Washington State requires all construction contractors to register with L&I. Self-employment taxes are not withheld from the earnings of independent contractors who are required to voluntarily declare and pay estimated earnings taxes to the IRS, which can lead to a trap for contractors who run into financial difficulty and become tempted to put off making the required estimated tax payments.
As you compare the two estimates, keep in mind that common sense dictates that from the roof to the foundation, each construction component’s costs contain general contractor and specialty contractors business costs, which would include their own overhead and profit costs.
Experts have found out that the contractors that usually do well are those that are able to fine tune their company by means of aligning the processes, the people and the technology so that they can produce results that soar above the average of this industry.
In order to avoid this problem, the owner should insist, as a condition to any payment to the contractor, that the contractor provide a partial release of lien with list of all sub-contractors, suppliers and materialmen that the contractor has used affirming that all of have been paid; and partial or final releases of lien, as applicable from all sub-contractors, suppliers and materialmen.
So if an insurance adjuster tries to cut out approximately 20-59% (or more) of common contractor market overhead cost, and profit cost, and sales tax cost, report that act to the Texas Department of Insurance, or your state’s insurance department, so that they can help protect you from being treated unfairly, or financially defrauded.