A considerable number of contractors have failed to adopt the most propitious method of tax accounting for their companies. Yes, it's true, that those having revenues of less than $1 million annually are on the cash method. But many are unaware of their eligibility to continue using the cash method as long as their revenues do not exceed on average $10 million annually.
What is equally egregious is the number of contractors who have failed to select a method of accounting for long-term construction contracts. The Internal Revenue Service does not restrict companies from adopting more than one method of accounting, and accepts different methodology for long-term contracts.
When cash flow is as important as profitably in these very challenging times for contractors, it is imperative that contractors elect the appropriate methods for its tax accounting, particularly one that maximizes the deferral of its tax liabilities.