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2008

Crackdown on Illegal Hiring Looms

U.S. Bureau of Labor Statistics and Census Bureau data show that foreign-born workers are critical to the construction industry. Problem is, contractors often can’t — or don’t — verify that their employees are eligible to work in the United States. And, as this article warns, Uncle Sam is starting to take more notice.

Are "Non-Traditional" Dependents Creating Tax Liabilities for Your Employees?

As the concept of the "traditional family" continues to evolve under various state laws, certain definitional departures from federal tax law arise creating some potentially troublesome issues.  This is certainly the case involving health care coverage for children and domestic partners of same-sex marriages who do not meet the definition of a dependent or spouse under federal tax law.  In cases where a taxpayer's employer pays for health care coverage of a same-sex spouse or child who is no longer a dependent, such costs result in taxable income to the taxpayer/employee. 

Construction Success Story: VoIP Helps Lower Expenses

While meeting with his financial advisor to discuss escalating expenses, a roofing and siding contractor in a growing suburban area mentioned that his telephone bills seemed to be growing exponentially each quarter. One potential solution that came to the advisor’s mind almost immediately was a Voice over Internet Protocol (VoIP) system — a technology that digitizes phone calls, allowing them to be transmitted via the Internet.

Tax Planning for 2008 and Beyond: Looking Forward By Looking Back

As a new calendar year begins, construction business owners may want to look back to last year for some strategic planning cues. For example, the Small Business and Work Opportunity Tax Act of 2007 (SBWOTA) included more than $4.8 billion in tax breaks for businesses. This article demonstrates how SBWOTA offers contractors some opportunities to plan strategically for this year and beyond.

Is Your Business Structure Still a Perfect Fit?

Most contractors wouldn’t dream of allowing a construction project to run unsupervised according to the original plans, because circumstances can change. The same is true of business structure: The ownership form that was once a perfect fit may eventually need to be adjusted. Beginning with the two most popular choices, this article provides a snapshot of each.

Stay in the Driver’s Seat With Sound Fleet Management

One of the many questions that cost-conscious contractors often struggle with is how to manage their company vehicles. How often should they be replaced? How should hours of use be accurately tracked? Are vehicles costing too much? This article explains how sound fleet management can help answer critical questions such as these and, ideally, save contractors money.

2007

Because You Can Never Be Too Safe: Tips on Building a World-Class Safety Program

On any project, safety is everyone’s business. But, as the owner of your construction company, the buck stops at your desk. So, you must do all you can to develop a quality safety program that not only reduces job-site injuries and workers’ compensation claims, but also speeds project completion and enhances revenues.

If your safety program has served you well, you may be tempted to think you’ve got things covered. But just as you can never have too much money in the bank, you can never be too safe on the job site. Here are some tips on building a world-class safety program.

Help Build Tomorrow's Workforce Today

In hopes of mitigating the labor shortage that has plagued the construction business for some time now, a variety of industry organizations have launched programs designed to draw new workers into careers in the construction industry. You can help spread the word — and build tomorrow’s workforce today — by getting involved on the local level.

When Scheduling Subs, Keep in Mind the Bottom Line

If there’s one thing guaranteed to erode the bottom line on a construction project, it’s subcontractors who throw things off schedule. Keeping in mind the bottom line when managing subs can put general contractors in a better position to roll with any other punches the project throws at them. This article offers some tips.

Construction Success Story

Reconsidering associations and trade shows

This issue’s “Construction Success Story” concerns a homebuilder in a moderately growing market who is reconsidering joining a trade association or exhibiting at a regional trade show. His financial advisor, who has worked with many other construction business owners in the past, had some pointed advice regarding these opportunities.

Tighter Mortgage Standards Threaten Homebuilding Market

Not too long ago, lenders were handing out mortgages to most who applied — even those who couldn’t afford down payments or were unlikely to maintain their payments once early “teaser” interest rates went up. Those days appear to be over: Generally, housing prices have fallen over the past year and many potential buyers are no longer able to readily obtain financing. This article examines how tighter mortgage standards are affecting the construction business.

Expanded Section 179 Break Lives On

If you’ve discussed year end tax planning with your CPA, you may have heard about the Section 179 expensing deduction. It allows you to expense (rather than depreciate) the cost of depreciable assets (within certain limits) in the year you place them in service.

