The Difference Between Bookkeeping And Tax Preparation

All professional accountants are aware of the relationship between your bookkeeping system and the Internal Revenue Service and the importance of paying the right amount of taxes.

Keep in mind, accounting serves two different functions:
Internal accounting is for making money - Bookkeeping
External accounting is for paying taxes - Tax Preparation

As a contractor, you get a lot of attention from the local, state, and federal tax agencies because, by nature, you spend most of your time standing up, moving around, building, remodeling, repairing, maintaining stuff that makes civilization possible; and not enough time and energy on your bookkeeping.

So you tend to put off your internal accounting as long as possible or find a cheap bookkeeper without realizing that in both options, you could end up in pain and tears.

Imagine you have an expert designer on your team. This person has an "eye" for coordinating colors and layout in your construction project, and they are so good at it you decide to have them install all the large beams on your construction project. It is not going to happen.

In Project Management, we refer to it as the "Halo Effect." When someone is skilled in a particular industry, they automatically assume they can do anything in that field.

Construction Accounting is as different from mainstream accounting as a backhoe is different from a garden shovel. And we know what happens when someone who has only ever used a garden shovel starts operating a backhoe! It is a very costly accident looking for a place to happen.

Tax accountants are reasonable people and have their place. Construction accountants should stay out of preparing and filing annual tax returns for the same reasons. We don't do it every day, and we don't keep up with the ever-changing tax code.

Either be a tax accountant and serve the interests of the tax collection agencies or be a construction accountant and serve contractors' interests. Pick one and be good at it.

About The Author:

Sharie_DeHart_President_Fast_Easy_Accounting_Serving_Contractors_All_Across_The_USA_Including_Alaska_And_Hawaii-1Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or email

Leave a comment

Please note, comments must be approved before they are published

Back to the top