FinTruction

A strategic accountant talks to you four times a year, not once: March reviews last year’s return for adjustments, June projects mid-year income and resets estimates, September times depreciation and major purchases, and November locks year-end decisions on bonuses, equipment, retirement, and entity moves.

On $250,000 of profit, the $15,000 isn’t one trick. It compounds: S-corp election, Solo 401(k) at the annual contribution limit, accountable plan reimbursements, Augusta rule for short-term personal-residence rental, Section 179 timing across multi-year purchases, and QBI optimization on pass-through entities. State conformity varies on §179 and S-corp treatment, so review the stack with a CPA familiar with your state.

A filing-only accountant won’t surface these moves because they’re paid to process the return, not plan it. The information sits in conversations that don’t happen unless someone schedules them.

A filing-only accountant relationship is intake forms in February and a return signature in April, while a strategic one adds a June projection, a September check-in, and a November year-end planning meeting.

THE FIX:
Audit the cadence. Count conversations in the last 12 months not initiated by you and not tied to the return itself.

If the count is zero or one, ask for a structured year-round schedule before assuming you need a new accountant. A filer can evolve into a strategist if the engagement supports it.

If your accountant resists structured planning conversations or bills hourly for strategic questions, look for a firm that includes advisory work in the engagement.

Prepare for the November conversation with YTD financials, equipment plans, retirement contribution capacity, and life events affecting your tax position.

We built a free Construction Accounting Checklist. 8 questions. 40 seconds. Answer each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

WIP (work-in-process) compares billed-to-date against earned-to-date on every active job. For percentage-of-completion reporters, it’s the spine of revenue recognition.

Two frameworks govern this. GAAP under ASC 606 requires PoC for long-term contracts, while tax basis allows IRC §460(e)’s small-contractor exception for contractors under the $32M 2026 gross receipts threshold (adjusts annually) whose contracts complete within two years. Most still run WIP regardless because bonding companies, banks, and internal planning require it.

A WIP schedule reads across columns: contract value, estimate at completion, costs to date, percent complete (costs ÷ EAC), earned revenue (contract × percent), billings to date, over/under. The over/under column shows whether you’ve billed ahead of work performed (overbilled, a liability) or behind (underbilled, an unbilled receivable).

Without WIP on cadence, an $80,000 imbalance on a single job is invisible. Bonding companies, banks, and the IRS all require or use it. The information sits in your books, but the report is what makes it usable.

THE FIX:
Confirm which method applies (PoC or completed-contract) by reviewing the §460(e) test and ASC 606 requirements with your CPA.

Build WIP monthly across active jobs. The columns are contract value, EAC, costs to date, percent complete, earned revenue, billings to date, and over/under.

Reconcile WIP to your general ledger monthly. Earned revenue on the schedule should match revenue recognized in your books. A gap means either the WIP math is off or the GL entries don’t reflect PoC properly.

Act on imbalances each month. Significant overbillings point to cash-flow or scope issues, while significant underbillings point to pay-app delays or unbilled change orders.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

Three crew members on 1099, each working only for you, using your tools, and following your schedule. The IRS common law test (behavioral, financial, and relationship factors) classifies that pattern as employment regardless of the engagement letter.

The exposure runs across three enforcers: IRS reclassification (back F**A, federal income tax withholding, penalties), DOL enforcement of FLSA (back overtime, liquidated damages often equal to the back wages), and state labor or tax actions (unemployment insurance, state withholding, workers’ comp gaps, state penalties).

State exposure varies. ABC-test states like California, Massachusetts, and New Jersey classify aggressively because prong B, work outside the hirer’s usual business, makes construction crew on construction jobs employees by default. Common-law states use a more contextual test that still lands on employment for your pattern. Workers’ comp coverage often doesn’t apply either, so an injury becomes direct payment without insurance backing.

THE FIX:
Audit each 1099 against the IRS common law test and your state’s classification rules. ABC-test states set a higher bar.

