Common Questions
Questions business owners ask about taxes, deductions, and accounting. Have another? We encourage them.
How do I track job costs for my construction business?
Job costing means tracking every expense by project so you know which jobs actually make money. The key is coding expenses to projects in your accounting software when they happen, not weeks later when you're guessing.
Read answerWhat is the best accounting method for contractors?
Cash basis accounting works best for most contractors. It aligns your tax bill with actual money collected and avoids paying taxes on receivables you haven't received yet, which matters a lot when dealing with retainage and slow-paying customers.
Read answerHow do I handle retainage in my construction bookkeeping?
Set up separate accounts for retainage receivable and retainage payable. Track both at the job level so you know exactly what's held back on each project. Record the full invoice amount as revenue when the work is done, even though part of the payment is withheld.
Read answerCan a contractor use cash basis accounting?
Yes, most contractors can. The IRS allows cash basis accounting for businesses with average annual gross receipts under $29 million. The bigger question is whether cash basis gives you useful financial information for running your business.
Read answerWhat tax deductions can construction companies claim?
Construction companies can deduct equipment and vehicle costs, materials, labor, insurance, bonding, job site expenses, and administrative overhead. The key is tracking expenses by job and maintaining documentation throughout the year.
Read answerHow do I set up QuickBooks for a construction business?
Start by enabling job costing and building a chart of accounts designed for construction. Configure customers as jobs, set up items for labor and materials, and structure everything to track profitability by project.
Read answerWhat is progress billing and how do I track it?
Progress billing lets contractors invoice customers incrementally as work gets completed instead of waiting until project end. Track it by setting up jobs in your accounting software with the total contract value and generating invoices against that estimate as milestones are reached.
Read answerHow do I handle change orders in my accounting?
Record change orders as soon as they're approved, tracking both the additional revenue and the associated costs separately from the original contract. This lets you see whether change orders are actually profitable.
Read answerShould I hire a bookkeeper who understands construction accounting?
Yes. Construction accounting requires job costing, progress billing, retainage tracking, and subcontractor management that generic bookkeepers typically don't handle well. Without industry expertise, your books might balance but won't tell you which jobs actually made money.
Read answerWhat records do I need to keep for construction projects?
Keep contracts, change orders, invoices, material receipts, labor records, subcontractor agreements, permits, and inspection reports. These records support tax deductions, protect you in disputes, and help you understand job profitability.
Read answerHow do I track equipment depreciation for my contracting business?
Maintain a fixed asset register that lists every piece of equipment, its purchase date, cost, and depreciation method. This schedule feeds directly into your tax return and needs to be updated whenever you buy, sell, or dispose of equipment.
Read answerWhat are the payroll requirements for construction workers in Idaho?
Idaho construction payroll requires state tax registration, workers' compensation insurance, and proper employee classification. Public works projects add certified payroll and prevailing wage requirements.
Read answerHow do I account for materials on job sites?
Materials should be expensed when used on a job, not when purchased. Code every purchase to a specific job immediately, document transfers between jobs, and track returns carefully so your job cost reports show true profitability.
Read answerCan I deduct tools and equipment as a contractor?
Yes. Small tools under $2,500 can be expensed immediately, while larger equipment qualifies for Section 179 or bonus depreciation. The key is documenting business use and keeping good records.
Read answerWhat is the difference between completed contract and percentage of completion accounting?
Completed contract recognizes all revenue when a project finishes. Percentage of completion recognizes revenue as work progresses. The method you use affects when you pay taxes and how your financial statements look to banks and bonding companies.
Read answerHow do subcontractors report income and expenses?
Subcontractors report income and expenses on Schedule C as part of their personal tax return. All income is taxable whether you receive a 1099 or not, and deductible expenses reduce your taxable profit.
Read answerDo I need workers compensation insurance as a contractor in Idaho?
Idaho requires workers' compensation if you have employees. Sole proprietors can opt out, but most general contractors and commercial clients require proof of coverage before they'll hire subs.
Read answerHow do I handle 1099s for subcontractors?
Collect a W-9 from every subcontractor before their first payment, track total payments throughout the year, and issue a 1099-NEC to anyone you paid $600 or more for services by January 31.
Read answerWhat are common IRS audit triggers for construction companies?
Worker misclassification, 1099 compliance issues, and unreported cash payments are among the most common triggers. Large vehicle and equipment deductions without proper documentation also draw IRS attention.
Read answerShould my construction business be an LLC or S-corp?
It's not really either/or. An LLC can elect to be taxed as an S-corp, which is often the best of both worlds. The decision comes down to your profit level and whether the tax savings justify the added payroll requirements.
Read answerHow do electricians track business expenses for taxes?
Use a dedicated business bank account and credit card, capture receipts daily with an app, and categorize expenses as you go. The goal is clean records that show exactly what you spent on materials, tools, vehicle costs, and job-related expenses.
Read answerWhat bookkeeping software works best for plumbers and HVAC contractors?
Most plumbers and HVAC contractors use QuickBooks for accounting and separate field service software for scheduling and invoicing. The right combination depends on your business size and whether you need job costing, inventory tracking, and mobile invoicing from the field.
