Preparing for the Tax Man: Tips for Architects, Engineers, and other small business owners
Miss me yet? No, I’m “not dead yet” (for you Monty Python fans). Nor have I fled to Hong Kong (a la Edward Snowden). And no, contrary to rumors, I am not working on a Middle Eastern documentary with Jon Stewart. Ahem. My MIA status was simply due to too much work. Good problem to have, right?
Regular posting will resume next week. In the meantime, since it is, once again, tax time for quarterly filers, I thought this guest post on tax issues particularly appropriate. Even if you don’t file quarterlies, pay attention now to save heart ache at the end of the year!
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Looking for a few small-business tax tips? Consider this shortlist to help streamline your process:
1. Proper record-keeping: Year-round record keeping ensures that come tax time, your paperwork will be in order. Make sure that you save all documents relating to deductions in case your business is audited. Because tax credits and deductions change from year-to-year, keeping excellent records allows you to adapt while being able to reference previous years simply by checking your filing.
2. Keep two Acts in mind: Both the Small Business Jobs Act and the Patient Protection and Affordable Care Act (aka “Obamacare”) help you manage your tax burden. The first has over 17 tax provisions that decrease taxes for small businesses, all of which can win your business great savings. The Affordable Care Act allows small businesses to cover 35 percent of the health care premiums that they pay to provide health insurance to employees. In 2014, the amount will increase to 50 percent.
3. Avoid an audit: Audit traps are indicators to the IRS that they need to investigate your business dealings further. Avoid this scenario by keeping the following details straight:
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Home Office Deduction rules: Know what qualifies a home office and make sure yours abides by the IRS definition before claiming one. Not all home-based businesses qualify for this deduction.
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Properly classify your employees: Independent contractors and employees are not one and the same from an IRS perspective and should not be treated as such. Non-compliance with proper classification is a red flag to the IRS that your business may be attempting to avoid payroll taxes and can result in back taxes and penalties.
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Miscellaneous deductions: Be cautious with your deductions, as a large amount of itemized deductions can raise suspicion. Be sure that you have all of your paperwork to support any deductions and claim them in a clear and specific manner.
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Business and personal expenses do not mix: While Turbotax encourages freelancers to combine business with pleasure and write off the expenses, the IRS does not welcome this blended method and will scrutinize individuals who combine their business and personal expenses too often. Maintain separate bank accounts for your personal life and business and maintain meticulous records to ensure that your actions do not require further attention.
Whether you have an accountant or do your business taxes yourself, knowing the proper way to file is an excellent policy for a small and growing business. By maintaining clean records and staying aware of IRS policies, you can make the most of business deductions and enjoy a penalty-free tax season.
Chelsea Terris provides online content for Meticulous Plumbing, a family owned company located in Portland, OR. Chelsea is passionate about helping small businesses thrive.
Thanks Chelsea for the tax tips!
Today we have a guest post from the folks at McCree General Contractors and Architects, located in Orlando. The McCree folks, naturally enough, think Design-Build has many features that make it advantageous over the traditional Design-Bid-Build method. Here are their thoughts:
Many construction projects are designed by an architect, and once the client is happy with the design a contractor is then hired to build it. While the client may have been told one estimate by the architect, once the contractor gets the plans the costs may change. There may be aspects of the design execution the architect didn’t think about, or parts that won’t work with the landscape of the construction site. This can result in changes to the original design, higher costs, and delaying of the project. Not to mention the frustration this can create for everyone involved.
Because of these obstacles that often arise between architecture firm and contractor firm, many people are now turning to a Design-Build Construction Firm. At these firms, the architects, designers, and contractors work together from the beginning. The firm takes responsibility for the project in its entirety, from design to execution. If the architect makes and adjustment to a design, the contractor will be right there to let him know if this may violate a regulation or if it won’t work with the topography of the site. Adjustments can be made without ever involving the client. The price quoted is more likely to be accurate, because a contractor and project manager will have also agreed that this design can be executed in the space allotted. There is no finger pointing and blaming the other firm, leaving the client in the middle, frustrated and spending more money than he originally thought. A Design-Build firm is also easier on the client because he only needs to contact one project manager. This streamlined process leads to a more efficiently run project, and efficiently run projects typically cost less and are finished quicker.
A Design-Build firm is advantageous for the client also because these firms typically allow the client to be as involved as he wants. As the design is developed and changed according to the client’s specifications, the contractor will be on hand to let the client and architect know if these changes are possible. There is no need for ordering design changes, which an architect working on his own would charge the client for. Because the contractor works for the firm, and not for himself, he is not looking to protect his own self-interest once building starts. Since the contractor has been involved from the beginning, there should be no surprises or setbacks once ground is broken. If there are, the Design-Build firm should take responsibility, instead of the contractor telling the client to go back to the architect.
