by Daniel Kittell | Accounting News, Construction, Industry - Construction, News, Uncategorized
Last year 35% of contractors reported turning down work due to skilled labor shortages. Couple this with a lack of resources due to supply chain issues and an industry that doesn’t seem to be slowing down, despite a short stall at the beginning of the pandemic, and construction firms are finding themselves in a position of putting the focus on running a more efficient business. Ultimately, this focus can help determine ways to save money or ways to reinvest in either hiring or retention and training. Read on for some strategies that will ultimately help you save time and money.
Provide Consistency
Consistency across the span of a project builds client trust and customer satisfaction, and building the importance of consistency into staff training can produce cost-effective results.
- Be sure your employees work by your company’s mission and core values. They should serve as touchstones throughout the duration of the project, whether anticipating customer expectations or meeting any unforeseen circumstances, including a shortage of staff.
- Hold on to returning customers by training employees to be responsive, helpful, and consistent with their answers.
- Employees who have the most interaction with customers should be trained in a way that provides consistency in addressing any questions and issues throughout the project. They should be proactive, empathetic to concerns, and solutions-oriented.
Prioritize Communication
As a business owner, if you feel that you lack the communication skills necessary to see a project through to the end, consider outsourcing a service to answer incoming calls. This can save time, and you can focus your energy on more pressing matters. Also think about establishing a company website as a means of interacting with current and potential clients. Use extensions like live chat, interest forms for gathering contact information, and online sales and specials to hook new customers and drive sales.
Invest in Software for Efficiency
Technology in the construction industry has the power to save time, improve workflow, attract skilled labor, and provide optimal customer service. Because efficiency in customer scheduling has proven to be a challenge for many construction firms, consider investing in software that focuses on customer and project management. Technology that can provide efficiency and capture project details can have a positive overall effect on your business.
Construction firms in today’s economy are faced with widespread labor shortage and supply chain issues, as well as skilled workers aging out of the workforce. This all culminates in an industry-wide lack of resources that is only growing. For an industry that is no stranger to labor turnover, focusing on consistency, time investment, and customer attention is paramount, and will allow you to run a more efficient operation and save money in the long run.
by Daniel Kittell | Accounting News, Construction, Industry - Construction, News
While Congress appropriated a total of $669 billion in loans to small businesses under the Payment Protection Program (PPP) as part of the larger CARES Act, funding was reportedly exhausted by May 5th of this year. However, there are a number of additional programs and tax provisions, discussed below, that business owners should be aware of to use in place of or jointly with PPP loans.
Section 2302 Delay of Payment of Employer Payroll Taxes
This provision, created under the CARES Act, permits employers and self-employed individuals to postpone payment of the 6.2% employer portion of the Social Security taxes. The first half would be due by December 31, 2021 and the second half would be due by December 31, 2022.
Credits and Incentives for Developing Businesses
States and local communities usually have programs and tax incentives accessible to growing companies. Small businesses, including construction firms, were hit hard during the Covid-19 pandemic, but preparing for the future is necessary as companies begin to recover. Look into possible tax credits, exemptions, and grants as methods that might assist in your business’s growth, either now or in the near future.
Section 2307 Bonus Depreciation of Qualified Improvement Property
Section 2307 of the CARES Act amended a technical error allowing businesses to directly write off costs correlated with improving facilities retroactive to January 1, 2018. The adjustment expands businesses’ access to cash, as it permits them to amend prior year returns to claim the 100% bonus depreciation for qualified improvement property. It also motivates businesses to invest in property improvements, thereby stimulating the economy.
Research and Development Tax Credits
Businesses can make use of both federal and state research and development tax credits that reward companies based on contribution to the development of new products and processes. These tax credits can be applied on both current and amended tax returns to produce refunds or credit carry forwards.
Cost Segregation Studies
Cost segregation is a vital tax planning tool that has the potential to shelter taxable income by depreciating various elements of a property at an accelerated rate. In real estate, commercial properties are depreciated over a period of 39 years. However, when a company obtains, renovates, restores, or builds real estate, it frequently overestimates the amount of 39-year real property and limits depreciation deductions. Under the Tax Cuts and Jobs Act (TCJA), business owners can take a bonus depreciation of 100% for qualified assets in the first year (as defined by a cost segregation study) instead of depreciating the assets over a longer period of time. This 100% bonus deduction is available until 2022 when it will slowly start to phase out until 2027.
by Stephen Reed | Accounting News, Construction, COVID-19, Industry - Construction, News, Tax Planning
Last year construction contractors saw projects suspended indefinitely (or scrapped altogether) and escalated competition in the bidding process, both of which effectively stifled profit margins. It’s safe to say that the construction industry was not spared the upheaval of 2020. After such a tumultuous year, tax planning for 2021 might seem like a daunting challenge, but it’s a critical step for construction contractors in preparation of the year ahead.
