How much to set aside for taxes is a CPA question
The right number depends on the entity, the year and the strategy, and the CPA decides it.
This page doesn't give a percentage, because the CPA handles tax strategy. What the company controls is the timing and the numbers the CPA works from. The close should be done by the 10th, so the profit and loss and the balance sheet don't change after the CPA sees them. A tax strategy meeting in early November works out what the company can do to finish the year under different scenarios. Retention billed when it can be collected also needs a question for the CPA about how it's treated.
Three moves, in order
Step 07: Monthly cadence
Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month.
Other problems step 07 solves
Other things that go wrong
What owners ask
Subcontractor taxes what percentage do I set aside?
The right number depends on the entity, the year and the strategy, and the CPA decides it. This page doesn't give a percentage, because the CPA handles tax strategy. What the company controls is the timing and the numbers the CPA works from. The close should be done by the 10th, so the profit and loss and the balance sheet don't change after the CPA sees them. A tax strategy meeting in early November works out what the company can do to finish the year under different scenarios. Retention billed when it can be collected also needs a question for the CPA about how it's treated.
Which part of the system fixes this?
The step is number 07, monthly cadence. Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month. It's drawn from chapter 7 of CONTROL: C.F.O.S. Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M to $5M averages 7% after taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
Close the books by the 10th each month so the CPA works from numbers that stay put.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 07 depends on step 03, overhead calculation and step 04, estimating system and step 05, software and bookkeeping alignment and step 06, project management. Install it ahead of those and it produces numbers the field won't trust, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system behind these figures. More about the author.