Read answerHow do I calculate overhead rates for bidding construction jobs?
Add up all costs not tied to specific jobs, divide by your expected billable labor hours for the year, and multiply that rate by estimated hours for each job you bid.
Read answerCan I deduct my work truck as a business expense?
Yes, if you use the truck for business. You can deduct either actual expenses or use the standard mileage rate. For trucks used heavily in construction or trades, the actual expense method with Section 179 depreciation often saves more.
Read answerWhat is job costing and why is it important for contractors?
Job costing tracks every expense, labor hour, and material cost to individual projects instead of lumping them together. It shows contractors which jobs actually made money and which lost, so you can bid better and stop taking unprofitable work.
Read answerHow do I track tip income for my restaurant employees?
Credit card tips track automatically through your POS system. Cash tips require employees to report daily. Both need to flow into payroll so you withhold taxes correctly and stay compliant.
Read answerWhat is the best POS system for restaurant bookkeeping?
The best POS depends on how well it integrates with your accounting software and fits your operation. Toast, Square, Clover, and TouchBistro all work when configured correctly. Setup and consistent use matter more than the brand you choose.
Read answerHow do restaurants handle sales tax on food and beverages?
In Idaho, prepared food and most beverages sold at restaurants are taxable at 6%. You collect it at the point of sale, track it separately from revenue, and remit it to the state on your filing schedule.
Read answerWhat tax deductions are available for restaurant owners?
Nearly all restaurant operating expenses are tax deductible. Food costs, labor, rent, equipment, supplies, marketing, and licensing fees all reduce your taxable income when tracked and categorized properly.
Read answerHow do I calculate food cost percentage?
Divide your cost of goods sold by your food sales, then multiply by 100. The key is getting an accurate COGS figure, which requires regular inventory counts.
Read answerShould I use accrual or cash accounting for my restaurant?
Most restaurants use cash accounting because it's simpler and matches how the business actually operates. Accrual becomes necessary when you grow past IRS thresholds or need financial statements for investors and lenders.
Read answerHow do I track inventory for a restaurant?
Count inventory weekly at minimum, track by category, and compare actual usage to what your sales say you should have used. The gap between those numbers tells you where food is walking out the door.
Read answerWhat payroll taxes apply to restaurant employees in Idaho?
Restaurant employees in Idaho are subject to federal Social Security, Medicare, and unemployment taxes, plus Idaho state income tax withholding and SUTA. Tipped employees add complexity with tip credit rules and reporting requirements.
Read answerHow do I handle credit card processing fees in my bookkeeping?
Record credit card processing fees as a separate expense category using the gross sales method. This gives you cleaner financial statements and ensures you claim the full deduction for fees paid to processors like Square, Stripe, or PayPal.
Read answerCan I deduct food waste as a business expense?
Food waste is deductible, but not as a separate line item. It's captured through your cost of goods sold calculation. When you throw out spoiled inventory, that cost is already reducing your taxable income.
Read answerWhat records should restaurants keep for tax purposes?
Restaurants need to keep income records including POS reports and tip documentation, expense receipts and invoices, payroll records, and inventory counts. The IRS typically wants three to seven years of documentation depending on the record type.
Read answerHow do I set up QuickBooks for a restaurant?
Restaurant QuickBooks setup requires customizing your chart of accounts for food costs, tip reporting, and POS integration. Generic settings won't track what you need to know about profitability.
Read answerWhat is prime cost and how do I track it?
Prime cost is your cost of goods sold plus total labor costs, expressed as a percentage of sales. For restaurants, it's the single most important number for understanding profitability. Track it weekly by monitoring food costs and all-in labor expenses.
Read answerHow do coffee shops handle bookkeeping differently than restaurants?
Coffee shops deal with higher transaction volumes at lower ticket prices and simpler inventory than full-service restaurants. The bookkeeping fundamentals are the same, but the complexity around food cost tracking and menu analysis differs significantly.
Read answerCan restaurant owners deduct employee meals?
Yes, meals provided to employees during their shifts are generally 100% deductible when furnished for the employer's convenience. For restaurants, this test is typically easy to meet since staff need to stay on-site during service.
Read answerWhat are the Idaho sales tax requirements for restaurants?
Idaho restaurants must collect 6% sales tax on all food and beverage sales, including prepared meals and most drinks. Registration with the Idaho State Tax Commission is required before opening, and filing frequency depends on your monthly tax liability.
Read answerHow do I account for catering and events separately?
Use classes in QuickBooks or separate income accounts to track each revenue stream. The key is capturing both revenue and direct costs by segment so you can see true profitability.
Read answerShould my restaurant be an LLC or corporation?
Most restaurants start as LLCs and that's usually the right call. An LLC provides liability protection with less paperwork, and you can elect S-Corp tax treatment later when profits justify the extra requirements.
Read answerWhat equipment can restaurants depreciate on taxes?
Most equipment you purchase for your restaurant can be depreciated. Kitchen appliances, refrigeration, dining furniture, POS systems, and HVAC all qualify. You can often deduct the full cost in year one using Section 179.
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