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Form 990 Mistakes That Can Impact Your Nonprofit’s Credibility

Form 990 Mistakes That Can Impact Your Nonprofit’s Credibility

For many nonprofit organizations, Form 990 is one of many year-end compliance requirements competing for limited time and resources. Between advancing your mission, managing operations, fundraising, and overseeing governance responsibilities, the annual filing can easily become just another item on the checklist.

However, Form 990 serves a much broader purpose than meeting an IRS requirement. Because it is publicly available, donors, grantmakers, board members, regulators, and other stakeholders often use it to evaluate an organization’s financial health, governance practices, and overall stewardship. Errors, inconsistencies, or incomplete disclosures can create compliance concerns and raise questions about organizational oversight.

As you prepare for your next filing, here are several common mistakes nonprofits should avoid.

Assuming Last Year’s Filing Still Applies

Many organizations take the same filing approach year after year without reconsidering whether circumstances have changed. While that may be appropriate, it should never be automatic.

The form your organization is required to file depends on several factors, including its tax-exempt classification, annual gross receipts, total assets, and activities. For example, smaller exempt organizations may qualify to file Form 990-N, while others may be eligible to file Form 990-EZ instead of the full Form 990.

Organizations should also remember that limited activity does not necessarily eliminate their filing obligation. Even if programs were reduced, revenue was minimal, or operations were largely inactive during the year, filing requirements may still apply.

The consequences of overlooking those requirements can be significant. An organization that fails to file a required annual return or notice for three consecutive years automatically loses its tax-exempt status. Restoring that status can be both time-consuming and costly, often requiring additional filings, IRS fees, and professional assistance.

A best practice is to review filing requirements annually, establish internal deadlines ahead of IRS due dates, and confirm that electronic submissions have been successfully accepted.

Submitting Financial Information Without Reconciliation

Form 990 relies on information from multiple sources, including accounting records, donor management systems, payroll reports, and audited financial statements. When those records are not reconciled, inconsistencies can easily find their way into the return.

Common issues include:

  • Contribution revenue that does not align with donor records
  • Grant revenue reported inconsistently throughout the return
  • Compensation figures that cannot be reconciled to Forms W-2 or 1099
  • Beginning net asset balances that do not match the prior year’s filing

Not every difference indicates an error, but every significant difference should be understood and documented before the return is finalized.

A clear reconciliation process improves reporting accuracy, provides support for reported amounts, and creates a stronger foundation if questions arise during a board review, audit, or regulatory inquiry.

Treating Narrative Disclosures as Boilerplate

Some of the most impactful sections of Form 990 are not financial at all.

Part III requires organizations to describe their mission and program accomplishments. Yet many nonprofits simply copy narrative descriptions from prior-year filings even when programs, priorities, or outcomes have changed.

Generic statements rarely tell stakeholders much about an organization’s impact. Instead, nonprofit leaders should use this opportunity to provide meaningful context around the services delivered, communities served, and measurable outcomes achieved during the year.

For example, rather than stating that the organization “provided educational services,” a stronger narrative might describe the number of workshops conducted, participants served, or certifications completed.

Annual review by program leadership can help ensure these disclosures accurately reflect current operations and are supported by organizational records.

Forgetting That the Return Is Public

Unlike many tax filings, Form 990 is intended for public inspection. As a result, the return should be reviewed not only for technical accuracy but also through the lens of an external stakeholder.

Financial information, governance disclosures, compensation reporting, and program descriptions all contribute to how an organization is perceived by donors, grantmakers, and community partners.

Before filing, organizations should compare Form 990 to other publicly available information, including:

  • Audited financial statements
  • Annual reports
  • Organizational websites
  • Board minutes
  • Approved compensation documentation

Differences may be completely appropriate, but they should be understood and, when necessary, documented or explained. Schedule O often provides a valuable opportunity to add context and enhance transparency.

Organizations should also exercise caution when preparing public-inspection copies to ensure sensitive information is handled appropriately and disclosure requirements are followed.

Creating a Filing Process That Relies on One Person

Many Form 990 issues stem from a lack of communication rather than a lack of technical knowledge. Important information often resides with multiple individuals across finance, development, operations, and leadership teams.

Even organizations with limited resources can benefit from a formal, repeatable filing process.

Consider developing a process that includes:

  • Reconciling key financial records after year-end close
  • Gathering information from accounting, payroll, development, and program teams
  • Reviewing narrative disclosures for accuracy
  • Completing internal leadership and board review procedures
  • Verifying IRS acceptance of the electronic filing

A consistent process helps reduce errors, improve efficiency, and ensure the preparer has complete and accurate information.

