PBMares Accounting Blog

Look-Back Interest on Long-Term Construction Contracts

Posted by Daniel L. Chenoweth, MPA, CPA on Aug 29, 2017 8:59:45 AM

If you are a construction contractor reporting long-term contracts on the percentage of completion method (§460(b)(1)) you may be required to calculate look-back interest (§460(b)(2)) on your long term contracts.

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Topics: Tax Planning, Construction

Virginia Enterprise Zones: Are You in the Zone?

Posted by Bronach Branan, ACMA, CPA on Aug 14, 2017 1:57:53 PM

Were you aware that the Commonwealth of Virginia appropriates grant funding for Companies that invest in certain areas in the state?  The Commonwealth of Virginia wants to encourage rejuvenation of certain towns and cities and is willing to award funding for the rehabilitation, expansion or new  construction of real estate and/or creation of higher wage jobs. In 2016, approximately $12m was set aside for this purpose, and in 2017 the General Assembly has approved a total of approximately $13m to be awarded to Companies who meet the specific criteria. 

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Topics: Construction, Virginia Enterprise Zone

Changes to Virginia Sales Tax effective as of July 1, 2017

Posted by Lori Roberts, CPA on Jul 17, 2017 8:00:00 AM

Each year the Virginia Legislature passes changes to the Virginia Tax Code that impacts residents and those doing business in Virginia. While many of the changes can seem mundane or minor, there are two that will have a significant impact on two segments of Virginia Business, automotive service centers and retailers and contractors selling and installing tangible personal property. Both will likely require changes to POS retail and accounting systems in order to administer properly.

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Topics: Tax Planning, Construction

U.S. Employers Are Required To Be Form I-9 Compliant

Posted by Joanne R. Wolfley on Jan 23, 2017 2:00:00 PM

Effective January 22, 2017, employers must use the revised form I-9, Employment Eligibility Verification Form.

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Topics: Tax Updates, Contractors, Construction

Employers: January 2017 Is Busier Than Ever With New Due Dates

Posted by Joanne R. Wolfley on Oct 12, 2016 3:40:39 PM

 

December and January are undoubtedly busy times for businesses with closing out their calendar years, gathering documentation for their accountants, tax preparers, and auditors, and filing wage and income information returns to taxing authorities for their employees and contractors.  Unfortunately, adding to this year’s stress and complexities are some accelerated due dates for certain information returns.  Below are those changes and some important reminders.

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Topics: Tax Updates, Contractors, Construction

FASB Throws a Curveball With Simplification

Posted by Todd Swisher, CPA CGMA on Sep 12, 2016 1:40:10 PM

For many years debt issuance costs have been a bit tricky to present and display correctly on financial statements. As part of the Simplification Initiative, the FASB issued Accounting Standard Update 2015-03, revisiting the issue of properly accounting for debt issuance costs and specifying their new categorization on the balance sheet. The change is a big shift, moving the issuance costs from the asset side of the ledger where it was originally reported. Now, debt issuance costs need to be reflected in the balance sheet as a direct reduction against the related debt. However, the effect is the same at the end of the day in that the debt liability is reduced up front rather than as an asset balanced against a liability over time.

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Topics: Construction

Certain Construction Activities Qualify for 9% Tax Deduction

Posted by Joanne R. Wolfley on Sep 1, 2016 8:30:00 AM

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Topics: Tax Planning, Contractors, Construction, Multi-state Tax

Lessees: Are You Prepared to Recognize Assets and Liabilities for Almost All Your Leases?

Posted by Helaine S. Weissman, CPA on Aug 29, 2016 8:30:00 AM

 

Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) – issued February 25, 2016

For most non-public entities this update is effective for fiscal years beginning after December 15, 2019. However, now is the time to start thinking about longer-term impacts before entering into new leases over the next few years.

Following is an overview, for lessees, of this comprehensive and intricate standard.

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Topics: Government Contracts, Construction, hospitality

Heavy Highway Vehicle Use Tax Return– Due August 31, 2016

Posted by Jennifer French, CPA on Aug 16, 2016 10:13:31 AM

Many companies may need to file Form 2290 - Heavy Highway Vehicle Use Tax for registered vehicles with a taxable gross weight of 55,000 pounds or more. This return is filed for the upcoming year of July 1, 2016- June 30, 2017 and is due August 31, 2016.

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Topics: Tax Updates, Tax Planning, Construction

Navigating Long-Term Contract Tax Reporting Options

Posted by Daniel L. Chenoweth, MPA, CPA on Jun 7, 2016 10:49:34 AM

The tax reporting options for long term construction contracts can be perplexing. The rules are complex, sometimes counter-intuitive, and a bad decision or poor advice can lead to some negative tax consequences.

First off, what is a long term contract? A long term construction contract is any contract written for the purpose of manufacturing, building, installing, or constructing a property that spans more than one tax year.  In other words, if a calendar-year taxpayer begins a construction job on December 31st and finishes it on January 1st, the contract would be deemed "long-term" since it spans two tax years.

Percentage of Completion Option

Long-term contracts are subject to the percentage of completion method for reporting taxable income (IRC Section 460(b)(1)); however, there are exceptions discussed later.  Percentage completion is a method of allocating the taxable income generated from a contract based on how much of the work has been completed.  Generally, the overall cost of the contract is used as the basis for allocation.  For example, if a contract is estimated to generate $30,000 in income and will cost $75,000 to complete, when $50,000 or 2/3 of the total contract costs have been incurred, $20,000 or 2/3 of the estimated contract net income would be recognized.

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Topics: Tax Planning, Construction