Architects, CPA & Tax Services

Why Architects in Dallas Need a CPA Who Understands Design Practice Finances

Architecture practices face tax and accounting challenges that most general CPAs handle poorly or miss entirely. Revenue recognition on long-duration projects, R&D tax credit eligibility for innovative design work, complex professional liability costs, and unbilled work-in-progress that distorts your financial picture: these are not generic small business issues. They require a CPA who has spent decades working with project-based professionals and understands how architectural fees actually flow.

At AG Freideman, we provide tax preparation, bookkeeping, and strategic tax planning for architects and architecture practices across Dallas, Plano, Frisco, Richardson, and the entire DFW metro. Al Freideman personally handles every client with 30+ years of experience, transparent pricing, and the kind of one-on-one attention that large accounting practices cannot offer. If your current CPA treats your practice like a simple service business, you are likely overpaying on taxes and missing deductions you have every right to claim.

How Does Percentage-of-Completion Reporting Affect an Architecture Practice?

For architecture practices with long-duration contracts, the IRS generally requires percentage-of-completion (PCM) accounting under IRC Section 460. This method recognizes revenue based on the proportion of costs incurred relative to total estimated project costs, not when you send an invoice or collect a check. Getting this wrong creates either phantom income (paying taxes on revenue you have not collected) or deferred income that triggers penalties later.

Here is what this means in practice for a Dallas architecture practice:

• Contract-by-contract tracking: Each project must be tracked individually. A residential renovation, a commercial build-out, and a municipal project all require separate cost and revenue schedules.
• Annual reforecasting: Total estimated costs change as projects evolve. Your CPA must update completion percentages each year to reflect scope changes, design revisions, and subcontractor adjustments.
• Small contractor exception: Practices with average annual gross receipts of $29 million or less (2026 threshold, adjusted for inflation under the Tax Cuts and Jobs Act) may qualify for the completed-contract method, which can provide significant tax deferral. Most Dallas architecture practices fall well under this limit, but you need a CPA who knows to apply it correctly.
• Look-back interest: Under IRC Section 460(b), when a long-term contract is completed, the IRS may require a “look-back” calculation comparing actual income to what was reported each year. Errors in your annual estimates can trigger interest charges in both directions.

We set up proper project-level tracking from day one so your books match reality and your tax return holds up to scrutiny.

Can Architects Claim the R&D Tax Credit for Design Work?

Yes, and most architecture practices in Dallas are leaving this money on the table. The Section 41 Research and Development Tax Credit is not limited to laboratories and tech companies. The IRS explicitly allows it for activities that involve developing new or improved designs, processes, or techniques where technological uncertainty exists. Innovative architectural design work frequently qualifies.

Eligible activities for architecture practices typically include:

• Structural and building envelope innovation: Developing new approaches to load distribution, material integration, or energy performance that go beyond standard practice
• Sustainable and net-zero design: Engineering novel HVAC configurations, passive solar systems, or water reclamation approaches that require iterative testing and calculation
• BIM process development: Creating custom parametric modeling workflows or computational design tools that did not exist before your team built them
• Code compliance for novel structures: Designing to meet building codes when no established method exists, requiring experimentation and engineering analysis

The credit itself is significant. Under the traditional method, the credit equals 20% of qualified research expenses above a base amount. The Alternative Simplified Credit (ASC), which most small practices use, provides a credit of 14% of qualified expenses exceeding 50% of the average qualified research expenses for the prior three years. For a practice spending $200,000 annually on qualifying design labor, the credit can easily reach $10,000 to $25,000 per year.

The key is documentation. We help you identify qualifying projects, track eligible wages and supply costs in real time, and prepare the IRS Form 6765 with contemporaneous records that survive an audit.

How Should Architects Handle Professional Liability Insurance and Risk Costs?

Professional liability (errors and omissions) insurance is one of the largest non-payroll expenses for architecture practices, and the tax treatment matters more than most CPAs realize. These premiums are fully deductible as ordinary business expenses under IRC Section 162, but the timing and classification affect both your tax liability and your financial statements.

Key considerations we manage for our architecture clients:

• Prepaid premium allocation: If you pay your E&O premium annually in advance, the IRS requires you to allocate the deduction across the coverage period rather than deducting the full amount in the payment year. We ensure proper accrual so you do not trigger an IRS adjustment.
• Tail coverage deductions: When a principal retires or a practice merges, tail coverage (extended reporting period policies) can cost tens of thousands of dollars. This is deductible, but the timing rules differ from standard premium deductions.
• Deductible reserves: Self-insured retention amounts and claim deductibles are deductible when paid, not when reserved. We track these properly so you claim them in the correct tax year.
• Risk management expenses: Costs for contract review, project documentation systems, and quality assurance programs that reduce your liability exposure are deductible business expenses that often get buried in general overhead instead of being properly categorized.

Why Unbilled Work-in-Progress Discipline Matters for Your Tax Return

Unbilled WIP is the gap between work your team has performed and invoices you have sent to clients. For architecture practices, this number can be substantial because design phases often run weeks or months ahead of billing milestones. If your books do not track WIP accurately, you are making business decisions based on incomplete financial data, and your tax return may understate or overstate income.

We reconcile WIP monthly as part of our bookkeeping services so that your financials reflect the true economic position of every active project. This discipline also feeds directly into accurate percentage-of-completion calculations at year-end, preventing the kind of large year-over-year income swings that trigger IRS attention.

Architecture Practice Tax Mistakes We Fix

After 30+ years of working with project-based professionals, these are the most common and costly mistakes we see when architects come to us from other CPAs or from DIY filing:

• Using cash-basis accounting when PCM is required: Many practices report income only when invoices are paid, ignoring the percentage-of-completion rules. This creates a ticking time bomb if the IRS audits prior years and reclassifies income.
• Never claiming the R&D tax credit: The most frequent missed opportunity. Practices performing genuinely innovative design work assume the credit is “only for tech companies” and leave thousands of dollars unclaimed every year.
• Misclassifying independent contractors: Using 1099 contractors for staff-like roles (full-time drafters, project managers) without meeting the IRS behavioral and financial control tests. Texas has no state income tax, but the IRS payroll tax penalties for misclassification are severe: 100% of unpaid FICA plus penalties.
• Ignoring the Texas Franchise Tax: Every Texas LLC and corporation, including architecture practices structured as PLLCs, must file the Texas Franchise Tax (margin tax) annually with the Comptroller. The no-tax-due threshold for 2026 is $2.47 million in total revenue, but you must still file the Public Information Report even if you owe nothing. Missing this filing can result in forfeiture of your entity’s right to do business in Texas.
• Failing to track project-level profitability: Lumping all revenue and expenses together instead of tracking by project makes it impossible to identify which project types are profitable and which are draining your practice. It also makes percentage-of-completion calculations unreliable.

What Does It Cost to Work with a CPA Who Understands Architecture Practices?

We believe in transparent pricing with no surprises. For architecture practices in Dallas and the surrounding DFW area, typical engagements include:

• S-Corp or Partnership tax preparation (Form 1120S/1065 with K-1s): $1,000 to $2,000
• Sole proprietor/Schedule C returns: $750 to $1,200
• Monthly bookkeeping with bank reconciliation and payroll: $300 to $600 per month
• Tax planning strategy session: $197+
• Texas Franchise Tax and Public Information Report: $250 to $500

Every engagement includes direct access to Al Freideman, not a junior associate. That personal attention is why we have 52 five-star Google reviews and zero negative reviews. Ready to talk about your practice? Call us at (972) 893-3481 or book your free consultation.