General Contractors, CPA & Tax Services

Why General Contractors in Dallas Need a CPA Who Knows Construction Accounting

Construction accounting is fundamentally different from standard small business accounting. General contractors deal with long project timelines, progress billing, retainage holdbacks, and workforce classification rules that most CPAs rarely encounter. If your CPA does not understand these issues deeply, you are almost certainly overpaying on taxes or carrying risk you do not even see.

At AG Freideman, we work with general contractors across Dallas, Plano, Frisco, and the entire DFW metro. Al Freideman has over 30 years of experience handling the exact accounting challenges construction businesses face: revenue recognition timing, work-in-progress reporting for bonding companies and lenders, subcontractor compliance, and Texas-specific obligations like franchise tax and sales tax on materials. Every client works directly with Al, not a junior associate learning on your dime.

If you are a GC doing $250K to $5M in annual revenue and your current accountant treats your business like a retail shop, it is time to talk. Call us at (972) 893-3481 or book a free consultation to see the difference a construction-focused CPA makes.

Percentage of Completion vs. Completed Contract: Which Method Saves You More?

Choosing the right revenue recognition method can shift tens of thousands of dollars in tax liability from one year to the next. For general contractors, this decision is not optional. The IRS has specific rules about which method you must or may use, and getting it wrong triggers penalties and back taxes.

Under the percentage-of-completion method (PCM), you recognize revenue proportionally as work is performed. The IRS generally requires PCM for any contract expected to be completed within two years if your average annual gross receipts exceed $29 million (the threshold for 2026, adjusted annually for inflation per IRC Section 460). Under the completed-contract method (CCM), you defer all revenue and expenses until the project is substantially complete.

For most Dallas-area GCs with gross receipts under $29 million, CCM is available and often preferable because it lets you defer taxable income on multi-month projects. However, CCM is not automatically better in every situation. If you have a year with several large projects completing simultaneously, the income spike can push you into a higher bracket and inflate self-employment taxes.

• PCM advantage: Smoother income recognition, which helps if you need consistent financials for bonding or bank credit lines
• CCM advantage: Tax deferral on projects in progress, which preserves cash flow during active construction phases
• Small contractor exception: If your average annual gross receipts are $29 million or less, you can elect CCM even on contracts lasting more than two years

We analyze your project pipeline, expected completion dates, and tax bracket projections to recommend the method (or combination of methods) that minimizes your total tax bill across multiple years.

WIP Schedules and Retainage: What Your Bonding Company and Bank Actually Need

A work-in-progress (WIP) schedule is the single most important financial document for a general contractor seeking bonding capacity or a line of credit. Banks and surety companies use WIP reports to determine whether your jobs are overbilled or underbilled, and those numbers directly affect how much bonding you can carry.

Overbillings (billing ahead of actual completion) appear as liabilities on your balance sheet. Underbillings (work performed but not yet billed) appear as assets. Lenders want to see that your billings track closely with actual completion percentages. A contractor showing heavy overbillings may look like a cash flow risk. One showing heavy underbillings may not be collecting fast enough to fund operations.

Retainage complicates this further. In Texas, retainage on commercial contracts is typically 10% of each progress payment, held until substantial completion. That retained amount sits as a receivable on your books, but it is not cash you can spend. We track retainage separately in your bookkeeping so your WIP schedules accurately reflect your real financial position. This matters because bonding companies in Dallas are looking at these numbers every time you apply for a new bond or request a limit increase.

Our monthly bookkeeping packages ($300 to $600 per month) include job-cost tracking and WIP schedule preparation so your financials are always lender-ready.

Subcontractor vs. Employee Classification: The Mistake That Triggers IRS Audits

Misclassifying workers is the single most common audit trigger for general contractors. The IRS and the Texas Workforce Commission both scrutinize construction businesses more heavily than almost any other industry for worker classification issues, and the penalties for getting it wrong are severe.

The IRS uses a multi-factor test examining behavioral control, financial control, and the type of relationship between you and the worker. Simply issuing a 1099 instead of a W-2 does not make someone a subcontractor. If you tell a worker when to show up, provide tools, and control how the work is done, the IRS considers that person an employee regardless of what your contract says.

The financial consequences of misclassification include:

• Back employment taxes: You owe the employer share of FICA (7.65%) plus the employee share you failed to withhold, going back up to three years
• Penalties: The IRS assesses a failure-to-withhold penalty of 1.5% of wages, plus failure-to-file penalties for each missing W-2
• Texas Workforce Commission: Separate state-level penalties for failure to pay unemployment insurance on misclassified workers
• Loss of deductions: If workers are reclassified, you may lose deductions you claimed for subcontractor payments

We review your subcontractor relationships, ensure your contracts are structured correctly, and verify that your 1099 reporting is complete and accurate. If you are already facing an IRS notice about worker classification, our IRS representation services ($200/hour) can help resolve the issue before penalties escalate.

General Contractor Tax Mistakes We Fix

After 30 years of working with construction businesses, these are the most common and costly mistakes we see Dallas-area general contractors making with their taxes.

• Using the wrong accounting method and never revisiting it. Many GCs start with cash-basis accounting because it is simple, then never switch to a method that actually matches their project-based revenue. As contracts get larger, this mismatch creates unnecessary tax spikes and inaccurate financials.
• Failing to track job costs separately. Lumping all expenses into general categories instead of allocating costs by project makes it impossible to produce accurate WIP schedules. It also means you cannot identify which jobs are profitable and which are losing money.
• Missing the Texas franchise tax filing. Every LLC and corporation in Texas must file a franchise tax return and Public Information Report annually, even if you owe $0. The no-tax-due threshold for 2026 is $2.47 million in total revenue. Missing this filing results in forfeiture of your entity’s good standing with the Texas Comptroller, which can block your ability to bid on contracts.
• Not collecting sales tax on taxable materials. In Texas, materials that become part of a real property improvement are generally not subject to sales tax when sold to the property owner as part of a lump-sum contract. However, if you purchase materials for your own use or for time-and-materials contracts, the rules change. The combined state and local sales tax rate in Dallas is 8.25%. Getting this wrong in either direction costs you money.
• Ignoring the Section 199A qualified business income deduction. Many GCs operating as S-Corps or LLCs are eligible for up to a 20% deduction on qualified business income, but the calculation requires careful planning around W-2 wages paid and the unadjusted basis of qualified property. Without proper planning, you leave this deduction partially or fully on the table.

What Construction-Specific Tax and Accounting Services Do We Provide?

We offer a full suite of services built around the way general contractors actually operate. Every service is handled personally by Al Freideman, a licensed CPA with over 30 years of experience.

• Business tax preparation (S-Corp and partnership returns from $1,000 to $2,000; Schedule C sole proprietor returns from $750 to $1,200)
• Job-cost bookkeeping and WIP schedule preparation ($300 to $600 per month, including bank reconciliation and payroll processing)
• Subcontractor 1099 compliance and worker classification review
• Texas franchise tax and Public Information Report filing ($250 to $500)
• Texas sales tax compliance (quoted based on filing frequency)
• Tax planning sessions for year-end strategy, entity election, and retirement contributions ($197+)
• LLC formation ($350 plus $300 state filing fee) and registered agent services ($149/year, included free with any tax or bookkeeping engagement)

We serve general contractors throughout Dallas, Plano, Frisco, Allen, McKinney, Richardson, Prosper, Celina, and across the DFW metro. We offer both in-person meetings at our Preston Road office and virtual appointments for your convenience. See our full transparent pricing or read what our clients say in our 52+ five-star Google reviews.