Small Business Tax Guide for Contractors

Taxes for construction contractors require careful management of deductions, quarterly payments, and record-keeping. This guide helps you maximize deductions, avoid penalties, and keep more of what you earn.

Essential Tax Deductions

Key deductions include vehicle expenses (standard mileage or actual costs), tools and equipment (Section 179 for immediate expensing up to $1.16M), home office (simplified $5/sq ft or actual expenses), materials and supplies, insurance premiums, licensing fees, subcontractor payments, advertising, and business travel. Track everything meticulously.

Quarterly Estimated Taxes

Self-employed contractors must pay quarterly if expecting to owe $1,000+. Due dates: April 15, June 15, September 15, January 15. Calculate by estimating annual profit, adding 15.3% self-employment tax plus income tax, then dividing by four. Missing payments results in penalties.

1099 Management

Issue Form 1099-NEC to unincorporated contractors paid $600+ for services. Get W-9 forms before paying anyone. Deadline: January 31. Not required for corporations, materials-only purchases, or credit card payments. Penalties range $50-$290 per missing form.

Record-Keeping Best Practices

Maintain receipts for all expenses, mileage logs with date/purpose/miles, bank statements, invoices, and payroll records. Keep tax returns permanently, supporting documents 7 years, employment records 4 years. Use accounting software like QuickBooks and scan receipts immediately.

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