What to Look for in a Construction Tax Advisor

Finding the right construction tax advisor is about more than just finding some to file your tax return each year. It’s about partnering with an expert who understands the unique financial landscape of the construction industry and can help you work through complex regulations, maximize tax benefits and build a stronger financial foundation for your business.

Let’s say you’re a mid-sized contractor who’s recently started taking on larger projects. You might be wondering how to handle the tax implications of long-term contracts or how to optimize your financial statements for bonding purposes. Or if you’re a well-established commercial contractor, you might need guidance on structuring your business to minimize tax liability across multiple entities.

These are precisely the kinds of challenges in which a specialized construction tax advisor can make a significant difference.

In this article, we’ll discuss what sets construction tax advisors apart, the key qualities to look for and how to evaluate potential advisors.

The Unique Challenges of Construction Accounting

Construction accounting is pretty different from standard business accounting practices. Several factors contribute to this — from the long-term contract rules that determine how revenue and expenses are recognized over the life of a construction project, to the complexity involved in managing several different projects at once.

Given these unique aspects, the importance of industry-specific knowledge cannot be overstated. A tax advisor well-versed in construction accounting understands these complexities, helping your company stay compliant while maximizing financial benefits.

Most Important Qualities to Look For in a Construction Tax Advisor

A well-qualified construction tax advisor should possess a combination of technical expertise, industry knowledge and a proactive approach to financial management.

This will help ensure your chosen advisor can provide the specialized guidance you need.

Let’s break it down in greater detail.

Deep Industry Expertise

Your ideal tax advisor should have a thorough understanding of construction-specific accounting methods like percentage-of-completion and completed-contract methods. They should be able to explain the requirements that apply to you, and the pros and cons of each approach to help you determine which is most beneficial for your company’s situation.

Knowledge of relevant construction tax credits is another crucial aspect of deep industry expertise. For example, your advisor should be familiar with:

• The Work Opportunity Tax Credit (WOTC): This credit incentivizes employers to hire individuals from certain target groups who have consistently faced barriers to employment.
• The Research and Development (R&D) Credit: While not typically associated with construction, R&D credits can apply to companies developing new construction techniques or materials.
• The Section 179D Deduction: The Section 179D deduction provides significant tax deductions for companies engaged in building energy-efficient commercial building properties.

A knowledgeable advisor will not only be aware of these credits but will also understand how to properly document and claim them on your behalf.

Finally, they should stay up to date with changing regulations and thresholds. Tax laws and accounting standards evolve, and it’s your advisor’s responsibility to be familiar with the latest developments.

At James Moore, our team includes CCIFP-certified professionals who stay current with industry-specific regulations and tax law changes. We bring a deep understanding of construction finance and ensure our clients receive up-to-date, relevant advice.

A Holistic Approach to Financial Services

A construction tax advisor should offer more than just tax preparation services. They should provide a comprehensive approach that integrates tax planning with other financial aspects of your business.

Look for an advisor who can:

• Integrate tax planning and assurance services, coordinating tax strategies with your financial reporting needs
• Align your tax position with overall financial goals, such as securing increased bonding capacity
• Reconcile financial statements and tax returns, explaining any differences while ensuring accuracy and compliance
• Understand bonding requirements and their financial implications for construction companies
• Work with your bonding agent and/or surety to present financial information favorably while maintaining accuracy

James Moore offers comprehensive services, including tax planning, assurance and advisory support, for a cohesive financial strategy for our construction clients. This integrated approach allows us to align your tax position with your overall financial goals and bonding requirements.

Proactive Planning and Advisory Services

Your construction tax advisor should take a proactive approach to managing your company’s tax position. This involves:

• Year-round tax planning to avoid surprises: Rather than only focusing on tax preparation during filing season, your advisor should engage in ongoing discussions about your company’s financial position and upcoming projects. This allows for timely adjustments to your tax strategy as your business evolves.
• Strategies for minimizing tax liability: A skilled advisor will help you identify opportunities to streamline your tax burden. This might include timing certain expenses or revenues, structuring contracts advantageously, or leveraging available deductions and credits specific to the construction industry.
• Cash flow management advice: Construction companies often face unique cash flow challenges due to the nature of long-term projects. Your tax advisor should be able to guide you on managing cash flow effectively, considering both tax implications and business needs.

Our proactive approach at James Moore means we work with clients throughout the year, providing timely advice and helping prepare for tax implications well in advance. This ongoing engagement allows us to identify opportunities and potential issues before they become problems.

Scalability and Resources

As your construction company grows, your tax needs will become more complicated. Your chosen advisor should have the capability to handle growing businesses, with access to a diverse team of specialists who can address various aspects of construction finance and taxation.

Look for a firm that has experience working with construction companies of various sizes. This breadth of experience means they can provide relevant advice as your company expands. They should be able to offer examples of how they’ve helped other construction businesses navigate growth-related challenges.

With experience serving construction companies of all sizes, James Moore’s team is equipped to support your business as it grows and evolves. Our talent pool includes specialists in various aspects of construction finance and taxation, so we can meet your needs at every stage of your company’s growth.

Benefits of Working with a Specialized Construction CPA Firm

Opting for a specialized construction CPA firm offers several advantages:

• Tailored tax strategies for the construction industry: A specialized firm understands the nuances of construction finance and can develop tax strategies that align with industry-specific challenges and opportunities.
• Compliance with industry-specific regulations: Construction companies face unique regulatory requirements. A specialized CPA firm stays current with these regulations so your company remains compliant.
• Potential tax savings through industry-specific credits and deductions: As mentioned earlier, there are several tax credits and deductions specific to or commonly used in the construction industry. A specialized firm is more likely to identify and properly apply these opportunities.
• Improved financial reporting for bonding and other business needs: Specialized firms understand the importance of financial statements in securing bonds and loans. They can help present your financial information in a way that strengthens your position with sureties and lenders.

In short, by working with a construction CPA, you’ll gain access to highly relevant insights and advice you might not get from a firm with less industry-specific expertise.

How to Evaluate Potential Construction Tax Advisors

When evaluating potential tax advisors, keep an eye out for these warning signs:

• Lack of construction-specific experience: If a firm can’t provide examples of work with other construction companies or seems unfamiliar with industry-specific terms and concepts, it may not be the best fit.
• Unfamiliarity with long-term contract accounting: This is a fundamental aspect of construction accounting. If an advisor doesn’t understand or can’t explain different methods of revenue recognition for long-term contracts, consider it a major red flag.
• Reactive rather than proactive approach to tax planning: If an advisor only contacts you during tax season or doesn’t proactively discuss tax planning strategies, they may not be providing the level of service your construction company needs.

To find a highly qualified partner, in addition to avoiding red flags, look for industry-specific credentials like the Certified Construction Industry Financial Professional (CCIFP). This certification demonstrates a deep understanding of construction finance. You might also ask about their experience working with other construction companies and their approach to the services you are looking for, like tax planning and compliance.

James Moore: Your Partners in Construction Tax Planning

Choosing the right construction tax advisor can significantly impact your company’s financial health and growth potential, and can set you up for stability and success in the years to come. Conversely, an under qualified advisor could result in missed opportunities or even increased risk.

James Moore’s team of specialized construction CPAs can help you evaluate your current tax position, navigate the complexities of construction tax regulation, identify and leverage potential tax credits and more. Contact us today to position your construction company for tax success.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.