Essential Tax Provisions for 2021 Preparation
With the uncertainty of the Covid-19 pandemic and a transfer of administrations in the White House this year, new legislation affecting tax provisions is a possibility, but there are several provisions under the current tax law, including those put in place under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, that you want to be sure not to pass over.
Bonus Depreciation
Are you eligible to use the bonus depreciation this year? Changes have been made to qualifying property under both the Tax Cuts and Jobs Act (TCJA) and the CARES Act as follows:
- TCJA: expanded the bonus depreciation deduction to 100% for specified property obtained and placed in service after Sept. 27, 2017, and before Jan. 1, 2023.
- CARES Act: authorized the qualified improvement property (QIP)—typically interior improvements to nonresidential property—to be depreciable over 15 years and eligible for 100% bonus depreciation.
Tax Credits and Deductions
These tax credits and deductions could aid in reducing tax liability for contractors:
- Research and development credits: contractors who test new techniques or processes on construction jobs could be eligible.
- Deduction for energy-efficient government buildings: contractors may be eligible for a deduction of up to $1.80 per square foot for building energy-efficient commercial buildings intended for federal, state or local governments.
- Credit for energy-efficient residential properties: Contractors can take advantage of tax credits for certain energy-efficient residential properties.
Note that the deduction and credit for energy-efficient buildings expire at the end of 2021.
Qualified Business Income Deduction
The TCJA replaced the 9% “domestic production activities deduction” under IRC Section 199 with a 20% Qualified Business Income deduction under IRC Section 199A. It also increased eligibility to encompass more businesses. Contractors might want to start the conversation with their tax advisor on how to maximize this deduction as well as receive guidance on how to maneuver through the calculation’s somewhat complicated rules and limits.
Flexibility with Accounting Methods
Smaller construction firms (meaning those with average gross receipts of less than $26 million from the prior three years) generally enjoy more flexibility with tax accounting methods. Such firms could be eligible to use cash, accrual, completed contract or “accrual less retainage” accounting methods, all of which usually aid in managing the timing of revenue recognition. This allows companies to stimulate revenue to counterbalance current losses and recognize revenue now in expectation of higher future tax rates.
Additional Tax Planning Considerations Amid the Pandemic
To help minimize the risks of ongoing economic uncertainty, contractors should consider keeping apprised of tax changes. Given the seemingly ever-changing legislation amid the pandemic, construction firms should keep in regular contact with their tax advisors in order to avoid any tax reform surprises. However, contractors should also aim to operate without presumption of further legislation. While the economic effects of the pandemic are ongoing, don’t assume further stimulus legislation like the Paycheck Protection Program will be passed by Congress.
In light of a turbulent 2020, the construction industry has experienced a return to the business practices that have proven successful in the past: more attention to jobsite monitoring, legal contracts, and insurance costs. Contractors can contact an MKR advisor to incorporate 2021 tax planning into this process.
by Pete McAllister | Construction, News, Tax
2017 has been a more promising economic year including higher wages, a lower unemployment rate and booming markets. The housing market, however, has proven to be a stumbling block for many, particularly those looking to purchase their first home. This year has brought an increase in home prices and a decrease in available homes.
Although it seemed that new buyers were beginning to take their place in the market again, that ratio has dropped to a low 34 percent of overall home sales. In years past, first time buyers have made up closer to 40 percent of the overall market, but there seems to be a correlation between rising student loan debts and falling first time homeowners.
Of those who did purchase a home for the first time in 2017, 41 percent recorded they had student debt, and half of buyers owed at least $25,000. The average amount of student loan debt increased from $26,000 in 2016 to $29,000 in 2017 as well. Many said this increase in debt has hindered their ability to save for a down payment. Conversely, the average home cost hit a new peak in August at $282,000, which means down payment costs rose as well.
Not only are fewer buyers purchasing for the first time, but it seems that those who did paid more for less house. In 2016, first time buyers averaged a 1650 square foot home for $182,500, but in 2017, first time buyers averaged a 1640 square foot home for $190,000. Across all buyers, 42 percent paid the list price or more for their home, which is the highest in survey history.
Although it is possible to have student loan debt and still be approved for a mortgage, many first time buyers are afraid to even apply, fearing a stressful, long-winded process that will result in them not being approved.
However, the Realtor’s report did mention that more buyers said the mortgage application and approval process was easier than expected, a positive note in the mix of rising debt and home prices. Unfortunately though, mortgage rates are on the rise, so first time buyers may choose to consider waiting for the new year in the hopes that rates and home prices will drop, and hopefully their down payment savings will increase.
