Construction executives: Build your cash reserves with new tax solution

CHICAGO, Ill. (August 18, 2015) – As the economy continues to recover, the construction industry is bouncing back and realizing more revenue. However, the increase in taxable income, liabilities and accounts receivable can negatively affect a company’s cash flow. To help construction companies automate the percentage-of-completion (POC) tax compliance process, Crowe Horwath LLP, one of the largest public accounting, consulting and technology firms in the U.S., has introduced the Crowe POC Manager solution.

Construction companies that average more than $10 million in gross receipts are required by the IRS to use a POC accounting method to calculate taxable income from contracts not completed within the taxable year. POC is calculated by comparing a contract’s annual costs incurred before the close of the tax year with the total estimated costs at contract completion.

Selecting the best POC strategies can help reduce current tax liability through deferrals of taxable income using methods approved by the IRS. Crowe POC Manager is a web-based solution that takes data from each ongoing contract and calculates the POC method that generates the best tax deferral.

“Many contractors think the deferral is a short-term benefit that they’ll just end up paying in taxes the next year,” said Rhonda Huismann, a construction and real estate tax services partner at Crowe. “But what they don’t realize is, with a large number of contracts at different stages of completion, they’ll continue to defer each year. It’s a quasi-permanent benefit as long as they continue in business.”

Many companies are reluctant to take the time to select an optimum tax POC method, thinking the benefits don’t outweigh the time and cost of applying separate methods for book and tax purposes and performing separate computations on a contract-by-contract basis. Although Huismann added that what took some taxpayers weeks using Excel models can now be completed in a few hours with Crowe POC Manager.

Benefits and features of Crowe POC Manager include:

• Simplified selection of the best tax accounting methods;
• Customized application to any size organization;
• Streamlined processing for a quicker turnaround;
• Tailored reports;
• Automated uploads of client information;
• Improved data accuracy and security using a centralized repository;
• Reference to prior year calculations with secure data retention;
• Automated calculations of look-back interest and completion of IRS Form 8697;
• Increased efficiency compared with spreadsheet-based tools; and
• Ease of projecting tax liabilities.

“I’ve yet to see a situation where we’ve not been able to generate a higher level of deferral for a contractor after analyzing their optimum methods,” Huismann said. “Larger deferrals can have a material impact on the cash flows of a company.” 

For more information, please visit http://www.crowehorwath.com/POC-NR.

About Crowe Horwath
Crowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting, consulting, and technology firms in the United States. Under its core purpose of “Building Value with Values®,” Crowe uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk and performance services. With offices coast to coast and 3,000 personnel, Crowe is recognized by many organizations as one of the country's best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world. The network consists of more than 200 independent accounting and advisory services firms in more than 120 countries around the world.