"He is saying he's not paying tax on $142,560 because it not his money."

Yes, it is, if he doesn't have a Trust Account and a Trust requirement. He's given funds, which are now available to him. He doesn't have to use it on their project; he just has to be able to fund their project when that job starts, and apply the prepayment to what they would owe, to avoid having the same client pay again.

As this business grows, he can consider moving to an Accrual Basis, and that would allow him to treat the funds as liability until earned; construction in progress and a contract completion operation. That gives him the ability to treat the funds as income and reduce liability at each milestone. Or, he works with a banker to manage construction draws and stops accepting his clients' funds directly. Put it into Escrow.