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Thus far in 2005, we have had the Energy Tax Incentives Act of 2005 and the SAFE Transportation Equity Act of 2005. The provisions of these acts do not directly relate to concrete contractors, but for business owners new provisions will provide tax incentives for energy-efficient improvements to new or existing buildings. If you are anticipating improvements to an existing building or constructing a new facility, review these provisions to see if tax incentives are available. I would also mention that on Sept. 9, the IRS increased the standard mileage rate to 48.5 cents per mile. This could provide enhanced deductions for vehicles for the later part of 2005.

What steps can contractors take to lower their taxes before the end of the year?

Contractors should review their method of accounting periodically to make sure they are minimizing tax. The construction industry has unique accounting method issues. Small contractors have a wide range of methods to choose from. Review your method with your tax adviser. If a change is beneficial, action may be needed before year-end. Otherwise, review income and expense items as you approach year-end. Properly deferring income or accelerating expenses may reduce the tax bite for 2005.

Equipment acquisitions should be reviewed. Each year a taxpayer is allowed to write off a certain amount of equipment purchases. This write-off eliminates the need to depreciate the asset. For 2005 the amount that can be written off is $105,000. Part of year-end planning should include a review of this provision to determine if additional equipment purchases could reduce taxable income for 2005. A change in the tax law last year limits the benefits of this provision to $25,000 for certain SUVs.

What can contractors do to address some common mistakes?

Review payments to independent contractors. The IRS reviews these payments to make sure the individuals receiving payments are not employees. How workers are classified for tax purposes has major tax consequences. You need to look at the degree of control the company has over the worker. If the company can control what will be done and how it will be done, the worker may be classified as an employee.