Construction companies newest focus of IRS examinations.(AUDITS)(Internal Revenue Service)(Brief Article)

Kiplinger Tax Letter, The, September, 2004

Construction companies are the newest focus of IRS examinations. IRS has found that firms using the percentage-of-completion method have been miscalculating the interest they owe. Once a job is completed and the total cost is set, firms must refigure taxes paid in past years to reflect the actual cost of the project instead of what they estimated. Interest is due on the balance if deductions in prior years were too high.

Auditors will be checking for underpaid interest and other issues related to the construction industry in coming audits. An IRS handbook at www.irs.gov/pub/irs-mssp/build.pdf tells examiners what to look for.