Financial Reporting Capabilities of Construction Accounting Software

Source: Construction Accounting and Taxation Journal. Volume 1, Number 4.

Choosing the correct accounting software is critical to construction companies due to the significant amount of data collection, processing and interpretation required. Contractors, both large and small, need to regularly perform financial reporting on two levels in order to monitor and manage the overall performance of their company.

Weakened States: The Plague of Presenteeism

There's little doubt that absenteeism can take its toll on any construction company's productivity. But employees who come in to work when they aren't feeling well - a phenomenon known as "presenteeism" - may pose an even greater risk. This article discusses the "plague" of presenteeism and how contractors can take steps to minimize its ill effects.

Like-Kind Exchanges Off Big Savings (But Complex Rules)

When a contractor is ready to trade in a piece of heavy equipment for a newer model, he or she might consider using a like-kind exchange to defer gain without decreasing his or her basis for depreciation. Under Internal Revenue Code Section 1031, taxpayers can swap unwanted property of the same nature - and defer gain until they ultimately sell something ourtright. This article examines the rules.

Could Semantics be Costing Your Company?

As the state of Massachusetts increases the number of sales tax agents on its payroll the logical expectation is that sales tax audit activity will also be on the rise. Exposure to double taxation should be a concern for any construction, manufacturing, or distributing company that conducts business in Massachusetts and also purchases materials and products outside of the state.

Slim Down Project Hassles with Lean Construction

Many contractors are finding that lean manufacturing processes can help slim down project hassles. Of course, there are some fundamental differences between manufacturing and construction. But, properly applied, lean approaches certainly show promise for contractors. This article explains how.

Contractors Get Boost from Extended Energy Tax Breaks

The Tax Relief and Health Care Act of 2006, signed into law Dec. 20, extended deductions for energy-efficient commercial buildings and credits for energy-efficient new homes through 2008. That’s good news for contractors, who now have until Jan. 1, 2009, to build and sell energy-efficient buildings. This article breaks down the tax rules of doing so.

Repair or Replace? That Age-Old Equipment Quandary

Unlike typical manufacturers who have stationary factories and produce the same product year in and year out, a construction company sets up a new “factory site” with each job. As you well know, transportation and setup puts a lot of wear and tear on your equipment. And, of course, the actual work these assets perform is rarely gentle.

Construction Success Story: One Contractor's Efforts to Combat Job-Site Substance Abuse

This issue’s “Construction Success Story” concerns a successful demolitions contractor whose company suffered a costly job-site accident. The construction company owner later learned, much to his horror, that the employee responsible for the mishap had been under the influence of illegal narcotics. When he mentioned the incident to his financial advisor, the two immediately began brainstorming ways to combat any further substance abuse on his job sites.

Exceeding Your Expectations: How to Analyze and Streamline Your Indirect Costs

Whether you call them indirect, administrative, overhead or back office costs, you probably deal with them every day. They’re the expenses not directly related to your projects — and they can have a marked effect on your bottom line.

3 Hot Construction Trends to Keep an Eye On

Construction is an ever-changing industry. The trends change often, and contractors who want to succeed need to stay on top (or, better yet, ahead) of them. Here are three hot construction trends you should keep an eye on.

Customer Satisfaction Survey Makes a Good Company Great

A midsize general contractor was known for outstanding work. Its owner was happy with her construction company’s financial performance and excited about its growth potential. Over the previous year, the business had been flooded with new opportunities and, to accommodate a substantial influx of new customers, it had added several new subcontractors to its roster.

2006

6 Ways to Cut Workers’ Compensation Costs

For contractors, having an employee suffer a work-related injury is an all-too-common occurrence. In 2004, the nonfatal injuries and illnesses incidence rate in the construction business was 6.4 per 100 full-time workers compared to 4.8 in the rest of private industry, according to the U.S. Department of Labor. For this reason, construction company owners are always looking for ways to control their workers’ compensation insurance costs. This article offers six to consider.

Spruce Up Your Internal Controls and Bring Some Shine to Your Bottom Line

In many construction companies, internal controls are put in place and left to operate on their own. But one essential (and often overlooked) internal control is the continual review and revision of internal controls. This article explains why keeping these policies and procedures up to date will not only help prevent fraud, but also bring some shine to a contractor’s bottom line.

