Construction Industry Specific Tax Regulations
1. Sales and Use Tax
- What It Is: Construction companies often deal with complex sales and use tax issues, including tax on materials purchased and used in construction, as well as tax on services provided.
- Tax Implications: Understanding when sales tax applies to materials or services is crucial to avoid penalties.
- What It Is: The construction industry must ensure that workers are properly classified as employees or independent contractors.
- Tax Implications: Misclassification can lead to significant penalties, and employers must pay payroll taxes for employees, including Social Security and Medicare taxes.
- What It Is: This deduction allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year.
- Who It Applies To: Construction companies often have significant equipment purchases, making this deduction particularly valuable.
- Tax Implications: Accelerates depreciation and reduces taxable income in the year of purchase.
- What It Is: The construction industry must follow specific rules for depreciating assets, including machinery, vehicles, and buildings.
- Tax Implications: Different depreciation schedules apply depending on the type of asset (e.g., 5-year depreciation for construction equipment). Bonus depreciation and Section 179 expensing can also apply.
- What It Is: The IRS has specific guidelines to differentiate between capital improvements and repairs.
- Tax Implications: Capital improvements must be depreciated, while repairs can often be expensed in the year incurred, affecting tax liability.
- What It Is: Workers in the construction industry may have specific tax considerations, including per diem payments, travel expenses, and deductions for tools and equipment.
- Tax Implications: Properly tracking and documenting expenses is essential for claiming deductions.
- What It Is: The relationships between general contractors and subcontractors have specific tax implications, particularly regarding 1099 reporting.
- Tax Implications: General contractors must issue 1099 forms to subcontractors for payments over $600, and failure to do so can result in penalties.
- What It Is: Many construction contracts require bonding and specific insurance policies.
- Tax Implications: Premiums for bonding and insurance are deductible expenses, but the timing and method of deduction may vary.
- What It Is: State and local tax laws can vary widely and often include specific rules for construction companies.
- Tax Implications: Understanding the specific tax regulations in each state or locality where a construction company operates is crucial to compliance.
- What It Is: Construction companies engaged in developing new methods or materials may be eligible for R&D tax credits.
- Tax Implications: This credit can reduce tax liability, but proper documentation of R&D activities is essential.
- What It Is: Various federal and state programs offer tax credits for construction projects that meet certain environmental or energy efficiency standards.
- Tax Implications: These credits can provide significant tax savings for projects that qualify.
State Tax Implications for Texas
Texas State Franchise Tax
If you are an LLC registered in Texas you will need to file a franchise tax return for years 2023 and prior.
New Filing Requirements for 2024
The no tax due threshold is increased to $2.47 million and certain filing requirements are eliminated.
Taxpayers Under the No Tax Due Threshold
For reports originally due on or after Jan. 1, 2024, a taxable entity whose annualize total revenue is less than or equal to $2.47 million is not longer required to file a No Tax Due Report. However, the entity is still required to file the Public Information Report or Ownership Information Report.
REINSTATING OR TERMINATING A BUSINESS
Both Texas-formed and out of state entities registered with the Texas Secretary of State (SOS) must satisfy all state tax filing requirements before they can reinstate, terminate, merge or convert a business. Note the filing due dates to avoid late penalties.
We can help with all of this.
If you are an LLC registered in Texas you will need to file a franchise tax return for years 2023 and prior.
New Filing Requirements for 2024
The no tax due threshold is increased to $2.47 million and certain filing requirements are eliminated.
Taxpayers Under the No Tax Due Threshold
For reports originally due on or after Jan. 1, 2024, a taxable entity whose annualize total revenue is less than or equal to $2.47 million is not longer required to file a No Tax Due Report. However, the entity is still required to file the Public Information Report or Ownership Information Report.
REINSTATING OR TERMINATING A BUSINESS
Both Texas-formed and out of state entities registered with the Texas Secretary of State (SOS) must satisfy all state tax filing requirements before they can reinstate, terminate, merge or convert a business. Note the filing due dates to avoid late penalties.
We can help with all of this.
Get started on your required Beneficial Ownership Information Report
(BOI Report to FinCEN)
As part of the Corporate Transparency Act, a new federal mandate requires that businesses file a Beneficial Ownership Information Report to avoid criminal and civil penalties. We can help you to file in a compliant and stress-free way. Most reporting fees are 100.00.
Why do you need to file?
In 2021, Congress passed the Corporate Transparency Act on a bipartisan basis. This law creates a new beneficial ownership information (BOI) reporting requirement as part of the US government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.
Who needs to file?
All domestic and foreign entities that have filed formation or registration documents with a US state, unless they meet one of 23 enumerated exceptions, including:
EXEMPT: Large operating entities that meet all the following criteria:
When to file?
(BOI Report to FinCEN)
As part of the Corporate Transparency Act, a new federal mandate requires that businesses file a Beneficial Ownership Information Report to avoid criminal and civil penalties. We can help you to file in a compliant and stress-free way. Most reporting fees are 100.00.
Why do you need to file?
In 2021, Congress passed the Corporate Transparency Act on a bipartisan basis. This law creates a new beneficial ownership information (BOI) reporting requirement as part of the US government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.
Who needs to file?
All domestic and foreign entities that have filed formation or registration documents with a US state, unless they meet one of 23 enumerated exceptions, including:
EXEMPT: Large operating entities that meet all the following criteria:
- Employee more than 20 people in the US
- Had gross revenue (or sales) over $5 million on the prior year’s tax return
- Has a physical office in the US
When to file?
- A company registered business before January 1, 2024 has until January 1, 2025 to file its initial BOI Report.
- A company created or registered in 2024 will have 90 calendar days to file after registration is effective.
- A company created or registered on or after January 1, 2025, will have 30 calendar days after registration is effective.
- Civil penalties are up to $500 per day that a violation continues.
- Criminal penalties include a $10,000 fine and /or up to two years of imprisonment.