As a contractor, you are not just managing projects—you are running a business, so your financial success depends on more than just getting the job done. It also requires smart financial management, tax planning, and compliance—all areas where an experienced accountant can make a major difference.
But to get the most value from your accountant, you need to ask the right questions.
In this post, we will walk you through the top questions every contractor should ask their accountant to stay compliant, maximize deductions, and plan for long-term success.
Contractors often miss out on deductions simply because they do not know what qualifies. From tools and equipment to home office expenses and mileage, an accountant can help identify eligible write-offs, so you do not leave money on the table.
Ask your accountant for an annual review of your expenses to catch anything you might have missed.
Choosing the right business structure—sole proprietorship, LLC, S-corporation—has huge tax and liability implications. The “right” choice depends on your income level, business goals, and personal risk tolerance. There are benefits and disadvantages to all, so it is important to choose what is best for you – for example: incorporating can offer tax advantages and legal protection but also comes with more compliance responsibilities.
Since you do not have taxes automatically withheld, it is up to you to plan for federal, state, and local tax obligations including self-employment tax. To prevent unwanted surprises, it is best to get ahead of this and figure out how much money you should set aside each month and whether or not you should make estimated quarterly tax payments. There is not one “right” decision as everyone’s circumstances are different, figure out what works best for you and yours.
Knowing whether each project is profitable is critical to growing your business. You can ask your accountant if they can help set up a job costing system that tracks labor, materials, overhead, and other costs in real-time. They may already be familiar with cloud accounting tools like JobTread, QuickBooks or Xero that can provide better visibility.
As a business owner, there are different ways to pay yourself—salary, owner’s draw, or distributions—each with different tax implications. The best option depends on your business structure and revenue. It is important to note that only owners of corporations (S corps or C corps) can pay themselves a W-2 salary. Those that operate as a sole proprietor, partnership, or LLC (not taxed as a corporation), can take owner’s draws instead of a formal salary.
Dealing with receipts, invoices, tax filings, contracts (and the list continues to go on) can quickly become overwhelming. Ask your accountant if they can provide a checklist of what to keep and for how long, as well as help you digitize and organize records for audit readiness. It is important to know how long to keep certain records to prevent hiccups in the future.
If you are expanding your team, you will need to understand the difference between employees and independent contractors, as well as your obligations for issuing 1099s or W-2s, withholding taxes, and carrying workers’ compensation insurance. Do not guess, misclassifying workers can result in serious IRS penalties. You should be able to discuss this with your accountant to determine how to properly classify an individual you are working with.
Revenue is only one piece of the puzzle. Ask your accountant which financial metrics matter most to your business such as profit margins, cash flow, and job costing metrics. With this knowledge you can make better financial decisions.
This is a great question to ask! Retirement may feel so far off that it is easy to put it on the back burner, but it pays to start planning early. Contractors have access to special retirement plans like SEP IRAs and Solo 401(k)s that offer high contribution limits and tax advantages. You can also ask about health savings accounts (HSAs) and other ways to reduce your taxable income.
Do not wait until tax season to connect with your accountant. Regular check-ins (monthly or even quarterly) can help you adjust your strategy, stay compliant, and avoid costly surprises later down the line.
The relationship you have with your accountant is one of the most valuable assets in your contracting business. Being proactive and asking strategic questions not only helps you stay in control of your finances, but it puts you in a position to grow, invest, and plan for the future.
*The information provided in this blog post is for general informational purposes only and does not constitute accounting, tax, financial, or legal advice. It is not intended as a substitute for professional consultation tailored to your specific circumstances.*
At adding technology, we know you want to focus on what you do best as a contractor. In order to do that, you need a proactive back office crew who has financial expertise in your industry.
The problem is that managing and understanding key financial compliance details for your business is a distraction when you want to spend your time focused on building your business (and our collective future).
We understand that there is an art to what contractors do, and financial worries can disrupt the creative process and quality of work. We know that many contractors struggle with messy books, lack of realtime financial visibility, and the stress of compliance issues. These challenges can lead to frustration, overwhelm, and fear that distracts from their core business.
That's where we come in. We're not just accountants; we're part of your crew. We renovate your books, implement cutting-edge technology, and provide you with the real-time job costing and financial insights you need to make informed decisions. Our services are designed to give you peace of mind, allowing you to focus on what you do best - creating and building.
Here’s how we do it:
Schedule a conversation today, and in the meantime, download the Contractor’s Blueprint for Financial Success: A Step by-Step Guide to Maximizing Profits in Construction.” So you can stop worrying about accounting, technology, and compliance details and be free to hammer out success in the field.
