Bookkeeping for Contractors on Long Island

Overview

Job costing in ninety seconds

Why contractor books are different

Most bookkeeping problems we pick up from contractors come from the same place: the books are organized by month and the business is organized by job. Purchases go to one materials account, payroll to another, subcontractors to a third, and at the end of the month you get a gross margin percentage that mixes a kitchen finished in week one with a roof started in week four.

That number tells you almost nothing. A month can look strong because you invoiced a large job and have not yet paid its subs, and look terrible the following month for the same reason. Owners we take on often know something is wrong with a particular type of work but cannot prove which one, because no report separates them.

The fix is to book cost to the job as it happens and to carry unfinished work on the balance sheet. After that, margin by job is a report rather than an investigation.

Job costing and work in progress

Cost lands on the job, not in a bucket. Labor, materials and subcontract cost each post to the job they belong to, as they are incurred. That includes the employer payroll taxes on the labor, which is the piece most systems leave out and which is a real percentage of the cost.

Unfinished work sits on the balance sheet. Costs on a job you have not invoiced yet are work in progress, an asset, until the revenue is recognized against them. Without that, every job looks like a loss while it is being built and a windfall in the month it is billed.

Deposits are a liability. Money taken before the work is done belongs to the customer until you do it. Booking deposits as revenue is how a contractor pays tax on money still owed as work.

Retainage is tracked separately. On larger jobs a percentage is held back until completion. It is earned revenue and a receivable you cannot yet collect, and it needs its own line so cash forecasting is honest.

Capital improvement or repair, and Form ST-124

This is the rule that decides whether you charge sales tax on a job at all, and it is the one contractors most often get wrong in both directions.

New York treats a capital improvement as work that substantially adds to the value of the real property or appreciably prolongs its useful life, and that becomes a permanent part of it. Building a deck, installing a hot water heater or fitting new kitchen cabinets are capital improvements. Repairing a broken step, replacing a thermostat or painting existing cabinets are repairs and maintenance.

What changes on the invoice. On a capital improvement you charge the customer no sales tax on the job. On a repair you charge sales tax on the whole bill, labor included. Either way you pay sales tax on the building materials when you buy them, and on a capital improvement that cost is recovered through your price rather than added as tax.

The paperwork is the protection. The customer gives you Form ST-124, the Certificate of Capital Improvement, and you keep it for at least three years. Without it on file you are the one holding the liability if the state disagrees with your call.

Both errors cost. Not charging tax on a repair leaves you owing tax you never collected. Charging tax on a capital improvement means taking money from a customer that should not have been taken, which is a refund conversation and a reputation problem at the same time.

Employees, subcontractors, and the line between them

Worker classification is the arrangement New York looks at hardest in the trades, and getting it wrong is expensive. A worker treated as a subcontractor who is really an employee produces back payroll tax, interest, and penalties, and the assessment reaches back over the years it applied to.

We keep the file that supports your position: signed agreements, certificates of insurance for every sub, and 1099s issued in January for anyone who needs one. If a sub cannot produce a certificate of insurance, your policy may pick up the exposure at audit, so that document is worth chasing before the job rather than after.

On public work there is prevailing wage and certified payroll to produce, which is a weekly filing obligation with its own format. If you bid public jobs, tell us before you bid rather than after you win.

Two counties, two rates

A contractor working across Long Island charges 8.625 percent in Nassau and 8.75 percent in Suffolk. The rate follows where the work is done, so a shop in Hicksville doing a job in Bay Shore charges the Suffolk rate. Suffolk's rate rose on 1 March 2025 with the water quality surcharge.

If you sell or install residential energy in Suffolk there is a further wrinkle: residential energy stays at the previous 8.625 percent rather than moving to the new rate.

What we file, and what late costs

Monthly we close the books and issue a profit and loss, a balance sheet and job margin. Quarterly we file sales tax on the state's March, June, September and December schedule along with payroll returns. In January we issue the 1099s.

Filing late is not a small thing. The penalty for a late return with tax due is 10 percent of the tax due for the first month plus 1 percent for each month after, up to 30 percent, and never less than $50. A late return with no tax due still carries the $50. Operating without a Certificate of Authority is worse: up to $500 for the first day of sales plus up to $200 a day after, to a maximum of $10,000.

Filing on time also earns you the vendor collection credit, 5 percent of the tax due up to $200 a period, if you file quarterly or annually.

1099s, W-2s, and the hiring paperwork

What you collect and file for a contractor, and what you register and file for an employee.

What this looks like in practice

These are the situations we are typically brought in to fix on Long Island. Details are generalised, and we never publish a client's business.

What it costs

A flat monthly fee, quoted from your transaction volume, your accounts, and whether you run payroll. You get the number in writing before any work starts. Catch-up work is quoted separately so it does not inflate the ongoing fee.

Why us

Our offices

Both offices are staffed. Most work happens electronically wherever you are, and the offices are there for the businesses that would rather hand something over in person.

Where these figures come from

• Sales tax rates by county. Publication 718: New York State Publication 718 lists the combined rate for every jurisdiction, including Nassau at 8.625 percent and Suffolk at 8.75 percent.
• Suffolk's rate change. Sales tax rates bulletin: Suffolk raised its local rate from 4.25 to 4.375 percent effective March 1, 2025, which is why the two counties no longer match.
• Clothing under $110. Publication 718-C: Publication 718-C sets out which localities exempt clothing and footwear under $110 and which continue to tax their local portion.
• MCTMT employer rates. MCTMT employer rates: The payroll expense threshold and the Zone 2 bracket rates that apply to Nassau and Suffolk employers.
• MCTMT if you are self-employed. 0.34 percent on Zone 2 self-employment earnings: Long Island is Zone 2, where net earnings from self-employment are taxed at 0.34 percent above a threshold that rises to $150,000 for tax year 2026.
• The vendor collection credit. 5 percent of tax due, up to $200 a period: Quarterly and annual filers who file on time keep 5 percent of the tax due, up to $200 a period. Monthly filers and PrompTax enrollees are not eligible.
• Property tax, full value rates. Overall full-value tax rates by county: New York State's overall full-value tax rates by county: Nassau $36.90 and Suffolk $18.90 per $1,000 for 2021, against $27.70 statewide outside New York City.
• Long Island Innovation Park at Hauppauge. 1,300 companies at the Innovation Park: HIA-LI, the park's steward, publishes the 1,300 company count cited in the capital map.
• CPA licence verification. NYSED licence register: The New York State Education Department register, where any CPA licence can be checked, including ours.

Every rate on this page links to the New York State authority that publishes it. Figures are current as of the date shown above. They explain how the numbers work and are not tax advice for your situation.

Local resources

• New York State Department of Taxation and Finance The capital improvement and repair bulletin, and Form ST-124.
• New York State Department of Labor Prevailing wage schedules and certified payroll requirements on public work.
• Suffolk County Clerk Business certificates and filings for Suffolk contractors.

Every rate on this page links to the New York State authority that publishes it. Figures are current as of the date shown above. They explain how the numbers work and are not tax advice for your situation.

Questions