End-of-Year Accounting for a Roofing Company: 1099s, WIP, Depreciation, and Extensions

December 15 through March 15 is the pressure window for roofing company accounting. Sloppy year-end work costs contractors thousands in overpaid tax, missed deductions, and IRS penalties. Tight year-end work unlocks tax savings and gives you a clean balance sheet to show to sureties, banks, and insurance carriers. This guide covers the seven year-end items that matter most: 1099-NEC issuance, WIP accounting, inventory adjustments, prepaid deposits, depreciation elections, and extension timing.

The Year-End Timeline

• November 30: review subs paid year-to-date, confirm W-9s.
• December 15: year-end tax planning meeting with CPA.
• December 31: physical inventory, AR aging snapshot, fixed asset review.
• January 31: issue 1099-NEC forms to subs.
• January 31: issue W-2 forms to employees.
• March 15: S-corp and partnership returns due (or extension filed).
• April 15: C-corp and personal returns due (or extension filed).
• September 15 / October 15: extended returns due.

Most roofing CPAs will not take new clients between February 1 and April 15. Lock your engagement by December.

1099-NEC Issuance

Form 1099-NEC (Non-Employee Compensation) is required for any non-employee paid $600 or more in a calendar year. For roofing, this is primarily subcontractors, public adjusters (sometimes), and independent sales contractors.

To issue correctly:

• Collect a valid W-9 from every sub before their first payment. Retroactive W-9 collection in January is the year-end nightmare most contractors experience.
• Track payments by payee in QuickBooks or RoofKnockers. Separate taxable 1099 payments from reimbursements.
• Verify EIN or SSN. Mismatched names and TINs trigger backup withholding.
• Mail to recipient by January 31. File with IRS by January 31 (paper) or March 31 (e-file).
• Use a service like Track1099 or Yearli. Manual 1096 and 1099 forms are error-prone.

Penalty for failure to file 1099-NEC can run $60 to $630 per form depending on timing and intentionality. At 50 subs, that is meaningful.

Form 1099-MISC vs. 1099-NEC

1099-NEC (Non-Employee Compensation) replaced 1099-MISC Box 7 in tax year 2020. Today:

• 1099-NEC: services performed by non-employees ($600 threshold).
• 1099-MISC: rent, royalties, attorney fees, and other miscellaneous payments.

Most roofing subs receive 1099-NEC. Office rent paid to an unincorporated landlord receives 1099-MISC.

WIP Accounting (Work in Progress)

This is where most small roofing companies get their books wrong. At any year-end, you have jobs that are:

• Started but not finished.
• Finished but not invoiced.
• Invoiced but not fully collected.

Under the percentage-of-completion method (required for contractors with average receipts over a certain threshold), you recognize revenue based on costs incurred vs. total estimated costs.

Job StatusContract ValueCosts to DateEst. Total CostsRevenue Recognized In progress$40,000$18,000$30,000$24,000 (60%) Complete not billed$30,000$22,500$22,500$30,000 (100%)

Most contractors under $29M (2026 threshold, adjusts annually) can use the completed contract method or cash method. Check with your CPA.

For internal management, the percentage-of-completion method produces more accurate margin reporting.

Inventory Adjustments

Roofing inventory is usually modest compared to a manufacturer, but meaningful. Typical categories:

• Shingle stock in warehouse or on trailers.
• Accessories (underlayment, drip edge, vents, fasteners).
• Tools under $2,500 (expensed, not capitalized).
• Tools over $2,500 (capitalized and depreciated).

Count physical inventory December 31. Compare to QuickBooks balance. Adjust with a journal entry. Shrinkage of 1% to 3% a year is normal and often deductible.

Prepaid Deposits

Customer deposits received before work starts are liabilities, not revenue. Review your deposit account and make sure:

• Deposits applied to completed jobs have been reclassified as revenue.
• Deposits on cancelled jobs have been refunded or forfeited and reclassified.
• Long-sitting deposits (over 12 months) are reviewed for whether the job will proceed.

Deposits on the books as liability lower taxable income. Do not rush them into revenue to inflate the top line for bank purposes; it is both against GAAP and shifts taxes forward.

Depreciation

Fixed assets include vehicles, computers, equipment, and leasehold improvements. Key year-end decisions:

• Section 179: elect to expense qualifying assets in year of purchase, up to the annual limit (2026 ceiling is $1.22M). Capped at taxable income.
• Bonus depreciation: phases down from 60% in 2024 to 40% in 2025, 20% in 2026, and 0% in 2027 absent legislative change.
• SUVs over 6,000 lb GVWR: have a separate cap on Section 179 ($30,500 in 2026).
• Heavy trucks (F-250/2500+): fully expensable if business use is 100%.

Time fixed asset purchases for year-end if the current year has higher tax liability. See our fleet guide for purchasing strategy.

Extension Timing

Filing an extension is neutral if you pay the estimated tax with the extension. Form 7004 (business) or 4868 (personal) extends the filing deadline, not the payment deadline.

When to extend:

• Your books are not ready by the original deadline.
• You are waiting on a K-1 or 1099 from another entity.
• You need more time to optimize elections.

When not to extend:

• You owe tax and cannot pay. The extension does not defer the underpayment penalty.
• You are chasing a deduction that will not materialize.

Most well-run contractor CPAs file 60% to 80% of returns on extension. That is normal, not a red flag.

Payroll Tax Reconciliation

Year-end payroll includes:

• W-2 issuance by January 31.
• 941 reconciliation (quarterly) against W-3 (annual).
• State unemployment reconciliation.
• Year-end bonuses processed in current or next year depending on timing and constructive receipt.

Discrepancies between quarterly 941s and annual W-3 trigger IRS notices that are time-consuming to resolve.

Bank and Surety Reporting

If you have a working capital line of credit or a surety program, your bank and surety will likely require CPA-prepared year-end financials within 90 to 120 days of year-end. Two levels:

• Compilation: cheapest, CPA compiles numbers without review or audit. $1,500 to $4,000.
• Review: CPA performs limited procedures. $5,000 to $12,000.
• Audit: full procedures, required by some sureties above $10M bond. $15,000 to $40,000.

Plan the level with your CPA and banker at the start of the year, not December 15.

Inside RoofKnockers

RoofKnockers accounting integration ties sub payments to W-9 records, tracks contract value vs. costs for WIP reporting, and flags deposits that have been on the books longer than 12 months. When your bookkeeper runs year-end, half the reconciling work is already done. See our cash flow, sales tax, and surety bond guides for the related financial disciplines.

Bottom Line

Year-end is not a scramble if you run clean books all year. Issue 1099-NECs on time. Use percentage-of-completion or completed-contract method with a CPA who knows construction. Reconcile inventory. Review prepaid deposits. Time fixed asset purchases. File extensions when your books are not ready. Deliver CPA-prepared financials to your bank and surety within 120 days. Contractors who nail year-end consistently pay less tax, get larger bond capacity, and sleep better in January than contractors who treat the books as a necessary evil.