Masonry Magazine August 1984 Page. 23
Changing Accounting Methods
Construction companies or contractors that want to change their accounting method must first demonstrate they have a good business purpose to make the change. During the transition period from one method to another, some duplication in reporting income may take place. Any changes require permission from the Internal Revenue Service.
Current Tax Rules For Long-Term Contracts
New changes in the Internal Revenue Service regulations are directed at preventing unreasonable deferral of income recognition. The IRS will be taking a harder look as to whether one contract should be divided into several contracts for purposes of determining completion dates. The new rules (which are being phased in over three years) are effective for contracts entered into after 1982 for taxable years beginning after 1982. There will be no effect on any contracts expected to be completed within two years.
Special rules have been established for construction contractors with $25 million or more in revenue from commonly controlled business or who have contracts expected at their outset to take more than three years. If a contractor is affected by these two special rules, the following costs can no longer be written off period costs, but are considered applicable to "extended long-term contracts" and must be treated in the same way as direct construction costs:
* Bidding expenses on awarded contracts.
* Certain general and administrative expenses.
* Tax over financial statement depreciation.
* Employee benfits and current service costs of retirement plans.
* Rework labor, scrap and spoilage.
Back-up Withholding Rules on Interest Dividends and Other Payments
In order to avoid "backup withholding," it is necessary for you to secure the correct identification number for each unincorporated provider of business services to your company, such as your accountants, your attorneys, and all unincorporated independent contractors, whose aggregate annual payments are $600 or more. Furnish all independent contractors with Form W-9 and request that they return it to you with their identification number prior to your paying for the services. Unlike the requirement for signature with regard to payments of interest and/or dividends, Form W-9 need not be signed by an independent contractor.
If your company pays interest and/or dividends, you must secure an executed Form W-9 from each payee certifying the correctness of their Social Security or employer identification number. You must enclose a stamped, self-addressed envelope. If you do not obtain the required ID numbers you will be required to withhold 20% and remit it to IRS.
ATTENTION! SAFWAY SCAFFOLD OWNERS & USERS IMPORTANT PRODUCT INFORMATION ANNOUNCEMENT
SAFWAY has designed a new guard rail retention system for use on standard SAFWAY manufactured scaffolding. The new system, called a "G-Lock"" (patent pending), is not interchangeable with existing guard rail posts. The purpose of this announcement is to urge all users of SAFWAY products to convert their existing guard rail retention systems to the G-Lock system.
The existing guard rail system, which utilizes a threaded stud and wing nut to hold the guard rail in place, is safe when the scaffolding is properly constructed and used. However, it has come to our attention that improper construction and misuse of the existing guard rail system has resulted in a number of accidents, some of which have caused severe injuries. The G-Lock system is designed to minimize such improper construction and misuse.
For this reason the new G-Lock has been incorporated into all SAFWAY inventory and newly manufactured SAFWAY equipment. In addition, we are offering to convert all other existing SAFWAY manufactured equipment to the G-Lock system at our expense.
We urge you to replace your existing SAFWAY guard rail system with the G-Lock system. You simply need to bring your SAFWAY guard rail posts to your SAFWAY dealer for a no cost modification or exchange for modified SAFWAY guard rail posts.
If you have any questions regarding this announcement, contact your SAFWAY dealer or Robert Freuden, Manager, Customer Service, Safway Steel Products. P.O. Box 1991, Milwaukee, WI 53201 (414) 258-2700.