How HTB Can Help

Form 990 is more than a compliance requirement. It is an opportunity to demonstrate transparency, accountability, and sound financial stewardship. HTB’s nonprofit professionals can help you navigate filing requirements, review reporting and disclosure considerations, identify potential issues before filing, and implement processes that support accurate, consistent reporting year after year. With the right guidance, your organization can strengthen compliance while staying focused on advancing its mission. Contact us today to start the conversation.

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Cash Flow Forecasting: Turning Financial Data Into Better Decisions

Cash Flow Forecasting: Turning Financial Data Into Better Decisions

Imagine reviewing a profitable month, seeing a healthy bank balance, and feeling confident about the road ahead, only to face a cash crunch a few weeks later.

Situations like this are more common than many business leaders realize. While financial statements provide valuable insight into past performance, they don’t always reveal what’s coming next. That’s where cash flow forecasting comes in.

By providing visibility into future cash inflows and outflows, cash flow forecasting helps business leaders make more informed decisions around hiring, capital investments, financing, and growth initiatives. When used effectively, it becomes more than a financial exercise. It becomes a strategic planning tool.

Financial Reporting vs. Financial Foresight

Most organizations rely on financial statements to evaluate performance. Profit and loss statements measure profitability, balance sheets provide a snapshot of assets and liabilities, and cash flow statements show how cash moved through the business during a specific period.

These reports are critical, but they share one common characteristic: they are largely focused on historical activity.

While financial statements can tell you what happened last month or last quarter, they cannot tell you whether you’ll have sufficient cash to fund a major purchase, support planned growth, or navigate a slower-than-expected season six months from now.

Relying solely on historical financial information can make it difficult to anticipate future cash needs and respond proactively to changing circumstances. By the time a cash flow issue appears in a financial report, the opportunity to address it may be limited.

Why Timing Matters More Than Profit

One of the most common misconceptions among business owners is that profitability automatically translates into cash availability.

In reality, profit and cash flow are not the same thing.

A business can be profitable on paper while still experiencing cash flow challenges if the timing of cash inflows and outflows doesn’t align. Customer payments may not arrive for weeks or months after revenue is recognized, while payroll, rent, inventory purchases, and other operating expenses continue on schedule.

Consider a business that secures a significant new contract. The project may increase profitability, but if customer payments are delayed while expenses must be paid immediately, the organization could face cash constraints despite reporting strong financial results.

Cash flow forecasting helps identify these timing gaps before they create operational challenges, giving leadership teams time to evaluate options and plan accordingly.

Using Forecasts to Make Better Decisions

Many organizations create a budget at the beginning of the year and periodically compare actual results to those expectations. A forecast serves a different purpose.

Rather than focusing on what was originally planned, a forecast answers an important question: Based on what we know today, where is the business headed?

Unlike a static budget, a forecast is updated regularly as new information becomes available. It evolves alongside the business and provides leadership with a current view of future cash needs.

Effective forecasting often requires input from multiple areas of the organization. Sales teams can provide insight into customer demand and expected revenue timing. Operations teams can identify upcoming equipment purchases, inventory needs, or vendor commitments. Finance teams can monitor collections, payment schedules, and financing requirements.

When those perspectives come together, forecasting becomes a powerful tool for decision-making rather than simply another financial report.

Signs Your Business Could Benefit From Better Forecasting

Many organizations would benefit from a more structured forecasting process, particularly if they experience any of the following challenges:

  • Cash balances fluctuate significantly from month to month.
  • Growth plans are delayed because future cash availability is uncertain.
  • Customer payment timing regularly creates operational challenges.
  • Major financial decisions are based primarily on current bank balances.
  • Financing conversations tend to be reactive rather than proactive.
  • Leadership teams spend significant time responding to cash flow issues rather than planning ahead.

A forecast cannot eliminate uncertainty, but it can help identify potential challenges early enough to evaluate solutions before they become urgent.

Scenario Planning and Working Capital Management

One of the greatest advantages of forecasting is the ability to evaluate multiple scenarios before making important decisions.

Rather than relying on a single projection, many organizations maintain a base-case forecast along with alternative scenarios that reflect potential opportunities and risks.

For example:

  • What happens if a major customer pays 30 days later than expected?
  • What happens if a large contract is delayed?
  • What happens if hiring needs accelerate faster than anticipated?
  • What happens if a new growth opportunity materializes sooner than expected?

Considering these possibilities in advance allows leadership teams to make decisions with greater confidence and flexibility.

