Bookkeeping Strategies for Construction Companies: Maximizing Deductions and Planning for Tax Time

S corporations can avoid both consequences by electing to distribute the subchapter C earnings and profits first, or by making a consent dividend election. Either the distribution or consent dividend can purge the S corporation of all its earnings and profits at year-end. For the closely held C corporation, an S corporation election needs to be considered from time to time. In addition, careful timing of equipment purchases can result in favorable depreciation deductions.

Plumbing work requires tools, materials, and the time of the skilled worker! Tracey will let you know what client accounts may need to be reevaluated or addressed. A corporation is generally allowed to deduct charitable contributions up to 10% of its taxable income for cash contributions. Under the CARES Act, the corporate limitation was temporarily increased to 25% of taxable income for cash contributions made in calendar year 2021. Contributions from pass-through entities are allocated to individual equity interest holders and are subject to the individual’s limitations.

Passive income and S corporations

Note, however, that accelerating income into the current tax year could be disadvantageous if the taxpayer expects to be in the same or lower tax bracket the next year. Running a successful plumbing business involves more than just expertise in the trade. Effective financial management is a key pillar that ensures your business remains viable and profitable. Here are 10 must-know financial strategies for plumbing business owners. When you started out in your plumbing business, you handled every detail. Unless you set up efficient plumbing business systems, you are either spending too much time on details or missing things that are hurting you.

  • In actual method, you itemize the list of expenses pertaining to your vehicle.
  • These expenses could be fixed or variable, meaning they typically remain the same or shift from month to month.
  • It is important to know which clients are behind in paying your company and develop a plan to address how to get them to pay.
  • But if you’re going to concentrate on business returns or professional returns, more sophisticated returns, then a business site is probably a better place to be.

For the small business practitioner, there are two organizations that are terrific to join. The National Society of Accountants, or NSA, has some terrific resources that you can access. It’s more designed for the small business accountant, similar to what our tools are and our programs are, they’re really designed to focus on the small business. And for taxes, there is a number of different organizations, but the one that I am closest to and that I appreciate the most is the National Association of Tax Professionals, or NATP.

Understand Your Business’s Financial Landscape

Bookkeeping for plumbers is not just about tallying the numbers and showing how much profit (or loss) you have. Your bookkeeping should help you identify opportunities to exploit and problems to fix. When you use bookkeeping software like QuickBooks you will be able to track your inventory, labor costs, unpaid bills, and other expenses. Whether you choose to handle all of your bookkeeping in house or use online bookkeeping services, professional bookkeeping for plumbers will make the difference between business survival and business success. There are two professional licenses that are recognized in the US — there’s the CPA and then there is the EA, or Enrolled Agent.

  • Remember to set aside money to pay your estimated taxes when they’re due every quarter.
  • A separate bank account for your plumbing business will help you keep track of any income and expenses that are business-related.
  • Ensuring your team is up-to-date with the latest plumbing technologies and best practices can set your business apart from the competition.
  • Such platforms also deliver precisely the kind of information your tax accountant will need to prepare and file your business taxes, which can save both time and money at tax time.
  • Ensure that each worker is classified correctly to avoid any missteps during tax time.
  • Generally, a taxpayer may have passive losses that have been suspended and not yet allowed as a deduction.

It means that when a business receives money, it recognizes it as revenue. If you are successful enough to have your own office, you may have employees and will need to pay Workers Compensation. For example, say you typically £200 a month on fuel, £500 on supplies and parts, and £100 on marketing, and £100 on insurance, and £200 on unexpected repairs. These expenses would put your business’s monthly costs around £1100 per month. Accountants must have at least a bachelor’s degree and most have logged at least 150 credit hours of accounting and business courses. Since most bachelor’s degrees only provide 120 hours of course credit, many accountants complete a master’s degree as well.

Accounting software

Some of these expenses are obvious, such as salaries, rent, and the purchase of certain tools. Business travel expenses, advertising, and in some instances, food – may also be eligible for deduction when filing your tax return. I mean, it’s a computer, it’s a printer, it’s Internet access, scanners becoming increasingly important to bookkeeping and tax businesses, so that’s really the core equipment. A lot depends, too, upon whether you do it out of your home or you do it out of an office, because there’s a cost to rent an office whereas your home is pretty inexpensive rent, in most cases. Software for a bookkeeping business typically is going to run you under $200, and that might be for several years, or some people might choose to upgrade every year. The tax business, most people choose to start out on a pay-per-return basis.

Bookkeeping And Tax Planning Strategies For Plumbing Companies

You also spend time going to part stores buying parts to use at the job sites. If you still do mailing campaigns such as postcards and ads in magazines, you can deduct those expenses as well. We bring you news on industry-leading companies, products, and people, Bookkeeping And Tax Planning Strategies For Plumbing Companies as well as highlighted articles, downloads, and top resources. You’ll receive primers on hot tech topics that will help you stay ahead of the game. Get the latest in tax and bookkeeping updates and issues that affect your finances and growth prospects.

Manage your plumbing expenses and more with Countingup

Bank and credit card statements are a good start, but every single penny you spend on your business should be tracked. To manage your spending, you’ll want to separate your business expenses from your personal ones. A specific business account will save you time because you won’t have to shovel through your bank statements to find business transactions. Accountants don’t have to sit for the Certified Public Accountant (CPA) exam, but many choose to do so. Passing the CPA exam and joining the American Institute of Certified Public Accountants allows accountants to do more things, such as represent people and companies before the IRS and act as external auditors. Many businesses specifically seek to hire CPAs to file their company’s tax returns.

Your plumbing company accountant can help you find the right classification for your situation, which might help you save on tax liability. Paying your taxes in installments is an intricate part of successful plumbing company accounting. As a small to medium-sized business, you may get hit with a larger-than-expected tax burden. This could threaten to close your business as it drains you of cash flow.

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