accounting - Linkenheimer LLP CPAs & Advisors

Construction Tax Planning Starts with Your Accounting Method

Construction company owners operate in one of the most complex business environments of any industry. Long-term contracts, retainage, fluctuating job costs, labor constraints, and uneven cash flow all affect how a company is managed day to day and how income must be reported for tax purposes—often in ways that feel disconnected from the cash actually available to run the business. Choosing the right accounting method is not simply a compliance decision; it directly impacts taxable income, estimated tax payments, IRS scrutiny, and long-term tax planning. Financial statements, bonding requirements, and tax planning are all interconnected for construction companies, and the accounting method sits at the center—shaping when income is taxed and how the business can plan and grow.

Cash Method
Under the cash method, income is reported when payments are received and expenses are deducted when paid. This method is common for smaller contractors because it generally aligns taxable income with cash flow and is simpler to maintain. However, it can produce inconsistent tax results on longer projects and is no longer permitted once a contractor exceeds certain IRS gross receipt thresholds. For tax years beginning in 2026, that threshold is $32 million, […]

By Linkenheimer LLP|2026-02-10T22:12:42+00:00February 10th, 2026|accounting, Advisor|0 Comments

Cash or Accrual Accounting: What’s Best for Tax Purposes?

Your businesses may have a choice between using the cash or accrual method of accounting for tax purposes. The cash method often provides significant tax benefits for those that qualify. However, some businesses may be better off using the accrual method. Therefore, you need to evaluate the tax accounting method for your business to ensure that it’s the most beneficial approach.

The current situation

“Small businesses,” as defined by the tax code, are generally eligible to use either cash or accrual accounting for tax purposes. (Some businesses may also be eligible to use various hybrid approaches.) Before the Tax Cuts and Jobs Act (TCJA) took effect, the gross receipts threshold for classification as a small business varied from $1 million to $10 million depending on how a business was structured, its industry and whether inventory was a material income-producing factor.

The TCJA simplified the definition of a small business by establishing a single gross receipts threshold. It also increased the threshold […]

By Linkenheimer LLP|2024-08-20T18:16:01+00:00August 20th, 2024|accounting|0 Comments

Advisory Spotlight: Safeguarding Your Business- The Critical Need for Strong Internal Controls in Preventing Accounting Fraud

In the dynamic landscape of business, private companies are not immune to the growing threat of accounting fraud. Regardless of size or industry, accounting fraud can devastate a company’s financial health, reputation, and even its existence. For small to medium-sized enterprises (SMEs), the impact can be particularly severe. As stewards of their businesses, it is incumbent upon business owners to recognize these risks and fortify their defenses through the establishment and maintenance of robust internal controls.

Understanding the Risks

Accounting fraud encompasses a spectrum of deceptive practices aimed at misrepresenting financial information. From fictitious transactions to intentional misreporting of revenues or expenses, fraudulent activities can occur at any level within an organization. For SMEs, common types of fraud may include embezzlement, falsification of financial statements, or misappropriation of assets.

In Sonoma County, where businesses thrive in a vibrant economy, the risk factors for accounting fraud can escalate. Factors such as rapid growth, complex financial transactions, or reliance on manual accounting processes can create vulnerabilities ripe for exploitation. Moreover, the intimate nature of small businesses, often characterized by a close-knit workforce and less formalized structures, can inadvertently foster an environment conducive to fraudulent activities.

The Role of […]

By Linkenheimer LLP|2024-06-05T18:39:43+00:00June 5th, 2024|accounting, Advisor, fraud|0 Comments

What’s the Best Accounting Method Route for Business Tax Purposes?

Businesses basically have two accounting methods to figure their taxable income: cash and accrual. Many businesses have a choice of which method to use for tax purposes. The cash method often provides significant tax benefits for eligible businesses, though some may be better off using the accrual method. Thus, it may be prudent for your business to evaluate its method to ensure that it’s the most advantageous approach.

Eligibility to use the cash method

“Small businesses,” as defined by the tax code, are generally eligible to use either cash or accrual accounting for tax purposes. (Some businesses may also be eligible to use various hybrid approaches.) Before the Tax Cuts and Jobs Act (TCJA) took effect, the gross receipts threshold for classification as a small business varied from $1 million to $10 million depending on how a business was structured, its industry and factors involving inventory.

The TCJA simplified the small business definition by establishing a single gross receipts threshold. It also increased the threshold to $25 million (adjusted for inflation), expanding the benefits of small business status to more companies. For 2024, a small business is one whose average annual gross receipts for the three-year period ending […]

By Linkenheimer LLP|2024-02-14T17:04:53+00:00February 14th, 2024|accounting, business, cash, tax basis|0 Comments

Tax Reform Expands Availability of Cash Accounting

Under the Tax Cuts and Jobs Act (TCJA), many more businesses are now eligible to use the cash method of accounting for federal tax purposes. The cash method offers greater tax-planning flexibility, allowing some businesses to defer taxable income. Newly eligible businesses should determine whether the cash method would be advantageous and, if so, consider switching methods.

What’s changed?

Previously, the cash method was unavailable to certain businesses, including:

C corporations — as well as partnerships (or limited liability companies taxed as partnerships) with C corporation partners — whose average annual gross receipts for the previous three tax years exceeded $5 million, and
Businesses required to account for inventories, whose average annual gross receipts for the previous three tax years exceeded $1 million ($10 million for certain industries).

In addition, construction companies whose average annual gross receipts for the previous three tax years exceeded $10 million were required to use the percentage-of-completion method (PCM) to account for taxable income from long-term contracts (except for certain home construction contracts). Generally, the PCM method is less favorable, from a tax perspective, than the completed-contract method.

The TCJA raised all of these thresholds to $25 million, beginning with the 2018 tax year. In […]

By Linkenheimer LLP|2020-09-03T20:04:25+00:00November 27th, 2018|accounting, business, New Tax Laws, tax planning|0 Comments