Forecasting can also help improve working capital management.

In many cases, cash flow improvements can be achieved without increasing revenue or reducing expenses. Accelerating collections, improving invoicing processes, negotiating customer deposit requirements, or extending vendor payment terms can all have a meaningful impact on cash availability.

Similarly, establishing a business line of credit before it is needed can create additional flexibility when short-term timing gaps arise.

A well-maintained forecast helps leaders understand when these strategies may be appropriate and what impact they are likely to have.

Building a Sustainable Forecasting Process

Creating an effective forecasting process does not necessarily require sophisticated software or complex financial models.

Many organizations begin with a straightforward framework that identifies recurring cash outflows, expected cash receipts, and major upcoming expenditures. The most important factor is consistency.

Regularly updating assumptions and monitoring results against projections often provides greater value than a complex forecasting model that is reviewed infrequently.

As organizations grow, forecasting can become more closely tied to broader strategic decisions, including expansion plans, hiring initiatives, pricing adjustments, capital investments, and financing strategies.

When forecasting becomes part of the organization’s decision-making process, it evolves from a reporting exercise into a valuable leadership tool.

How HTB Can Help

Financial statements remain an essential part of managing a business, but they only tell part of the story. Cash flow forecasting provides the visibility leaders need to anticipate challenges, evaluate opportunities, and make informed decisions with greater confidence.

At HTB, we help business owners and leadership teams move beyond historical reporting and use financial information as a strategic planning tool. Whether you’re evaluating growth opportunities, strengthening working capital, preparing for financing discussions, or building a more robust forecasting process, our advisors can help you develop an approach tailored to your organization’s goals.

By combining financial insight with practical business guidance, we help clients turn financial data into better decisions that support sustainable growth and long-term success. Contact us today to start the conversation.

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Prepare Now for a Smoother W-2 Season

Prepare Now for a Smoother W-2 Season

As year-end approaches, now is an ideal time for employers to take a proactive look at payroll records before W-2 reporting begins. With only a few months remaining in the calendar year, addressing potential issues now can help reduce administrative burdens during W-2 season and give employees time to make any necessary withholding adjustments.

Review Employee Information

Employers should verify that employee names, addresses, and Social Security numbers are accurate and up to date. Even minor discrepancies can create delays or require corrections during the W-2 filing process. It’s also a good time to confirm that former employees have current mailing addresses on file, as W-2s must be provided to all employees who received wages during the year.

Encourage Employees to Review Form W-4

Life events such as marriage, divorce, the birth of a child, or significant changes in household income can affect an employee’s tax withholding needs. Encouraging employees to review their Form W-4 now allows them to adjust withholding before the end of the year and helps reduce the likelihood of unexpected tax bills or large refunds when they file their returns.

Employees may also find the IRS Tax Withholding Estimator at IRS.gov helpful when evaluating their current withholding elections. For additional information on 2026 Form W-2 and W-4 updates, click here.

Review Benefit and Deduction Reporting

Before year-end, employers should review payroll deductions to ensure employee benefits, insurance premiums, retirement plan contributions, and other withholdings have been deducted and remitted correctly throughout the year. Addressing discrepancies now can help avoid reporting issues, employee concerns, and time-consuming corrections during W-2 preparation.

Businesses should also confirm that employer contributions to retirement plans and other benefit programs have been properly recorded and funded.

Evaluate Taxable Fringe Benefits

Employers that provide fringe benefits should begin gathering the information needed for year-end reporting. Common taxable fringe benefits include:

  • Personal use of a company vehicle
  • Group-term life insurance coverage exceeding $50,000
  • Employer-paid moving expenses (with limited exceptions)
  • Gift cards and other cash-equivalent awards
  • Greater-than-2% S corporation shareholder health insurance premiums
  • Cell phone allowances exceeding $100 per month

Reviewing these items now helps ensure the appropriate amounts are included in employee wages before W-2s are prepared.

Consider Electronic W-2 Delivery

Many payroll systems offer secure electronic delivery of W-2 forms. In addition to providing employees with faster access to their tax documents, electronic delivery can help reduce the risk of forms being lost, delayed, or intercepted through the mail. Employers should review their payroll provider’s available options and ensure employees are properly enrolled if electronic delivery is offered. QuickBooks Payroll users can provide employees with electronic W-2 access through the Workforce platform.

Plan Ahead for Employee Bonuses

As businesses begin planning holiday and year-end bonuses, it’s important to remember that bonus payments are taxable wages and should be processed through payroll. Rather than issuing separate checks outside the payroll system, employers should ensure bonus payments are properly reported and subject to the appropriate tax withholding requirements.