For each worker who fails the test, talk to an employment law attorney or a payroll-specialist CPA. Self-correction paths include the IRS Voluntary Classification Settlement Program (VCSP), voluntary reclassification, and going-forward W-2 conversion. Order of operations matters and varies by state.

Update the engagement template for new workers. True contractors have multiple clients, set their schedule, supply tools, and carry financial risk.

Review 1099 relationships quarterly. A legitimate sub who started part-time and now works full-time only for you has drifted out of contractor status without anyone noticing.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

$94,000 work truck purchased in December and placed in service before year-end. Whether the deduction routes through Section 179, bonus depreciation, or both, the year-one number often lands the same. The choices diverge after.

Section 179 caps the deduction at $2,560,000 for 2026. Inside that, vehicles split into three buckets: passenger autos and light trucks under 6,000 lbs GVWR trigger Section 280F luxury auto limits, SUVs 6,001-14,000 lbs GVWR are capped at $32,000, and heavy trucks over 6,000 lbs GVWR with 6+ ft beds sidestep both. Both dollar figures adjust annually for inflation. Your truck’s bucket determines which applies to the $94,000.

State conformity is the second. Several states including California and New Jersey diverge from federal treatment, creating a multi-year state tracking problem.

Net losses are the third. Bonus depreciation, restored to 100% under OBBBA, has no income limit and can create or enlarge an NOL that carries forward, while Section 179 stops at taxable income. For uneven year-to-year profit, the choice determines which year the deduction lands in.

THE FIX:
Confirm the truck’s classification with your CPA. Heavy truck, SUV, or passenger auto class determines which limits apply.

Run the projection across approaches: 179 only, bonus only, and combinations. The federal year-one number often matches, but the state return and multi-year picture diverge.

Pull your state’s conformity rules. The federal-state mismatch becomes a multi-year tracking obligation your CPA or a SALT specialist needs to handle.

Project the next two or three years of taxable income before electing, and document the choice in your tax file. The deduction’s value depends on whether you’re creating an NOL now or holding it for a stronger year ahead.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situa

A $1,400 backcharge gets agreed to in the parking lot. The sub nods, you go back to work, and three months later the final check goes out at full contract value because nobody wrote anything down.

The bookkeeping side is simple. The $1,400 should have come out of the sub’s final payment, reducing their cost and keeping it off your reports. Instead it sits in your costs.

But the verbal agreement is the bigger problem. Most subcontract templates, including AIA A401 and ConsensusDocs 750, require backcharges to be in writing with specific notice timing before withholding. A verbal nod doesn’t satisfy the contract, and if the sub pushes back, you’d be holding $1,400 against money contractually owed.

State prompt-payment laws add another layer. Most states allow a GC to withhold for legitimate disputes, but require written notice within specific timeframes. Improper withholding can trigger interest, penalties, and attorney’s fees. A construction attorney in your state should walk through what your contract requires and what your state’s statute imposes.

THE FIX:
Document every backcharge in writing at the moment of damage. A written notice naming the date, the damage, the cost basis, and the planned deduction goes to the sub before any pay app moves.

Follow your subcontract’s actual backcharge clause. Most subcontracts have a specific setoff provision with timing and notice requirements.

When the pay app goes out, the backcharge appears as a deduction line referencing the written notice. The sub sees it before the check is cut, with time to dispute.

For any backcharge above a threshold you set, or any sub who pushes back, route the dispute to a construction attorney. State prompt-payment laws govern the mechanics, and getting it wrong can cost more than the backcharge.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” & we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specif

Your estimator pulls a cost database, drops in the takeoff, applies the suggested unit costs, and produces a bid in 45 minutes. The number looks professional. The unit costs came from a database that doesn’t know your supplier, what your crew installed in a day on the last three kitchens, or which sub came in $4,000 over on the cabinet install.

Your books already have all of that. Closeout numbers from your last five comparable jobs show materials cost by category, hours the crew logged by scope element, and what subs billed for each trade. The data is sitting in QBO with nobody pulling it.

Averages have a source problem. RSMeans and the regional cost databases are built on samples that have nothing to do with your suppliers, your crew, your subs, or your local market. Useful for a sanity check on a scope you’ve never bid, not for the recurring work where you have your own history.

