Annual Year-End Planning for 2019
By: Thomas G. Wolf, Dealership Consultant
The end of 2019 is right around the corner. You’ve been on top of your financials all year long. However, it’s important to take one last look at a few things before you officially close out the year. It’s time to double-check some items to ensure compliance and minimize the tax burden on your dealership.
First, let’s cover the things you know by heart. Have you done the following?
- Prepared all bank reconciliations
- Reviewed and researched outstanding items for potential year-end adjustments
- Reported unclaimed property to state agencies
- Written off any uncollectible balances
- Recorded finance chargebacks in December
- Record the December LIFO estimate
- Writedown used vehicles
These items would benefit from being checked one more time. We’ve addressed the full list in a webinar we just released.
Essential Items for Tax Planning Purposes
Now, on to the things you might not know inside and out.
2018 was an eventful year with the tax law changes. Continuing to maximize the 20% Qualified Business Income deduction is key to minimizing your taxes in 2019.
In years prior to 2018, paying your taxes through withholdings or estimated taxes carried the same weight. With the new tax law, a combination of both could minimize your tax obligation. To figure out how to balance how much money goes to each option, it’s best to talk to us about it.
Bonus depreciation is limited for dealerships that pay floorplan interest and have greater than $25 million in gross receipts, but the IRS did provide some relief in September 2019.
With the new tax law in 2018, the standard deduction increased significantly. It’s now $24,400 in 2019 for married filing joint. With this increase, your more common itemized deductions may lose value. So, consider bunching deductions like charitable contributions. We’ve seen taxpayers doubling their donations to their favorite charities this year, so they get above the standard exemption- and forgoing next year’s gift.
We have just a few items of note on your reporting and compliance measures:
- All individuals who are given a demo vehicle should sign a written demonstrator policy agreement. At this point, not all of you are doing this. Brady Ware can help you identify the best method because the IRS has approved four different methods.
- Travel expenses are deductible in full, but certain meal expenses are limited. Costs related to holiday parties, office snacks, promotions, and on-site employee meals are not limited but should be posted to a separate account.
- And one final note, entertainment expenses are no longer deductible. This includes expenditures for amusement, recreation, and membership dues.
Watching our webinar with help you with the full scope of year-end planning- that way you start the new year on the right foot!