All the decisions regarding the design and building of a project will be taken into account from the very beginning with a Design-Build firm. When using separate design and contractor firms, an architect will simply tell the client what will be the most cost effective design, and then a contractor will decide the most cost effective way to build this design. The schedule of the contractor’s team is not on the architect’s mind, and the contractor may not know the most cost effective materials needed to execute the design. These problems are also eliminated with a Design-Build firm. The experience of the team, quality and availability of materials and schedule of the contractor and construction crews are also taken into consideration from the very beginning of the project. This further streamlines the process, making it quicker and more painless for everyone involved.
Melissa again: Design-Build projects definitely present unique opportunities, and unique challenges. If you are considering entering into a design-build contract, considering a joint venture with a contractor on a project, or otherwise undertaking a corporate organizational change, make sure you have a good lawyer (or three) on board for the myriad issues that such ventures present.
Now it’s your turn: What do you think? Is Design-Build the next best thing since sliced bread? Have you had issues, problems, or good results as part of a Design-Build team? Share your thoughts below.
Copyright Info for Shutterstock Photo: Image ID: 61778761 Copyright: sam100
I have previously discussed the ABCs of Lien Laws for those making claims on a project (that is, architects, engineers, contractors, subcontractors, and suppliers) and the 123s of Lien Laws for project owners. Now, time to learn some new tricks: enter, the Lien Agent.
In case you’ve been hiding in your man-cave waiting for warmer weather to arrive and missed all the hoopla, as of April 1, 2013, North Carolina has a new lien law act. Essentially, for *most* construction projects [there are a few limited exceptions for low dollar work or single family, owner occupied residences], owners will need to file a notice of an entity to be their “Lien Agent”, and contractors will file notices within a short window of starting work. If done correctly, it should keep everyone aware of who is on the project, who is doing what work, and who may have a lien.
The most pertinent part that affects architects and engineers? This:
N.C. Gen. Stat. § 44A‑11.2
(h) When a lien agent is not identified in a contract for improvements to real property subject to G.S. 44A‑11.1 entered into between an owner and a design professional, the design professional will be deemed to have met the requirement of notice under subsections (l) and (m) of this section on the date of the lien agent’s receipt of the owner’s designation of the lien agent. The owner shall provide written notice to the lien agent containing the information pertaining to the design professional required in a notice to lien agent pursuant to subdivisions (1) through (3) of subsection (i) of this section, by any method of delivery authorized in subsection (f) of this section. The lien agent shall include the design professional in its response to any persons requesting information relating to persons who have given notice to the lien agent pursuant to this section. For purposes of this subsection, the term “design professional” shall mean any architects, engineers, land surveyors, and landscape architects registered under Chapter 83A, 89A, or 89C of the General Statutes.
In other words, if the owner designates a lien agent up front, you follow the process and note your involvement for the record.
What if the owner does NOT designate a lien agent up front? You are covered by default, once he does so. And he will do so, as before the owner can get a building permit, he will be forced to designate a lien agent. Nice, right? You have built in protections, and you don’t need to worry about filing a lien and damaging a relationship with an owner if they are slow to pay.
The on-line system for selecting Lien Agents (for owners) and notifying Agents of your work (for everyone else) on a project is LiensNC. A helpful tip sheet produced by the Title Insurance industry walks you through the process.
Many other fine folks have weighed in on the nuts & bolts of how the new system works, so I will not repeat it all here. Instead, let me direct you to a few of these resources (apologies in advance for anyone I may have slighted):
Bryan Scott: A good place to start for a broad overview of what you need to know
Gregory Shelton: Perspective of Lien Claimants; Perspective of Owners on the what the new lien law means to each
For the designer’s perspective, from Matthew Bouchard:
I’m a design professional providing services prior to the execution of a contract for construction. What if there’s no lien agent in placing during my pre-construction performance?
That depends on whether your contract is with the owner or with another design professional. If you are in direct contractual privity with the owner and your contract does not include the lien agent information, the owner is responsible for providing your contact information to its lien agent upon the owner’s appointment of same. If you are a design subcontractor, you should make a written request to the owner for the lien agent’s contact information. By statute, you will have no obligation to comply with the preliminary notice requirements until you receive the contact information you have requested.
