Contractors recognize revenue over the life of a contract, carry billings in excess of costs, hold retainage, and buy heavy equipment and vehicles.
Contract revenue is typically recognized over time using a measure of progress such as cost-to-cost; billings above or below revenue are contract liabilities or assets.
ASC 606-10-25-27; ASC 910
Amounts withheld by customers until completion are receivables, assessed for collectibility.
ASC 910-310
Long-term contracts generally use the percentage-of-completion method; contractors meeting the gross-receipts test, with contracts expected to finish within two years, may use other methods.
IRC §460, §460(e); Form 8697 (look-back)
Heavy equipment may be expensed under §179 — up to $2.5 million for 2025, phased out above $4 million of qualifying property — or under 100% bonus for property acquired after 19 January 2025.
IRC §179(b), §168(k) (as amended by P.L. 119-21)
Business-use percentages are required for vehicles, and passenger automobiles are subject to annual depreciation limits.
IRC §280F; Form 4562 Part V
The differences between the two are Schedule M-1 adjustments.
And they are where examinations tend to look first.
Each industry has a knowledge pack that sits in the stable, cached part of every prompt, so most of its cost is incurred once per return rather than on every round. Knowledge packs are in development.
Asset approach weighted for equipment; backlog and margin in the income approach.
Stated as at November 2026 for general information only; not tax, legal or accounting advice. Rules change and their application depends on facts. NGTAX.AI currently prepares Form 1120 only; other forms listed are identified for the reviewing professional and may not yet be prepared by NGTAX.AI. See the disclaimer.
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