| The IRS included in it's e-News for Tax | | | | holds true: |
| Professionals, detail information on Contractors, | | | | Ordinary and necessary business expenses are |
| subcontractors and individual workers, not | | | | deductible. An "ordinary" expense is one that is |
| reporting or under-reporting business income from | | | | common and accepted in the construction |
| construction activities. | | | | business. A "necessary" expense is one that is |
| The IRS says businesses and individuals need to | | | | helpful and appropriate for the construction |
| be aware of everything that counts as income | | | | business. An expense does not have to be |
| and proper accounting methods in order to pay | | | | indispensable to be considered necessary. |
| their fair share of taxes. | | | | An example of business expenses for |
| The report went on to say that businesses and | | | | Contractors, subcontractors and workers working |
| individuals also need to be aware of all deductible | | | | in the construction industry are as follows: |
| expenses so that they don't overpay their taxes. | | | | Utilities |
| The tax gap is the difference between the | | | | Car and truck expenses |
| amount of taxes that should be paid in a given | | | | Advertising |
| year and the amount actually paid voluntarily and | | | | Employee salaries |
| in a timely way. | | | | Trade association dues |
| Income | | | | Rent expense |
| Contractors, subcontractors, and workers must | | | | Supplies |
| pay taxes on income received for all work, | | | | Continuing education |
| including side jobs and work that is paid for with | | | | Small tools expected to last one year or less |
| cash. This includes work in exchange for credit on | | | | Steel toe work boots |
| a bill. It also includes work that is done in | | | | Business licenses |
| exchange for goods or services in a barter | | | | Expenses for business assets that are expected |
| exchange. | | | | to last more than a year must be capitalized and |
| The IRS went on to stress that Contractors, | | | | depreciated over their useful lives. Examples of |
| subcontractors and individual workers are required | | | | assets include: |
| to report their income even if a Form 1099 or a | | | | Cement mixer |
| W-2 is not issued to them. | | | | Compressor |
| As for accounting methods, income and expenses | | | | Ladder |
| are reported on tax returns based on one of two | | | | Other heavy machinery |
| accounting methods, which include either the cash | | | | Buildings and real property |
| method or the accrual method. Your tax | | | | Personal expenses including clothing that can be |
| professional can help you determine which method | | | | worn off the job site, fines and penalties, and the |
| is best for you. Most small business owners and | | | | non-business use of vehicles or computers cannot |
| individuals use the cash method. And business | | | | be deducted. |
| activities for contractors, subcontractors and | | | | The above information is a summary of Income |
| individuals are usually reported on Schedule C. | | | | and Expenses for the Construction Industry. For |
| Expenses | | | | further clarification of the Tax Code, visit irs. |
| Based upon the IRS Tax Codes the Following | | | | |