Reclaiming $300,000 in Liquidity for a Growth-Minded Contractor
For many construction firms, the biggest challenge is not a lack of work but a lack of cash. Superstein PA partnered with a commercial construction client to resolve a tax strategy issue that was creating unnecessary cash flow strain and unlock immediate working capital.
Client Profile
- Industry: Commercial Construction
- Annual Revenue: $8M+
- Initial Accounting Method: Completed Contract (Accrual)
- Key Challenge: High retainage delaying cash flow
The Problem: Paying Taxes on Uncollected Revenue
Despite a strong project pipeline, the client faced ongoing cash shortages. Our review uncovered a structural issue in their accounting method:
- Revenue was fully recognized when a project closed.
- Clients withheld 10–15% retainage for months after completion.
- The company paid taxes on income it had not yet received.
This resulted in $750,000+ taxed before reaching the company’s bank account.
The Superstein Strategy
Superstein PA implemented a formal IRS-approved accounting method change from Accrual/Completed Contract to Cash Basis. This allowed the company to:
- Recognize income only when cash was received
- Defer taxes on retainage until funds were collected
The Results
- $750,000+ removed from current taxable income
- ~$300,000 in combined federal and state tax savings
- Immediate liquidity for payroll, equipment, and new bids
- Fully IRS-compliant strategy
“This wasn’t about finding new revenue. It was about reclaiming it. We unlocked $300,000 in existing capital, giving our client the freedom to scale without cash flow pressure.”
— Drew Superstein, Managing Partner
Why This Matters
Contractors carrying significant retainage may be overpaying taxes on money they have not yet received. Superstein PA helps ensure tax strategies support operations and growth, not hinder them.