Start the Fourth Quarter Strong

A little preparation now can go a long way toward creating a smoother year-end reporting process. By reviewing employee information, evaluating withholding elections, confirming benefit and deduction reporting, planning for employee bonuses, and identifying taxable fringe benefits, employers can reduce last-minute stress and be better prepared for W-2 season.

At HTB, we understand that payroll compliance and year-end reporting can be time-consuming and complex. Our team works with businesses of all sizes to address payroll, tax, and accounting considerations throughout the year. If you have questions about payroll reporting, employee withholding, or year-end tax planning, contact us to learn how we can help support your business goals.

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State Tax Nexus in 2026: Understanding Your Multi-State Tax Obligations

State Tax Nexus in 2026: Understanding Your Multi-State Tax Obligations

As businesses expand beyond their home state, many owners are surprised to learn that their tax obligations may expand as well.

Hiring remote employees, selling products online, working with contractors in other states, or using third-party fulfillment providers can all create tax responsibilities in jurisdictions where a business has never opened an office or established a physical location.

The concept that determines when these obligations arise is known as nexus. While the rules vary by state and tax type, nexus generally refers to the level of connection a business has with a state that allows it to impose tax, registration, or filing requirements.

Understanding where nexus may exist can help businesses minimize compliance risk and avoid unexpected obligations as they grow.

Understanding Nexus

Nexus is not a single rule that applies uniformly across all taxes. Sales tax, income tax, payroll withholding, unemployment taxes, business registration requirements, and gross receipts taxes may each have different standards. Those standards can also vary significantly from state to state.

Generally, nexus is established in one of two ways:

  • Physical presence within a state
  • Economic activity within a state

Both can create significant tax and compliance obligations.

Physical Presence: It’s More Than Just an Office

Historically, nexus was most commonly associated with maintaining an office, storefront, warehouse, or other physical location within a state. Today, the definition is much broader.

Remote Employees and Contractors

One of the most common ways businesses create nexus is through remote workers.

In many states, having an employee working remotely may create payroll tax, unemployment insurance, registration, or business tax filing obligations. Depending on the state and circumstances, a single employee may be enough to establish nexus.

Independent contractors can create similar concerns. Whether providing sales support, consulting services, installation work, or customer assistance, individuals working on behalf of a business in another state may create filing or registration requirements.

Remote work can also create payroll complexities. Certain states, most notably New York, apply a “convenience of the employer” rule under specific circumstances. Depending on the facts, employers may be required to withhold tax even when employees perform services outside the state.

Even when the initial obligation is primarily administrative, failing to identify requirements early can create compliance issues later.

Inventory Held by Third-Party Fulfillment Providers

Businesses selling products online should also consider where inventory is stored.

Companies that use Amazon FBA or other fulfillment networks may have inventory distributed across multiple states, often without actively selecting those locations.

In many states, inventory stored within a state’s borders may create nexus, potentially resulting in registration, reporting, or tax obligations. Even where marketplace facilitators collect and remit sales tax, businesses may still have additional compliance responsibilities to evaluate.

Economic Nexus: When Sales Activity Creates an Obligation

Nexus is not limited to physical presence.

Following the Supreme Court’s decision in South Dakota v. Wayfair, states gained authority to require remote sellers to collect and remit sales tax based on economic activity alone.

Today, every state that imposes a statewide sales tax has adopted some form of economic nexus standard.

The most common threshold is $100,000 in annual sales into a state, although some states use higher thresholds. For example, California and Texas currently apply a $500,000 threshold.

Once a business exceeds a state’s threshold, registration and sales tax collection obligations may arise, even if the business has no employees, property, or physical location in that state.

Important Considerations

When evaluating economic nexus exposure, businesses should keep several factors in mind:

  • Not all sales are treated the same. Some states measure thresholds using gross sales rather than taxable sales, meaning exempt transactions may still count toward the threshold.
  • Marketplace sales may be included. Sales made through platforms such as Amazon, Etsy, or similar marketplaces may count toward nexus thresholds, even if the platform handles sales tax collection.
  • Transaction-count thresholds are becoming less common. Many states have moved away from thresholds based on the number of transactions and now focus primarily on sales volume.

Common Nexus Triggers

Several business activities frequently warrant a closer look, including:

  • Hiring employees in states where the business has never operated before
  • Expanding online sales into new markets and approaching economic nexus thresholds
  • Storing inventory in multiple states through marketplace or fulfillment providers
  • Using contractors or employees to perform services across state lines

If any of these situations apply to your business, a nexus review can help determine whether additional compliance obligations may exist.

