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What's the best way to track subcontractor payments?

Get a W-9 from every subcontractor before you pay them anything. This form collects their legal name, address, and tax ID number. Without it, you can’t file accurate 1099s at year end and you risk IRS penalties. Make this a non-negotiable part of bringing on any new sub.

Set up each subcontractor as a vendor in your accounting software with their complete information from the W-9. Include their payment terms, contact info, and the type of work they do. This setup pays off at tax time when you need to pull reports showing total payments by vendor.

Code every payment to the job it belongs to. This is where most contractors fall apart. Paying a sub without assigning the expense to a specific project means you can’t see true job costs. You’ll know you paid $40,000 to your plumber last year but not how much went to the Smith renovation versus the Jones new build. That detail matters for understanding which projects actually made money.

Keep backup documentation for every payment. The sub’s invoice, proof of the work being billed, and any lien waivers if applicable. Store these digitally, organized by job and vendor. When questions come up six months later about what you paid for, you’ll have answers.

Track running totals by subcontractor throughout the year. Anyone you pay $600 or more needs a 1099-NEC by January 31. Waiting until January to figure out who qualifies creates a scramble. Many construction businesses miss the deadline because they’re hunting for W-9s in January that should have been collected months earlier.

Reconcile your accounts payable regularly. Match your records against what subs claim you owe them. Disputes happen less often when both sides are looking at the same numbers and you catch discrepancies early.

If you’re using QuickBooks, make sure job costing is enabled and your chart of accounts is set up for construction work. Generic QuickBooks configuration won’t give you the job-level reporting you need. Many contractors run QuickBooks for years without ever seeing accurate profitability by project because the initial setup was wrong.

The system doesn’t need to be complicated. W-9 before first payment, proper vendor setup, code to jobs, keep documentation, track totals. Do those things consistently and you’ll have clean records for taxes, clear visibility into job costs, and fewer surprises when a sub disputes what they’ve been paid. If managing this alongside running crews feels like too much, bookkeeping services in Richmond can handle the tracking so you can focus on the work.

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More Questions

How long does it take to catch up on a year of bookkeeping?

A year of catch-up bookkeeping typically takes one to four weeks of work time, though this varies based on transaction volume, documentation quality, and business complexity. Cash-heavy businesses and those with disorganized records take longer.

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Do I need to charge sales tax on services in Virginia?

Virginia generally does not tax most services. The retail sales tax applies mainly to tangible goods, not labor or professional expertise. However, there are exceptions for certain services like accommodations and repair work involving parts.

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What's the difference between catch-up bookkeeping and cleanup bookkeeping?

Catch-up bookkeeping addresses a time gap when your books stopped being maintained. Cleanup bookkeeping fixes quality issues like miscategorized transactions and accounts that don't reconcile. Many businesses need both.

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How do I calculate how much sales tax I owe?

Multiply your taxable sales for the period by the applicable tax rate. In most of the Richmond area, that's 5.3%. The key is making sure you've correctly identified which sales are taxable and reconciling against what you actually collected.

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How often do I need to file sales tax returns?

Your state determines filing frequency based on how much sales tax you collect. Virginia requires monthly filing if your liability exceeds $4,000 per month, quarterly for lower volumes, and annual filing for very small amounts.

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I'm months behind on my bookkeeping. Where do I start?

Start by gathering all your bank and credit card statements for the missing months. Check for urgent deadlines like quarterly taxes or pending loan applications, then work through reconciliation one month at a time starting with the oldest.

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