How are holdbacks treated for tax purposes?
The construction industry has special tax rules relating to when the income is recognized for tax purposes.
A holdback amount on each invoice (i.e. 10% of the progress billing) is a typical billing method in the construction industry. The customer does not pay this amount until they have approved the work as 100% completed and without deficiencies. Read More
What is the tax treatment of reserves?
A common reserve to record on financial statements is an allowance for customer receivables that are considered to be bad debts. For tax purposes there are many additional types of reserves that may be claimed in calculating taxable income.
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