Taking a Proactive Approach

A nexus review can help identify where obligations may exist and whether action is needed. Areas to review often include:

  • The location of employees and contractors
  • Inventory locations, including third-party fulfillment providers
  • Sales activity by state
  • Potential economic nexus thresholds
  • The specific products or services being sold

Even when historical exposure exists, businesses often have options available. Many states offer voluntary disclosure programs that may help limit penalties and reduce lookback periods for businesses seeking to come into compliance.

Because nexus rules continue to evolve, periodic reviews are often more effective than a one-time assessment. Businesses should revisit their state tax footprint whenever they expand into new markets, hire employees in new locations, add fulfillment arrangements, or experience significant revenue growth.

How HTB Can Help

As businesses grow, state tax obligations can become increasingly complex. Activities that seem routine, such as hiring a remote employee, expanding online sales, or using a third-party fulfillment provider, may create filing and compliance requirements in states where a business has never operated before.

At HTB, we help businesses evaluate their state tax footprint, identify potential nexus exposures, assess compliance requirements, and develop practical strategies that support continued growth. Whether you’re expanding into new markets, managing a remote workforce, or simply looking to better understand your multi-state tax obligations, our team can help you evaluate your situation and determine the most appropriate path forward.

By taking a proactive approach, businesses can reduce risk, avoid unexpected surprises, and focus on growth with greater confidence. Contact us today to start the conversation.

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How New Tax Regulations Are Reshaping Bank Lending and Investment Strategy

How New Tax Regulations Are Reshaping Bank Lending and Investment Strategy

The banking industry is entering a period of significant transformation as sweeping federal tax changes begin influencing how financial institutions approach lending, investments, and client advisory services. These developments are about more than compliance. They are reshaping the economics behind commercial lending decisions, altering investment strategies, and creating new opportunities for banks to add value for their customers.

For financial institutions that can quickly assess and respond to these changes, the potential benefits extend well beyond the tax department. Institutions that understand the practical implications of new legislation will be better positioned to strengthen client relationships, identify growth opportunities, and navigate an increasingly complex regulatory environment.

Today’s banking tax professionals are working through a landscape that continues to evolve. Federal reforms are intersecting with changing state requirements, while audit expectations remain high. As a result, tax considerations are becoming more closely tied to broader business decisions, influencing everything from loan underwriting and portfolio strategy to capital allocation and long-term planning.

The Qualified Business Income Deduction and Commercial Lending

Among the most significant developments is the permanent extension of the Section 199A (§199A) qualified business income deduction, which preserves a deduction for eligible noncorporate taxpayers, including many owners of pass-through businesses. The basic deduction remains 20%, subject to income, wage, property, and specified-service-business limitations.

For banks, this change may meaningfully affect how commercial borrowers are evaluated. Reduced tax liabilities can improve after-tax cash flow and increase a borrower’s capacity to reinvest in operations, pursue growth opportunities, and service debt. As these benefits become more widespread, financial institutions may find it necessary to revisit assumptions that were developed under previous tax law.

The impact extends beyond underwriting considerations. Many business owners are also evaluating entity structures, compensation strategies, and investment timing to maximize available tax benefits. As a result, banks have an opportunity to deepen relationships by helping clients understand how tax changes may influence broader financial decisions.

New Opportunities in Agricultural and Rural Lending

Federal legislation has also introduced lender interest exclusions for qualifying rural and agricultural real estate loans, creating a potentially attractive incentive for financial institutions serving these markets. New Section 139L (§139L) allows qualified lenders, including FDIC-insured banks and savings associations, to exclude 25% of qualifying interest income from certain post-enactment loans secured by rural or agricultural real property.

As the after-tax economics of these loans improve, some banks may find opportunities to expand agricultural lending portfolios or strengthen their presence in rural communities. However, realizing these benefits requires thoughtful implementation.

Institutions should carefully evaluate the tax accounting, reporting, and documentation requirements associated with these provisions. Close coordination among lending, accounting, and tax teams will be essential to ensure compliance and support positions during future examinations.

Affordable Housing Tax Credits Gain Momentum

Recent changes to the Low-Income Housing Tax Credit (LIHTC) program are also creating new considerations for financial institutions.

Enhanced tax credit benefits are improving the financial profile of many affordable housing projects, making certain investments more attractive than they may have been under prior rules. For banks involved in community development initiatives, these changes may present opportunities to revisit investment strategies and evaluate projects that previously offered limited returns.

