Construction Dollars and Sense

Tax and Financial Reporting
News and Tools August 2018

 

The Tax Cuts and Jobs Act (TCJA) generally effective stating in 2018, raised the threshold for the requirement to use the percentage-ofcompletion method (PCM) from $10million average annual gross receipts (AAGR) to $25million for contracts starting in 2018.

 

Contractors who were previously required to switch from a deferral method, such as the completed contract method (CCM), because their AAGR exceeded $10million, or the cash or an accrual method, will be able to go back to that former method in 2018 if their AAGR is less than $25million. The required steps are in an IRS issued Revenue Procedure dated August 3, 2018.

Contractors using, or going back to, an accrual method, can elect to exclude retainage receivable from revenue as late as the date for filing the tax return. This election requires that retainage payable also be deferred until it is actually payable, but since the receivables generally are more than the payables, the net difference is a great deferral to a subsequent year. A huge benefit is available for contractors using the PCM in certain common situations. This is not a provision of the TCJA, but a calculation that the IRS has only recently been approving for the last few months. This change in accounting method requires the prior consent of the IRS.

 

A huge benefit is available for contractors using the PCM in certain common situations. This is not a provision of the TCJA, but a calculation that the IRS has only recently been approving for the last few months. This change in accounting method requires the prior consent of the IRS.

 

Download Full Article

Latest News

Affiliations

  • Slider 01
  • Extra 1
  • Slider 02
  • Extra 2
  • Slider 03
  • Slider 18
  • Slider 17
  • Slider 16
  • Slider 15
  • Slider 14
  • Slider 13
  • Slider 12
  • Slider 11
  • Slider 09
  • Slider 08
  • Slider 07
  • Slider 06
  • Slider 05
  • Slider 04
  • Slider 10