Q&A with CPA Dan Kraft from VonLehman
STACK sat down with Dan Kraft, CPA at VonLehman CPA and Advisory Firm, to discuss all things tax season for the construction industry. Read our Q&A below to learn about tax credits, grants, deductions, and the biggest mistake contractors are making with their accounting. With Dan’s expert knowledge and advice, you‘ll find solutions and resources for your business to better prepare you for long-term financial stability.
What is the biggest mistake contractors are making with their accounting?
They aren’t making it a priority! Regardless of size, companies often don’t invest in the infrastructure behind them, meaning the accounting function. The accounting department is not just an overhead cost. Truly, this team is responsible for measuring the financial performance of the company.
A lot of mistakes occur surrounding job schedules. Contractors live and die by their job schedules and project calendars. If those aren’t up-to-date and aren’t being tracked and monitored properly, losing control of the job or the company, is a real possibility. To mitigate this risk, contractors must get ahead of it in order to prevent mistakes in the future.
Companies also need to keep their books up to date to make sure bills are getting paid, or worse, find out if someone is stealing from them. If the company isn’t handling their accounting internally, it’s vital to make the investment and outsource to a talented CPA.
Can you share any 2021 construction industry tax updates?
The net investment income tax was introduced in 2013 as a tax of 3.8% on net investment income. So basically, interest, dividends, capital gains, and passive income would have an additional tax imposed if a company’s adjusted gross income was above $250,000, married filing jointly, or $200,000 filing single. It was introduced in conjunction with the Affordable Care Act to essentially help offset some of those costs.
A lot of VonLehman’s clients are S corporations or partnerships. This means they have flow-through income – income and deductions that pass to the owners or investors and are only taxed once. So that additional 3.8% could be a big number, and if a lot of contractors are doing well like the ones that we worked with this year, some planning is going to have to be done around this new tax.
Although not specific to the construction industry, the child tax credit could affect a lot of employees. Executives need to be proactive and provide the correct information and details to their teams on the advanced child tax credit, which started getting paid out in July 2021. Doing something as simple as providing employees with the documents they need can reduce stress and increase their confidence in their employers.
Are there any 2021 COVID-19 related tax breaks?
The Paycheck Protection Plan (PPP) is an SBA-backed loan that helps businesses keep their workforce employed during COVID-19. The government is now offering full loan forgiveness as long as a company qualifies (i.e., maintained employee and compensation levels, the loan was spent on payroll costs, etc).
The Employer Retention Tax Credit can also be very lucrative. In 2020, it was $5,000 a head per quarter. For 2021, it’s $7,000 a head per quarter. That could be another $28,000 per employee that contractors get back as a refund for the year. Imagine having 100 employees; that number adds up pretty quickly.
Are there tax write-offs for employee training?
There are grants that help offset the cost of onboarding a new employee and training them: everyone from a warehouse employee to a truck driver to an office manager. It can be very expensive to bring on a new employee, even just to the level of where they can