look at each month, to get a good idea of your seasonal patterns.
2. Collect all vendor invoices and contracts
Ideally, you would have your statements and contracts saved together and digitized, but no matter your current filing system, make sure you account for all vendor expenses. While you’re at it, double check that all vendor contracts have been fulfilled.
3. Find your deductions
Many business related expenses, like tools, transportation, license fees, and trade dues are eligible for tax deduction. This can add up to a sizable amount for a construction company. Keep in mind, however, that you cannot deduct any expense that a client later paid for, like lumber for a client’s deck.
4. Review vehicle expenses and mileage
Driving to and from job sites is a normal part of the construction business, and these are important things to keep track of. Vehicle wear and tear, insurance, fuel, mileage, and other facets should be tracked and itemized, to not only potentially deduct mileage, but also vehicle depreciation.
5. Check employee and contractor records
Since the construction industry often relies on subcontractors and independent contractors, as well as dedicated crew, this is a key piece of tax filings. Make sure that your employees are classified correctly, and that your payroll accounts for all third parties, even the one specialist you called in for one job.
Running a successful construction company takes dedication and organization. Lots of moving parts and variable staff/vendors can create challenges, particularly around tax time. If you need help managing your finances, or filing your business taxes, reach out to us at S.J. Wick & Associates today.