As affordable housing investments become increasingly competitive, institutions may need to reassess portfolio concentrations, underwriting assumptions, and long-term valuation models. Tax considerations will play an important role in determining the overall profitability and strategic fit of these investments.

Business Interest Deduction Changes May Influence Borrower Behavior

Modifications to business interest deduction limitations are similarly reshaping the financing landscape for many commercial borrowers. The Section 163(j) (§163(j)) can increase interest-deduction capacity for borrowers subject to the business-interest limitation by restoring the depreciation, amortization, and depletion addback in adjusted taxable income. That can reduce after-tax borrowing costs for affected borrowers.

By reducing the after-tax cost of debt, these changes may encourage businesses to pursue expansion projects, refinance existing obligations, or adjust capital structures. Increased borrowing activity could create new lending opportunities for financial institutions while also changing how borrower risk profiles are evaluated.

For banks, understanding the relationship between tax policy and capital structure decisions will become increasingly important. Credit analysis may require a more nuanced assessment of how borrowers are likely to respond to the evolving tax environment and how those decisions affect long-term financial performance.

Turning Regulatory Change into Strategic Opportunity

While each of these provisions presents unique considerations, they share a common theme: tax policy is becoming more closely connected to business strategy.

Financial institutions that view these developments solely through a compliance lens may overlook opportunities to enhance lending programs, strengthen investment performance, and provide greater value to clients. Conversely, banks that combine technical tax knowledge with strategic planning will be better positioned to adapt to changing market conditions and capitalize on emerging opportunities.

Success in this environment requires more than monitoring legislative developments. It requires the ability to evaluate how regulatory changes affect both the institution and its customers and to implement practical strategies with confidence.

How HTB Can Help

At HTB, we work with financial institutions to navigate complex tax and regulatory developments that affect lending strategies, investment decisions, financial reporting, and client advisory services.

Our team helps banks evaluate the practical implications of new legislation, implement tax-efficient strategies, and maintain positions that can withstand regulatory scrutiny. By combining technical tax knowledge with practical industry insight, we help financial institutions make informed decisions in an increasingly complex environment.

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Why Your Construction Tax Strategy Should Evolve With Every Project

Why Your Construction Tax Strategy Should Evolve With Every Project

No two construction projects are exactly alike. Every job has its own timeline, contract structure, payment schedule, and profitability profile. Yet many contractors approach tax planning the same way year after year, revisiting it only when it’s time to file a return.

In an industry where cash flow drives decision-making and profit margins can be tight, a static tax strategy can leave valuable opportunities unexplored.

A tax strategy shouldn’t be something you set once and forget. It should evolve alongside your business. As project types change, new contracts are signed, and operational goals shift, your tax plan should adapt as well. The contractors who treat tax planning as an ongoing process are often better positioned to manage cash flow, pursue growth opportunities, and avoid surprises at year-end.

Construction Businesses Change. Your Tax Strategy Should Too.

Construction companies rarely look the same from one year to the next. A contractor that once focused primarily on residential work may expand into commercial construction. A company accustomed to handling shorter projects may begin taking on longer-term contracts. Others may experience rapid growth, enter new markets, or take on public-sector work.

Each of these changes can affect how revenue is recognized, when tax liabilities arise, and what planning opportunities may be available.

Consider a contractor who selected an accounting method years ago and never revisited it. While that method may have aligned with the company’s operations at the time, changes in project mix, contract duration, or payment patterns could make it far less effective today.

Without regular reviews, contractors may find themselves paying taxes sooner than necessary, missing opportunities to defer taxable income, or overlooking strategies that could improve working capital.

The goal of construction tax planning is not simply to reduce taxes. It’s to better align tax obligations with the realities of your business and keep more cash available for operations and growth.

New Opportunities for Residential Contractors

Recent changes under the One Big Beautiful Bill Act have expanded tax planning opportunities for many residential contractors, particularly through the broader availability of the completed contract method for qualifying residential construction projects.

Historically, a residential contractor using the percentage-of-completion method often had limited flexibility in how project income was recognized for tax purposes. Under the new rules, qualifying residential contractors may be able to elect a non-POC method for new residential projects, including the cash basis or completed contract method.

This creates opportunities to better align tax obligations with cash flow and project timing.

Cash Basis

Under the cash basis method, income generally is not recognized until payment is received, and expenses generally are not deducted until they are paid.

For some contractors, this creates valuable flexibility because taxable income more closely follows actual cash flow. This may allow certain contractors to defer recognition of income until payment is received, depending on their specific tax circumstances.