Qualified Pension Plan Contributions for 2007

The IRS announced revised dollar limitations for pension plans and related amounts for calendar-year 2007.  Some amounts changed due to cost-of-living adjustments, while other changes were Code-required.  Included in this article are the contribution limits of particular importance for 2007.

5 year end tax-saving opportunities for contractors
Tax planning is an ongoing process that contractors should monitor throughout the year. That said, year end is the perfect time for construction company owners to review their financial situations and see what can be done to lower their tax bills. This article presents five ideas to consider, including stepping up collections and sweetening purchases with Section 179.

If you build it, will they come?
Financing opportunities abound in economically challenged areas
Any construction company willing to turn vacant lots and abandoned buildings into new businesses or affordable housing could enjoy years of benefits. A contractor interested in trying his or her hand at developing such a property, or working with a developer to do so, should know that there are a variety of financing options available for would-be buyers. This article describes just a few of them.

Subcontractor focus
Preserve your lien rights to ensure timely payment
Lien rights are an important consideration for all contractors, but they’re especially essential for subcontractors. A mechanic’s lien is among the only ways they can take action against an owner or general contractor who fails to pay up. This article offers a general overview of these liens as well as a step-by-step approach to preserving their efficacy.

Older Employees Shatter Industry Hiring Myth

Although few would admit it, there’s a persistent myth in the construction industry that older employees make bad employees in the field. Yet the labor shortage we’ve all come to know and loathe isn’t going anywhere. And anyone holding on to stereotypes is passing up a rich pool of smart and dedicated workers.

4 Ways to Stem the Tide of Employee Turnover - July 2006

The construction industry continues to flounder in the depths of a labor shortage. In fact, contractors will have to recruit 200,000 to 250,000 workers annually to mitigate staff departures and retirements, predicts the National Association of Home Builders. Here are four ways to help stem the tide of employee turnover.

Final Regulations: IRS Code Section 199 -- July 2006

The Treasury and IRS recently issued final regulations concerning Internal Revenue Code section 199, the deduction related to domestic production activities.  Section 199 was enacted into law as part of the American Jobs Creation Act of 2004.

Go, Cash, Go!
Smart strategies to keep your money moving -- July 2006

Many accountants point to a construction company’s statement of cash flows as the most telling part of its financial documentation. Sure, profitability is important, but if the business isn’t generating positive cash flow, trouble surely lies ahead. Here are some smart strategies contractors can use to keep their money moving in the right direction — toward their bottom line.

Account Collection Continues to Confound Many Contractors -- July 2006

Many construction companies have gone out of business not because of poor management, underpricing or lack of experience, but simply because they ran out of money. A contractor’s ability to collect accounts receivable can determine the success or demise of the business. Here are some ways to take an early and proactive approach to collections.

Finding the Perfect Fit
Tailor your insurance to suit your specific needs - July 2006

The construction business is inherently diverse. As a result, it’s important that contractors tailor their insurance coverage to meet not only the bid requirements of a project, but also the specific needs of company owners and assets. Here are some important aspects of insurance such as endorsements, exclusions and policy adjustments.

4 Final Bidding Factors to Consider -- August 2005

Making an effective bid in today’s construction industry involves much more than just crunching a few obvious numbers. To win business, contractors must look at not only their direct costs, but also a variety of other elements. This article suggests four final bidding factors to consider: 1) each and every prospective job cost, 2) risky project particulars, 3) potentially detrimental or beneficial relationships, and 4) the number and quality of the competition.

Know Your Options -- Choosing the Right Accounting Method -- August 2005

Among the most complex issues construction companies face is their choice of accounting methods. Because no two projects are ever alike, and their earnings may fluctuate from year to year, it’s important to know the options. This article examines the overall accounting methods contractors may choose from as well as approaches for long-term contracts.

IRS Launches Study of S Corporation Reporting Compliance -- August 2005

On July 25 th, the Internal Revenue Service officials announced the launch of a study to assess the reporting compliance of S corporations. The study, carried out under the National Research Program (NRP), will examine 5,000 randomly selected S corporation returns from tax years 2003 and 2004.

Connecticut -- Sales and Use Tax: Surcharge Imposed on Rental of Machinery (on or after July 1, 2005 ) -- August 2005

3 Steps to Curing “Profit Fade” -- June 2005
Many construction companies suffer from a disabling condition called “profit fade.” It occurs when a contract is complete or near complete, but the job continues to incur additional costs — often not factored into the estimate. Here are three steps to fighting this malady.

