Accounting for Construction
Construction accounting turns on job costing and revenue recognition. Longer contracts often require percentage-of-completion rather than recognising income when paid, and retainage sits on the balance sheet rather than in revenue. Blue Sage handles job-level reporting, the method choice, and the licensing and multi-state issues contractors run into.
What we handle
- Job costing and work-in-progress reporting
- Percentage-of-completion and completed-contract method analysis
- Retainage receivable and payable tracking
- Contractor versus employee classification review
- 1099 issuance for subcontractors
- Multi-state registration and withholding for out-of-state jobs
Who this is for
General contractors, specialty trades, and subcontractors — from a two-truck operation to a business running several crews and multiple jobs at once.
The single most useful thing a construction business can have is job-level profitability. Knowing the business made money last year is not the same as knowing which jobs made it, and only one of those tells you what to bid next time.
Deadlines and rules worth knowing
| Item | What applies |
|---|---|
| Revenue recognition | Long-term contracts above a gross receipts threshold generally require percentage-of-completion |
| Retainage | Amounts held back are receivable, not revenue, until released. Treating them as income early distorts the year. |
| Job costing | Labour, materials, subs, and equipment allocated per job. This is what makes bidding accurate. |
| Worker classification | Misclassifying a worker as a subcontractor carries back taxes and penalties. The tests are applied by both IRS and state agencies. |
| 1099s | Required for subcontractors paid above the annual threshold. Collect W-9s before you pay, not in January. |
| Out-of-state jobs | Can create registration, withholding, and filing obligations in that state |
How we work
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Review what exists
We read last year’s return and whatever records you have. Most of what needs fixing is visible quickly.
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Fixed quote in writing
Scope and price before anything starts, counting entities, states, and any cleanup needed.
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File and maintain
Returns prepared and filed, notices answered, and a projection before year end.
Questions
Which accounting method should a construction company use?
It depends on contract length and gross receipts. Smaller contractors can often use the completed-contract or cash method, which defers income. Above a gross receipts threshold, long-term contracts generally require percentage-of-completion, which recognises income as the work progresses. The choice materially changes when tax is paid.
Is my worker a subcontractor or an employee?
It turns on control u2014 who directs how and when the work is done, who supplies tools, and whether the worker is free to take other jobs. Getting it wrong is expensive, because back payroll taxes, interest, and penalties apply, and both the IRS and state labour agencies can raise it independently.
Last reviewed 11 September 2026 by Fahadun Nabi, Founder, Blue Sage Tax and Accounting Inc.. General information, not advice for your specific situation.
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Talk it through before the deadline, not after.
A free consultation call, no obligation, and a fixed quote if you want to go further.