Tax Prep & Bookkeeping for Contractors and the Trades

Built by someone in the business

HB is locally owned, with hands-on experience in the construction industry. Bids, materials runs, subcontractor payments, equipment, and slow and busy seasons are familiar to us, so you won't have to explain how a job works before we can talk about how to report it.

What Tennessee contractors should track all year

• Income by job. Deposits, draws, and final payments, tied to the job they came from.
• Materials and supplies. Lumber, fixtures, fasteners, and supply-house receipts.
• Subcontractor payments. Who you paid, how much, and when, plus a Form W-9 on file for each.
• Vehicle use. A mileage log (date, destination, purpose, miles) or actual truck expenses, depending on the method used.
• Tools and equipment. Purchase dates and costs; larger items may be depreciated or may qualify for faster write-offs.
• Other job costs. Insurance, permit fees, equipment rental, dump fees, phone, and work clothing or safety gear.
• Estimated tax payments. Dates and amounts paid to the IRS during the year.

Keep business and personal money in separate accounts. It's the single biggest time (and fee) saver at tax time.

Form 1099-NEC: the 2026 threshold is $2,000

If your business pays a non-employee (such as a subcontractor) for services, you may need to file Form 1099-NEC. A federal law enacted in 2025 (P.L. 119-21) raised the reporting threshold:

• Payments made before 2026: $600 threshold.
• Payments made in 2026: $2,000 threshold. You generally file a 1099-NEC for each non-employee you paid $2,000 or more for services during 2026, including parts and materials billed as part of the service.
• Payments made after 2026: the threshold is adjusted for inflation; check IRS Publication 1099 for the current amount.
• Backup withholding: if you withheld federal income tax under the backup withholding rules, a 1099-NEC is required regardless of the amount.

Forms 1099-NEC for 2026 payments are filed in early 2027. They are generally due to both the IRS and the recipient by January 31 (or the next business day). Collecting W-9s up front makes this easy.

Sources: IRS: Am I required to file a Form 1099?; IRS Publication 1099; IRS FAQ: Form 1099-NEC and independent contractors.

Self-employment tax and estimated payments

If you work for yourself and your net earnings from self-employment are $400 or more, you generally owe self-employment tax (Social Security and Medicare) and file Schedule SE. The rate is 15.3% (12.4% Social Security plus 2.9% Medicare) on net earnings, and you can deduct half of it when figuring adjusted gross income.

Because nobody withholds tax from contract income, you generally need to make quarterly estimated payments if you expect to owe $1,000 or more. Payments are due April 15, June 15, September 15, and January 15 of the following year (moved to the next business day when a date falls on a weekend or legal holiday).

Sources: IRS Topic 554, Self-employment tax; IRS FAQ: Estimated tax.

Tennessee notes for the trades

Tennessee has no state income tax on earned income, but trades businesses may still have state and local obligations, such as business tax based on gross receipts in the county or city where you work, or franchise and excise tax if you operate as an LLC or corporation. We'll flag what to look into based on how your business is set up.