- What's Changed?
- Why Should Construction Business Owners Care?
- What You Need to Do
🚨 ATTENTION Construction Business Owners: Your Schedule K-1 Just Got an Upgrade
The IRS is watching closer than ever. If you run your construction business as a partnership or LLC, the new 2026 tax season brings changes you need to understand—NOW.
What's Changed?
The IRS has added NEW codes to Box 19 of your Schedule K-1:
- ✅ **Basis shifting tracking** — They're monitoring related-party transactions
- ✅ **Self-employment tax** — For service partners, the IRS wants to know exactly what's being distributed
Translation: The taxman has sharper eyes on how you're structuring distributions.
Why Should Construction Business Owners Care?
If you're a general contractor, subcontractor, or construction LLC owner, you likely operate as a partnership or S-corp for tax purposes. These new K-1 codes mean:
- **More scrutiny on related-party transactions** — If you shift basis between entities, expect questions
- **Higher visibility into distributions** — What you take out vs. what you reinvest is now tracked more closely
- **Potential audit trigger** — Incorrect reporting could flag your return
What You Need to Do
1. Review Your Partnership Agreement
Don't file blindly. Pull out your operating agreement and review how distributions are structured.
2. Document Everything
If you've made entity-to-entity transfers, have the paperwork ready.
3. Consult a Pro
This isn't fear-mongering—it's due diligence. A construction CPA who knows your industry can spot issues before they become problems.
The Bottom Line
The IRS isn't targeting construction specifically—but they ARE paying attention to how partnership profits move. If you're not reporting correctly, 2026 is the year they'll notice.
Need a second opinion on your business structure? We're here to help. Contact us today for a consultation.
💡 **Pro Tip:** Even if your setup is legitimate, having documentation ready proves you did your homework. That's your best defense.
About the Author
Jason Astwood, Fractional CFO & Tax Strategist
As an IRS Enrolled Agent* and Financial Services Certified Professional®, Jason is a trusted authority in taxation, financial strategy, and business growth. He is the author of The S-Corp Playbook and the Director of Union National Tax, bringing over two decades of expertise in proactive tax planning, financial management, and compliance. Jason specializes in helping business owners minimize tax liability, optimize cash flow, and build long-term financial success. His combined expertise as a tax strategist, financial advisor, and Fractional CFO empowers entrepreneurs to scale their businesses with confidence.