A bid built on your own data competes on accurate terms. You walk away from work that won’t be profitable at your real costs, and you win work the average bidder either overpriced or underpriced into a loss.

THE FIX:
Pull job cost reports on your last five jobs of each recurring scope: kitchen remodels, bathroom remodels, additions, whatever you bid often. Build a unit-cost library from them, with line items like cost per linear foot of cabinet, cost per square foot of tile, or average sub cost for electrical on a kitchen scope. The data is in QBO already, but it needs to be extracted into a format your estimator can use.

Update the library annually, or after major changes in suppliers or sub pricing. Two-year-old numbers are no better than a database.

Lead with your unit-cost library on every bid. Use industry databases only for scopes where you don’t have your own history yet.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your

A $12,000 fixture order ships from an out-of-state supplier. No sales tax appears on the invoice, and your bookkeeper records the $12,000 as material cost.

Most US states require buyers to self-report and pay use tax when taxable property is bought from out of state without sales tax paid. Five states (NH, OR, MT, AK, DE) have no general sales tax. Since the 2018 Wayfair ruling, most out-of-state sellers above state thresholds collect the buyer’s tax, so this scenario is less common than it used to be, though it still happens.

For construction contractors, most states treat the contractor as the consumer of materials installed into real property, so use tax is owed when sales tax wasn’t paid. Hawaii, Mississippi, and New Mexico are exceptions.

The audit window depends on whether a return was filed. On a filed return, the statute is typically three to four years, but unfiled returns stay open much longer. California is eight years, several states keep the window open indefinitely, and unreported transactions can stay on the table far past the filed-return statute.

Use tax rules vary sharply by state on rates, return mechanism, contractor treatment, exemptions, and audit timing. A SALT specialist or your CPA should walk through what applies to your purchases.

THE FIX:
Identify out-of-state purchases from the last twelve months with no sales tax on the invoice.

Confirm whether your state requires use tax, at what rate, and whether contractor-as-consumer treatment applies.

File the appropriate returns with a SALT specialist or your CPA. Many states have voluntary disclosure programs that reduce penalties when you self-report first.

Going forward, any out-of-state purchase without sales tax gets flagged for use tax review before month-end close.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your situation.

Your $86,000 skid steer was financed over 60 months with a $1 buyout at the end. Your bookkeeper coded every payment as Lease Expense, but a $1 buyout makes this a financed purchase, not a rental.

How this gets recorded depends on your accounting basis. Most contractors are on tax basis or modified cash, where the equipment is a fixed asset and the financed amount is a note payable. The monthly payment splits between principal reduction and interest expense.

If your books run on GAAP, ASC 842 calls this a finance lease. The substance is the same, but the labels change. The equipment is a right-of-use asset, the financed amount is a lease liability, and the payment splits the same way.

Either way, the current treatment puts the whole payment on the P&L. Neither the asset nor the liability shows up on the balance sheet, so your equity, your debt-to-income, and your asset list for insurance and disposition are all wrong.

One nuance: if your accountant elects Section 179 or bonus depreciation on the capitalized asset, your year-one tax deduction can match what you got from expensing the lease. The balance sheet damage stands regardless.

THE FIX:
Reclassify the equipment. The asset gets capitalized at $86,000, and the financed balance becomes a note payable, or a lease liability under GAAP. Your accountant books the entries dated to when the equipment was placed in service.

Every payment going forward splits between principal and interest. The lender’s amortization schedule has both numbers.

If the equipment was placed in service in a filed year, the correction restates prior-year depreciation and expense. Your accountant decides whether to amend the return or post to the current year, and whether to elect Section 179 or bonus depreciation on the capitalized asset.

We built a free Construction Accounting Checklist. 30 items your bookkeeper should be tracking but probably isn’t. Score each one and it tells you exactly where your books are exposed.

Comment “BOOKS” and we’ll send it over.

This content is for educational purposes only. Every business is different. Before making any changes to your books, reach out to us for guidance specific to your s