Why Do Home Builders Need An Accountant?

new home construction accounting

From large corporations to small boutique brands, one universal factor for home builders is that their finances can be quite complex. Most employ accountants or accounting firms but some may not understand how crucial these are in the construction industry. If you are curious why home builders need accountancy services, read on for Liu & Associates guide to this complicated issue.

Real Estate & Construction Accounting

Selling real property and constructing or renovating a property are viewed as distinct industries when it comes to finance. Though they share many fundamentals with general accounting, each makes use of different types of reports and strategies.

Contractors & Temporary Employees

The widespread use of contractors and temporary employees in construction makes its accountancy contrast with other fields. When building or renovating a property, a variety of skilled labourers will likely add to the final project– though very few, if any, will be on-site for the entirety. Construction accounting must accommodate and keep track of each worker and their contribution.

Mobile Industry

Construction involves vehicles, equipment, materials, temporary staff and many other dynamic variables. This can be difficult to manage financially without a reliable construction-focused accountant or accounting firm. With this many moving parts, traditional bookkeeping tends to fall short of the comprehensive understanding provided by construction accounting.

Percentage of Completion

As stated above, construction projects require input and effort from many different employees or contractors. The value each contributes must be determined against the final estimate– also known as “percentage of completion.” A good construction accountant can avoid expensive missteps and costly errors when determining this essential element.

GST & Home Construction

Most Canadians know that Goods and Services Tax (GST) is applied to all transactions and construction is no exception! There are intricate rules that determine whether or not you are responsible for the GST. Building, renovating, buying, selling– the definitions and GST responsibility vary between each of these situations. Construction accountants can help decode these complexities and avoid harsh fines or penalties.

As you can see, there are many areas where an accountant specialized in construction can help a home builder navigate the financial waters. Ignoring or forgetting these factors can be extremely expensive, so contact or visit Liu & Associates today! Our firm has years of professional expertise that can aid you, no matter your goals or industry.

Income Tax Guide To Independent Contractors

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Independent contractors in Canada are eligible for many of the benefits provided to small business and the self-employed. First you must determine that you are indeed a contractor and not an employee of the company or companies that you service. To do so, verify your eligibility with the information below. After that, you can read on for a brief summary of the tax credits available to contractors.

 

AM I AN EMPLOYEE OR CONTRACTOR?

It may seem inconsequential at first glance, but it’s an important distinction– employees are not eligible for the same tax credits. Consult the criteria below to ensure you do indeed operate as an independent contractor.

Who withholds payroll, income tax and GST/HST? If the company that contracts you does all this, you are most likely considered an employee in the eyes of Canada Revenue Agency (CRA).

Who contributes income to Canada Pension Plan and Employment Insurance? If you handle your own CPP & EI contributions, you are most likely considered a contractor in the eyes of CRA (defined as “self-employed” or “small business”).

Who owns or pays for the necessary equipment? Independent contractors are almost always financially responsible for the gear, material and tools needed for the work being completed. This is why CRA considers them tax deductible for contractors, small businesses and the self-employed.

Are you financially at-risk? Employers often guarantee the income and contracts of their employees because the corporation at-large can absorb all financial risk. On the other hand, contractors stand to lose their entire investment and can even report a loss– regardless, they are almost always required to complete the work.

 

WHAT TAX BENEFITS ARE AVAILABLE TO CONTRACTORS?

The following is only a summary of a few CRA claims and credits offered to independent contractors:

  • Supplies and materials
  • Tools
  • Computer hardware and software
  • Travel costs
  • Meals and entertainment
  • Home office or workspace
    • Utilities
    • Mortgage/rent
    • Maintenance & upkeep
    • Insurance
  • Vehicle expenses
    • Fuel
    • Repairs & maintenance
    • Tolls & parking costs
    • Insurance

After you use this guide, cross-reference the CRA definitions and rules via their website or a Liu & Associates tax expert. Our representatives can ensure you enjoy all of the claims and credits available to independent contractors. Don’t let your business miss out– visit or contact us today!