| IRS ruling may make it easier to deduct bonus accruals |
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Many contractors may distribute safety and performance bonuses for the previous year’s work after year end. Until recently, they could deduct these “bonus accruals” on their tax return for the “performance year” (rather than the “payment year”) only if by the end of the performance year they specified exactly how much each eligible employee would receive. Now, under IRS Revenue Ruling 2011-29, bonus accruals may be more easily deductible in the year accrued. This may be beneficial because it allows contractors to accelerate the deduction, deferring tax. This article discusses details of the ruling, including rules that must be met to claim the deduction. A sidebar looks at some exceptions to the Revenue Ruling.
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| Got bonding? — The Surety Bond Guarantee program can help |
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For small construction companies, obtaining bonding can be a huge challenge. But the U.S. Small Business Administration (SBA) may have a solution. The SBA’s Surety Bond Guarantee program helps provide surety bonds of up to $2 million per project for qualified contractors. This article examines these qualifications and the application process, noting that the program may be a good option for construction businesses with limited working capital but a healthy amount of ambition to take on new projects.
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| EVM puts project costs in perspective |
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When it comes to job costs, the one thing every contractor needs is perspective. With project data coming at them from all directions, obtaining the perspective needed to properly assess these situations isn’t easy. One way to process this information more efficiently and draw critical strategic conclusions is earned value management (EVM). This article explores EVM — a project management technique that measures job progress in dollars, giving contractors an objective assessment of both cost and schedule performance.
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| Construction Success Story — Job order contracting fits one builder’s needs |
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This issue’s “Construction Success Story” looks at the case of a contractor whose projects had been taking a little longer to get off the ground because of haggling with the developer over costs. The contractor’s financial advisor suggested exploring job order contracting — a fast-track delivery method that enables owners to secure performance on a variety of projects quickly and cost-effectively through a multiyear contract.
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