You read many articles this time of year about easily overlooked IRS deductions for your personal taxes. A similar dynamic applies to government contractors when evaluating actual indirect rates for the year.
Measuring indirect rates is critical for contractors having cost reimbursable contracts or cost-funded grants. Under-running billing rates (pre-approved, negotiated, or capped annual indirect rates) means you may owe the government money on contracts with cost-based billings or grant drawdowns.
While undesirable in this first case, low indirect rates can mean extra profits on Time & Material or Fixed-Price contracts. However, under-running rates on T&M and fixed –price contracts might not be in your best interest from a long-term financial or competitive pricing point of view.
So here is our Top 10 List of easily overlooked allowable expenses for government contractors that you can take advantage of before the end of the year.
- Accrued vacation (FAR 31.205-6)
- Bonuses (FAR 31.205-6)
- Equipment, hardware, software below capitalization limit (FAR 31.205-25/26)
- Raise the capitalization limit to $5,000 per item
- Training/seminars (FAR 31.205-44)
- Dues and subscriptions (FAR 31.205-44)
- Visiting prospects (FAR 31.205-46)
- Bid and Proposal (FAR 31.205-18)
- Independent Research & Development (FAR 31.205-18)
- Some patent and other legal costs (FAR 31.205-28/30)