Heads Up: A Checklist for Managing Contract Risk -- June 2005
Taking every new contract to your attorney for review before signing it may seem inconvenient. Yet, no matter how experienced you are with construction contracts, obtaining a professional opinion can protect you from hidden risks.

That said, there are many potential contract dangers you can uncover yourself. If the owner uses a standard AIA form, these items will be easy to find. But if it’s a custom contract form, you may have to do a little digging. View the Full Article for a checklist of a few key points to review to avoid getting burned.

Independent Contractors 2004 -- June 2005
Not too long ago, the IRS reclassified a number of the software giant's independent contractors as employees, costing Microsoft millions in penalties as well as back employment taxes and benefits. This case shed a chilling light on the once-seemingly harmless practice of hiring independent contractors to cut employment costs. Here's a closer look at how to keep your company safe from the dangers of misclassifying workers.

Potential Tax Liability of Hiring Non-Mass. Construction Contractor -- April 2005 
Any individual or business that enters into an agreement with a Non-Massachusetts Contractor to perform construction services in Massachusetts has a potential liability for any unpaid sales/use tax on that project. In the event that the Non-Massachusetts Contractor does not comply with the state's requirement, the enforcement passes to the person entering into the contract. The "person who let the contract" becomes personally liable unless they follow the procedures outlined in the statute. 

Head Off Trouble with an Annual Cash Flow Projection – April 2005
Cash flow management is the process of planning, budgeting, measuring and controlling the money that flows into and out of a construction business. Among the most valuable tools in such a monumental effort is the annual cash flow projection. This article describes the critical elements of an effective projection.

Building a Better Bonus Program – A Construction Success Story – April 2005
This success story concerns a general contractor who needed a better way to determine employee bonuses. With her financial advisor’s help, she developed a more equitable bonus program that rewarded workers based on their individual contributions to the company’s bottom line.

2005 Tax Planning Opportunity - Production Activities Deduction -- February 2005
Starting in 2005, a 3% deduction is allowed for the portion of income attributable to U.S. manufacturing, construction, engineering and architectural services.

If there is an S corporation, income from the S corporation connected with the above activities will be allowed the additional deduction. Wages of the shareholders will still be taxed at the full rates. Therefore, it may be beneficial to reduce the shareholders wages, and increase the S corporations' income to take advantage of the additional deduction. Remember that the wages will have to be $210,000 per shareholder in order to maximize their pension contribution.

New Massachusetts Independent Contractor Law --February 2005
On July 19, 2004, a change in the Massachusetts definition of "independent contractor" was enacted. This law change is part of "An Act Further Regulating Public Construction in the Commonwealth" that was signed by Governor Romney on that date.

The law sets forth the presumption that a worker is an employee unless each of the following factors are present: the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and the service is performed outside the usual course of business of the employer; and, the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.

Fare Well After Your Farewell - Succession Planning for Family Construction Businesses -- February 2005
A significant number of businesses don't survive the transition from founder to second generation. And, often, it's excessive taxes triggered by the transfer that lead to their demise. This article looks at some succession planning methods that can help owners safely transfer ownership of their construction companies.

IRS Releases Construction Tax Curriculum -- February 2005
The Internal Revenue Service recently released the Construction Industry Federal Tax Curriculum. This is an 80-page guide that discusses federal income and payroll tax issues that commonly arise for construction companies.

Whip Job Progress Problems with a WIP Schedule -- February 2005
Keeping track of job progress is vital to any contractor's success. That's why it's best to track projects with a work-in progress (WIP) schedule. Using a sample WIP schedule, this article details the key components of this critical job tracking tool.

VIEs: Why Should You Care? -- February 2005
Generally, variable interest entities (VIEs) are standalone companies that either don't have equity investors with voting rights or whose equity investors don't provide sufficient financial resources to support the VIE's activities. Under a new accounting rule, VIEs are no longer considered separate business units and must be consolidated into the financial statements of their primary beneficiaries. This article explains why this new rule may significantly affect contractors' bank covenants and bonding capacity.

A Trap for the Unwary - A Whole New Meaning: the Perils of Section 409A by Jonathan Chapman, CPA -- November 2005

What's the (Business) Plan? - September 2003

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