2017 Year-End Dealership Accounting Checklist
Dec 20, 2017
2017 Year-End Dealership Accounting Checklist
Now more than ever, it is vital to consider how you will be preparing for the year-end. Broken into four comprehensive categories, we suggest using the following 30-point checklist when compiling financial information to conclude your 2017 year-end:
Month-end closing items to pay particular attention
- Review bank reconciliations and reverse any checks that are not expected to clear. Record all unposted activity in the current year.
- Make sure to record all the December finance chargebacks on the December general ledger.
- Prepare the December floor plan reconciliation prior to the year-end.
- Review all balance sheet accounts and confirm accurate month-end balances. Check all scheduled for aged items that could be adjusted during the year-end close.
- Check for missed Form 8300 submissions and review a full year for any potential errors if tests have not been conducted through-out the year.
- Make sure there is a back-up of each month’s accounting records as required by the IRS.
Year-end closing items to complete
- Make sure that all wages and commissions that are paid in 2018 for 2017 services have been accrued in 2017. Make sure the first payroll in 2018 is based on the date the payroll checks are handed out (pay date), even though some portion of the payroll was for 2017 services. Also, make sure that the first payroll in 2018 is not included on your W-2s for 2017, but will instead be on the W-2s for 2018.
- Review prepaid assets and expense all items that are not valid assets.
- To report transactions in the proper period, keep accounting records open at the end of December for as long as possible:
- Record December finance chargebacks in December.
- To maximize LIFO deductions, record all new vehicles invoiced in 2017 as vehicles purchased in 2017 by keeping the new vehicle purchase journal open the first several days of 2018. Vehicles built in 2017, but not received until 2018 still belong as a 2017 purchase.
- Keep the accounts payable journal open to record all 2017 expenses.
- If any vehicle deal is not 100% complete in 2017, treat it as a 2018 vehicle sale.
- Adjust all miscellaneous inventories to actual, including labor inventory, sublet, gas-oil-grease body shop materials, etc.
- Complete any building repair or maintenance items by the end of 2017.
- Review all past due accounts receivables and write off uncollectible receivables.
- Pay interest on shareholder loans to and from dealership by year-end. Issue IRS Form 1099 for this interest (if applicable).
- Compare actual parts inventory versus accounting parts inventory and make any appropriate adjustments. Have the parts manager determine which parts are considered worthless.
- Put a reasonable estimate of LIFO adjustment on all versions of the December statement.
- If the dealership is not on LIFO for used vehicles, adjust all used vehicles to current wholesale market value as of the end of the year; consider adopting Used Vehicle LIFO.
- If the dealership is a “C” corporation, pay any salaries, commissions or bonuses to stockholders and their related family members in December for the 2017 deduction.
- Ensure that payroll tax and sales tax payable accounts equal the actual amount of all taxes paid in 2017 for the 2017 fourth quarter and year-end tax returns.
- Verify how much was spent on meals and entertainment in 2017, not including travel and the employee holiday party.
- Have all demonstrator users sign a comprehensive demonstrator agreement and:
- Sales department employees – Limit personal use or apply charge for non deductible personal use.
- Non-sales department employees who use a personal vehicle – Charge for personal use of demonstrator, using IRS lease table.
- Stockholders and their family members/non owner non employee – Show this value as income on their W-2 or give them IRS Form 1099 for the fair market value of their personal use of the vehicle.
- Make sure IRS Form 1099-MISC is issued to all non-incorporated entities that received $600 or more in 2017 for payment of services, awards, commissions or fees for services. Review these nonemployees to see if they should be considered employees for payroll tax purposes.
- Review all standard entries for possible adjustments.
- List and gather receipts or invoices for all fixed assets placed into service for 2017. Also make a list of fixed assets disposed of in 2017. These will be needed to complete the dealership’s taxes.
- Tie in all intercompany accounts and have interest paid on all amounts considered a loan.
- If the dealer or the dealership owns stocks that have unrealized losses, consider selling them.
- For federal tax purposes, businesses may look at bonuses and Sect. 179 depreciation where you can accelerate depreciation of certain assets placed into service in 2017. The deduction for Sect. 179 could be up to $500,000, but various restrictions apply to review the purchase with your tax professional.
- Make any charitable contributions in 2017.
Compliance and other responsibilities
- Confirm the Red Flag Program has been reviewed within the current year and the annual review is filed in the Red Flag binder.
- Be sure to report all uncashed checks on your Unclaimed Property Report.
- Review the FTC Customer Safeguarding Program to confirm timely testing and all vendor safeguarding agreements are on file. The risk assessment should be on file and reviewed within the year.
- Be prepared to mail out all the 8300 form acknowledgment letters to all applicable customers prior to January 31st, 2018.
DISCLAIMER: As required by U.S. Treasury Regulations governing tax practices, you are hereby advised that any written tax advice contained herein was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
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