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Client is small S Corp Home Builder. Builds 1 house per year and sells it before the year's end. For tax year 2021, he built a house & paid his subcontractors, plumber, electrician, masonry, etc. all in 2021 but did not sell the house until February 2022. #1 Since he is a builder selling less than $ 25,000 000.Can he deduct his subcontractors until 2022 when the house sold? and # 2 Will he give subcontractors' 1099s NEC in 2022? Thank you.
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They are inventory costs that won't be expensed until 2022. The 1099s should have gone out in January for the 2021 payments.
Slava Ukraini!
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Agree with IronMan. Most small home builders are on the Completed Contract Method of accounting. Therefore all costs are capitalized until the property is sold. Then it is expensed as a cost of sale. But the taxpayer still reports subcontract labor to the IRS for 1099 purposes on the cash basis method - in the year paid.
