3 Common Accounting Mistakes Contractors Should Avoid
Every contractor needs the skills and equipment to deliver the results their clients expect, but running any successful business also means careful record-keeping and organization. Of course, bookkeeping, paperwork, and business tax preparation aren’t why most contractors go into business in the first place, but even simple mistakes can result in trouble with the IRS or missing out on valuable deductions. Below are a few of the most common accounting mistakes contractors make.
A Guide to Accounting Mistakes Contractors Should Watch For
1. Misreporting Revenue of Shared Ventures
Shared projects and joint ventures are excellent ways to increase revenue, build partnerships, and get your name out there. However, there are several ways of reporting income from these projects, which can impact both the value of your company and your tax burden.
Depending on how much you have invested, your business tax return professional may recommend using an accounting method based on consolidation, cost, or equity.
2. Not Keeping Orderly Records
Many new contractors are surprised and overwhelmed by the sheer volume of accounting tasks involved in running a construction company. This often results in disorganization, which can lead to incomplete accounting records and serious mistakes on your tax returns. If your accounting system always seems to be slipping into chaos, a professional can help you set up a streamlined process that’s much easier to manage.
3. Misstating Estimated Job Costs
Having accurate records of your expenses is crucial to reconciling the books, but many contractors rely on the estimates they made beforehand. Forgetting to compare projected and actual costs on a regular basis can easily introduce errors into your accounting system, some of which could lead to tax penalties or financial issues down the line.
Whether you need help setting up an accounting system or could use a hand with business tax preparation, let ZP Tax handle the details. They’ve been serving Montgomery County, MD, contractors for over 20 years, and they pride themselves on getting tasks done fast and doing them right. Visit their website for more on their business tax preparation services, or call (301) 587-4829 to set up an appointment with one of their bilingual agents today.