Contractors and building trades
Accounting for Chicago Contractors and Building Trades
Job costing, retainage and subcontractor paperwork.
Common mistakes in this industry
- Retainage held by a general contractor is earned revenue you have not been paid, and leaving it out of the books hides both the profit and the receivable.
- A subcontractor with no tax details on file is a year-end form you cannot issue and a deduction an examiner will question.
- The state treats a contractor as the end user of materials, so tax is paid on purchase rather than collected from the customer. Billing tax on top is a refund fight later.
- Deposits taken before work starts are not revenue yet, and treating them as revenue makes a slow quarter look profitable.
Contractor or trade
Frequently asked questions
Do I charge sales tax on a remodel?
A construction contractor is the end user of the materials, so you pay sales tax when you buy them and you do not add tax to the customer invoice. Retail sales of appliances or fixtures sold without installation are a different transaction and are taxed.
When does a worker have to be on payroll instead of paid as a contractor?
Control decides it. A worker you schedule, supervise and equip is an employee, whatever the paperwork says. The state applies a strict test in construction specifically, and a reclassification carries back taxes for every quarter involved.
How do I know which jobs actually made money?
Job costing. Every hour, invoice and material receipt is coded to a job, and the monthly report shows gross margin per job rather than one company-wide number. Most contractors find one or two customers running at a loss inside the first quarter.
What do I need for bonding or a line of credit?
Two or three years of reconciled statements, a work-in-progress schedule and returns agreeing with the statements. We produce the set together, since a balance sheet without a work-in-progress schedule gets sent back.