However, timing matters. An unexpected customer payment received late in the year can significantly affect taxable income. Contractors who successfully use the cash method typically maintain strong visibility into upcoming collections and communicate regularly with customers about payment schedules.

Understanding the differences between these methods is important, as each can impact the timing of taxable income and cash flow in very different ways.

Completed Contract

The completed contract method generally allows contractors to defer recognizing revenue and expenses until a project is substantially complete.

For businesses with longer project durations, this can create meaningful tax deferral opportunities. Delaying tax liability may improve cash flow and leave more capital available to support ongoing operations throughout the life of the project.

However, deferred taxes are not eliminated. They are simply postponed until the project is completed. Contractors should regularly evaluate future tax obligations and avoid treating deferred tax dollars as excess cash available for spending.

The right method depends on your specific operations, project pipeline, and business objectives. What works well for one contractor may not be the best fit for another.

Don’t Overlook the 10% Method

Contractors who remain on the percentage-of-completion method may still have access to a valuable and often-overlooked tax deferral opportunity: the 10% method.

This election allows contractors to defer recognizing gross profit on contracts that are less than 10% complete at year-end.

While the impact on a single project may seem modest, the combined effect across multiple projects can be substantial. For contractors with several contracts in the early stages of completion, the resulting deferral can preserve valuable working capital.

That capital can be reinvested into equipment, workforce development, bonding capacity, technology improvements, or future projects instead of being paid to the IRS earlier than necessary.

The key is identifying these opportunities before year-end. By reviewing project statuses throughout the year, contractors can make proactive decisions rather than scrambling during tax season.

Questions Every Contractor Should Be Asking

Effective tax planning starts with understanding your business, not filling out tax forms.

As your company evolves, consider asking the following questions:

  • Has our project mix changed over the past year?
  • Are we taking on larger or longer-duration contracts?
  • Have our payment cycles changed?
  • Do we have visibility into year-end cash receipts?
  • Are we planning equipment purchases before year-end?
  • Are there projects that may qualify for tax incentives or specialized deductions?
  • Have recent legislative changes created new planning opportunities?

If the answer to any of these questions is yes, your current tax strategy may no longer reflect the realities of your business.

Waiting until tax season often limits your options. Reviewing your tax position throughout the year can help uncover planning opportunities while there is still time to act.

Tax Planning as a Competitive Advantage

For construction companies, effective tax planning is ultimately a cash flow strategy.

The capital preserved through effective tax planning can be used to purchase equipment, strengthen bonding capacity, hire employees, invest in technology, or pursue new opportunities. Those resources can provide a meaningful competitive advantage in an industry where liquidity and flexibility often drive success.

The most effective construction tax strategies are not created once and left unchanged. They are reviewed regularly, adjusted as projects evolve, and aligned with the company’s broader goals.

How HTB Can Help

Construction tax planning works best when it’s proactive, not reactive. As projects, timelines, and business objectives evolve, your tax strategy should evolve with them. That’s why we work with contractors throughout the year to identify planning opportunities, evaluate accounting methods, and help ensure tax decisions support broader business goals.

Our construction professionals understand the unique challenges contractors face, from managing cash flow and bonding capacity to navigating revenue recognition and changing tax regulations. Whether you’re reviewing your current tax approach or evaluating new opportunities created by recent legislation, we’re here to help. Contact us today to start the conversation.

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Section 179D Energy-Efficient Commercial Building Deduction: A Reminder for Projects Already Underway

Section 179D Energy-Efficient Commercial Building Deduction: A Reminder for Projects Already Underway

The June 30, 2026 deadline for Section 179D has come and gone. As a result, energy-efficient commercial building projects that begin construction after that date generally will not qualify for the deduction.

However, that does not mean the opportunity has disappeared for every project.

If construction began on or before June 30, 2026, a project may still be eligible for the Section 179D deduction, provided all applicable requirements are met. For businesses, building owners, designers, and organizations that have recently completed or are currently constructing commercial buildings, now is a good time to determine whether a benefit may still be available.

What Types of Projects May Qualify?

Section 179D is designed to encourage energy-efficient improvements in commercial buildings. While many taxpayers associate energy incentives with solar or renewable energy projects, Section 179D often applies to more common building upgrades that improve overall energy performance.

Potentially qualifying improvements may include:

  • Interior lighting systems, including LED conversions, lighting retrofits, and lighting controls
  • Heating, cooling, ventilation, and hot water systems, including certain HVAC upgrades and control systems
  • Building envelope improvements, such as qualifying upgrades to roofs, walls, windows, doors, and insulation

The deduction may be available for qualifying improvements made as part of new construction projects or renovations to existing commercial buildings. For projects currently under review, one of the most important considerations is whether construction began on or before June 30, 2026.

