Targets Aid to Small Construction Business Owners

The IRS is aiming to deliver more tax tips and resources to the construction industry, especially to smaller contractors and subcontractors, through its web site and other channels.

By Jim Muckey

The Internal Revenue Service's Small Business/Self-Employed division has created Taxpayer Education and Communication, a unit designed to work with the small business community. The unit has developed educational products and outreach presentations to inform and educate small business owners about their unique tax obligations.

Among those initiatives, the agency has launched a one-stop resource center online at www.irs.gov/businesses/small/index.html that covers federal tax-related issues and educational material. The site, which houses information on how to open, operate, and even close a business, also has a specific construction section containing industry information, including technical tax issues, notification of tax schemes, and an industry issue resolution program.

One of the latest additions to this section is a construction industry federal taxation curriculum. It offers detailed information on various issues related to the construction industry, such as long-term construction contracts, percentages of completion methods, and excise taxes. The broader subject matter includes:

• proper reporting of income and business deductions
  
• recordkeeping
  
• worker classification
  
• employment tax
  
• accounting methods
  
• electronic submissions.

While the curriculum is primarily for start-up construction businesses, it can also be useful to anyone interested in understanding the fundamentals of federal tax requirements. Each chapter contains a wealth of information and examples.

In addition to the existing tax code, business owners should get to know the American Jobs Creation Act of 2004, a recently adopted law that has several provisions relevant to construction business owners. Some of the new elements cover:

• small business expensing
  
• amortization of start-up and organizational expenditures
  
• mobile machinery exemption for excise taxes
  
• modification of off-highway vehicle definition
  
• depreciation for sport utility vehicles.

Beyond staying abreast of legal issues, construction industry firms should make efforts to minimize the common filing errors that afflict many small businesses. These include:

• incorrectly calculating or transferring self-employment tax
  
• incorrectly calculating or transferring net profit on Schedule C or C-EZ to income section
  
• incorrect or late filing of election to become an S corporation
  
• filing Form 1120S before receiving approval
  
• omitting employer identification numbers from returns
  
• failing to list number of Schedule K-1s on line 1 of Form 1065.

These common errors delay the processing of tax returns and cause other backlogs detrimental to taxpaying contractors. One solution is using the IRS e-file program to help minimize some of these errors.

Another solution is the Electronic Federal Tax Payment System. Users can pay all federal corporate, excise, and employment taxes as well as quarterly estimated tax payments quickly and easily. Other features include an instant, printable Electronic Fund Transfer acknowledgement number that provides documentation of every transaction and access to 16 months of tax payment history.

As the IRS expands its commitment to working with the construction industry and its trade associations to resolve issues and provide new tools, we urge you to frequently check our construction section web page - accessible at the address below - for the latest tax law changes and tax hints. Organizations may contact a local IRS office to schedule a presentation on topics of interest concerning the construction industry. In New York, contact: Lillie Davenport in Manhattan at (212) 436-1829; Kim Young in Brooklyn at (718) 488-2102; or Jim Muckey upstate at (315) 233-7335. In New Jersey, contact Claudia Hawkins at (215) 861-3888, and in Connecticut, contact Antonio Hernandez at (203) 781-3134.

IRS-TEC construction section web site address: www.irs.gov/businesses/small/industries/content/0,,id=99329,00.html

Jim Muckey is a senior tax specialist in the Office of Taxpayer Education and Communication for the Internal Revenue Service.