I believe that the new lien law will help design professionals, as you no longer have to worry about alienating the owner by filing a lien or risk losing your lien priority. Instead, the lien agent will be as common as a building permit. You will be protected from the beginning with little effort, and without even having to depend on the owner. What do you think?
Comments? Questions? Share you thoughts in the comments box, below.
Photo (c) Seattle Municipal Archives.
Today’s guest post is by David Morrison. David has worked on both sides of the construction site during his time in renovation. Having stepped from the gravel pit into the office a few years ago, David currently now works with UK Tool Centre, liaising with the industry on their behalf.
Working as a site engineer or lead architect has many challenges and is undoubtedly one of the toughest roles, interwoven around effective communication skills with the clients as well as the site contractors, subcontractors and suppliers.
Since maintaining discipline and accountability is at the core of any successful venture, the same is true for a construction site also. The site engineer plays the “unwanted” role of implementing carrot and stick policy, awarding the effective contractor and dealing with the laggard.
For those beginning their engineering and architectural careers, or for those who still struggle to maintain a tight ship when dealing with contractors, there are a number of things to keep in mind.
a.) Organizing Self - The way a site engineer organizes his work plays a very important role in meeting the final objective and let the workplace run as a team. The first and most important thing is to set an example by doing things in the same manner as you are requiring and expecting from the contractors.
b.) Be Clear - A site engineer must ensure that the contractors have clear instructions, drawings and specifications related to their work. Otherwise the “garbage in; garbage out” rule shall be applicable to the final outcome.
c.) Work Milestones - A site engineer should coordinate with the general contractor, who in turn should use professional project management tools, define work milestones and interact with the subcontractors to keep an eye on their timely completion. If any issues arise, they must be addressed quickly, so that the contractor or subcontractor’s work is not delayed.
d.) Performance Appraisal - Informing a contractor of his performance quality is only half the job; informing him in a timely manner is the remaining half. The site engineer should develop methods of regular assessment of work of each prime contractor, and should include this information in regular project meetings. This allows the site contractor to timely identify the gaps (both related to man and machine) in his work and to take action to complete the work successfully.
e.) Teamwork, Motivation and Inspiration - To foster teamwork among various site contractors, a site engineer should know how to dig into his own experience of similar works. He should always work to motivate them by giving good and bad examples out of his experience. A well experienced site engineer always have lots of good advice from his earlier encounters to inspire the contractors and give them potential solutions to difficult tasks and situations.
f.) Prompt Payments - A site engineer must always ensure that as per contractual terms with contractors the payment for the various milestones must be promptly processed and done without any delay. This is of utmost importance in getting the work done from contractors on a construction site.
g.) Safety - A site engineer must always ensure that contractors shall never compromise on safety and security rules to expedite the work. A bad accident can be devastating, to the individuals involved and also to the project schedule.
h.) Friendship, Philosophy and Guidance - A site engineer should know how to work as a friend-philosopher and guide to the contractors and must not always act as bully. After all, the contractor may have some genuine issues with the design team’s performance as well.
Advice for construction is ten to the dozen and there are a lot of potential misguiding mantras out there. One of the most useful to take into account has always been: “It may take a lifetime to learn the ways to deal with contractors on-site, and still a lot will be left to learn.”
Thanks David. Now it’s your turn. Thoughts, comments, questions? Share in the comment section below.
Photo courtesy Teaching Underground.
How many bridges do you drive over on your way to work each day? Probably a bunch, if you have the typical commute of 32 round trip miles per day. Now, how many of them are *not* structurally sound? Probably more than you realize.
The American Society of Civil Engineers (ASCE) has just released its American Infrastructure Report Card. Overall, the nation scored a miserable overall D+. Here’s the breakdown for the Transportation categories:
| Aviation | D |
| Bridges | C+ |
| Inland Waterways | D- |
| Ports | C |
| Rail | C+ |
| Roads | D |
| Transit | D |
In the breakout for North Carolina,
- 2,192 of the 18,165 (12.1%) bridges in North Carolina are considered structurally deficient.
- 3,296 of the 18,165 (18.1%) bridges in North Carolina are considered functionally obsolete.
The report has a ton of interactive information, including a nation-wide county by county deficient bridges look up, identifying infrastructure defects in detail. Currently, much of the planned infrastructure improvements is in limbo while the sequester is in effect. However, our nation’s system of deficient bridges must be a priority. Will it take another event similar to Minnesota’s I-35 bridge collapse before we fix our nation’s infrastructure? Let’s hope not.
Your turn. What are your thoughts about the current infrastructure of America’s roads and bridges?
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