Understanding the Potential Tax Benefit

The amount of the Section 179D deduction depends on several factors, including the building’s energy savings and whether prevailing wage and apprenticeship requirements are satisfied.

For taxable years beginning in 2026, the deduction generally ranges from:

  • $0.59 to $1.19 per square foot under the standard rules
  • $2.97 to $5.94 per square foot for projects that meet prevailing wage and apprenticeship requirements

Because the deduction is calculated on a per-square-foot basis, the potential benefit can be significant. For example, a qualifying 100,000-square-foot building could generate a deduction of up to $119,000 under the standard maximum rate or as much as $594,000 under the enhanced rate.

Actual deduction amounts will vary based on the specific facts of the project, energy performance results, certification requirements, and other applicable limitations.

Documentation Matters

One of the most common misconceptions about Section 179D is that a taxpayer can simply determine that a building is energy efficient and claim the deduction.

In reality, Section 179D requires technical analysis and supporting documentation. Energy savings must generally be evaluated using approved methodologies, and the deduction requires certification from a qualified third party. Taxpayers claiming the deduction must also file Form 7205, Energy Efficient Commercial Buildings Deduction, with their tax return.

Given these requirements, maintaining complete project documentation is critical. Relevant records may include:

  • Construction-start documentation
  • Placed-in-service dates
  • Energy modeling reports or retrofit analyses
  • Third-party certification materials
  • Square footage calculations
  • Allocation documentation for qualifying tax-exempt building projects

Projects that may otherwise qualify can encounter challenges if supporting documentation is incomplete or unavailable.

Now Is the Time to Evaluate Existing Projects

With the construction-start deadline now behind us, the focus has shifted from planning future projects to identifying and preserving deductions tied to projects already underway before June 30, 2026.

Building owners, developers, architects, engineers, and organizations involved in commercial construction should consider whether their projects have been evaluated for Section 179D eligibility and whether the necessary documentation and certification requirements have been addressed.

At HTB, we help clients navigate complex tax incentives and identify opportunities that can support their overall tax strategy. Whether you’re evaluating a recently completed project, reviewing documentation requirements, or determining whether a project may qualify for the Section 179D deduction, our team can help you understand the rules and assess the next steps. Contact us today to start the conversation.

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Financial Planning for Pre-Retirement: Preparing for the Transition

The pre-retirement years are a critical time to evaluate readiness, optimize financial strategies, and prepare for the next phase of life. Discover how a coordinated approach to retirement planning can help maximize opportunities, reduce surprises, and support long-term financial security.

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HTB Named to INSIDE Public Accounting’s Top 200 List

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Hannis T. Bourgeois, LLP has once again been named one of the Top 200 Accounting Firms in the U.S. by INSIDE Public Accounting, recognizing the firm’s excellence and continued growth.

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IRS Increases Standard Mileage Rates for the Remainder of 2026

IRS Increases Standard Mileage Rates for the Remainder of 2026

The IRS increased the standard business mileage rate from 72.5 cents per mile to 76 cents per mile, effective July 1, 2026. The medical and moving mileage rate also increased from 20.5 cents per mile to 23.5 cents per mile, while the charitable mileage rate remains 14 cents per mile.

According to the IRS, the increases reflect recent changes in fuel prices and vehicle operating costs.

What This Means for Taxpayers

The higher rates may result in larger tax deductions and higher reimbursements for miles driven after July 1, 2026.

For business mileage:

  • January 1 – June 30, 2026: 72.5 cents per mile
  • July 1 – December 31, 2026: 76 cents per mile

Self-employed individuals who use the standard mileage method may be able to claim larger deductions for eligible business travel during the second half of the year. Employees who are reimbursed for business mileage may also receive higher reimbursements, depending on their employer’s policy.

Because the change took effect midyear, taxpayers must apply the correct mileage rate based on when the miles were driven. The charitable mileage rate did not change because it is set by federal law.

Don’t Overlook Recordkeeping

The higher mileage rates do not change the need for good documentation. Taxpayers should continue maintaining detailed mileage logs that generally include the date, destination, purpose, and number of miles driven for each trip.

Businesses that reimburse employees for the business use of personal vehicles may also want to review their mileage reimbursement policies and systems to ensure the updated rate was applied beginning July 1, 2026.

Reviewing mileage records now, rather than waiting until year-end, can help taxpayers claim the appropriate deduction and avoid errors when filing their returns.

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