February 2008: For the Record
Words: Jennifer Morrell, Grant Thornton
For the Record
Uncle Sam Is Calling
Are you knee-deep in your taxes yet, handing off paperwork piece-by-piece to your accountant in an effort to wrap up this tax season as soon as possible?
Whether you turn the whole tax kit and kaboodle over to your tax person, or you try to file taxes for your company on your own, you're probably already tired of thinking about it.
I have a shoebox full of receipts at home that I need to get crackin' on, but I'll probably wait until early-April to do so. Hopefully, you're more on-the-ball than I am.
To get you started or pull you through the muck and mire of tax season, I've secured a few tax tips for construction contractors from www.constructionbusinessowner.com (provided by Grant Thornton, LLP). Maybe at least one of these tips will help you.
1. Examine your capital asset depreciation methods and lives. "Catch-up" deductions are possible on under-depreciated existing assets. You may be able to write off 100 percent of the under-depreciated amount in the current tax year without amending past returns by filing an automatic change in accounting method.
2. Obtain a marketing edge by offering your customers more. Work with a tax advisor to provide a turnkey cost segregation study to your customer with your completed project. Your tax advisor can assist in analyzing and appropriately classifying capital assets associated with the project into the most tax-beneficial depreciable lives.
3. Analyze the structure of your business. How your business is organized can have a major impact on the amount of taxes you pay, especially in the areas of state, local and unemployment taxation. Consider the benefits of restructuring your business (for example, by establishing a partnership to provide inter-company services), while at the same time potentially reducing state, local and unemployment tax liabilities.
4. Consider establishing a separate entity to own and lease fixed assets used in your business. Often referred to as "leasing companies" or "procurement companies," these entities help manage your assets and may significantly reduce your sales and use tax — a tax you collect and remit regardless of whether your company is profitable.
5. Review your accounting methods. The operations of contractors can result in the need for multiple methods of accounting. Be sure that you are using appropriate and advantageous methods.
Happy filing!