8 essential steps to streamline tax preparation for your dealership in 2025

By Christopher M. Merkey

As your dealership prepares for the 2025 tax season, it’s worth taking a moment to ensure you’re gathering all the necessary information to make the filing process a smooth one.

From reconciling inventory to expensing equipment, preparing the year-end tax filing means pulling together many moving parts. With over 25 years as a controller in various dealerships, I know how challenging the record-keeping part of the business can be, especially with everything else that is going on. 

Below are eight areas to pay particular attention to as you get everything ready, highlighted because some or all of them have caused issues for dealerships over the years.

1. Provide a trial balance for year end

The first step in preparing for tax filing is ensuring you have a year-end trial balance -- a comprehensive list of all accounts, ideally formatted in Excel. This document serves as the foundation for organizing your annual tax filing.

If your dealership operates on a 13-month fiscal calendar, include a 13-month trial balance. Some Dealership Management Systems (DMS) only allow you to generate a trial balance in Excel if the month remains open. Ensure you export this data before closing the month to avoid complications.

2. Detailed schedule preparation

Each schedule requires specific timelines for determining when a control number in an account is considered overdue. For instance, vehicle contracts in transit are typically overdue after 10 days, while rebates and warranty receivables are generally overdue after 30 days.

Ensure that employees responsible for accounts include notes on any past-due balances and document any receivables that may need to be written off as uncollectible.

• Note: In systems like Reynolds & Reynolds, CDK, and Automate, Excel schedules can only be processed before the month closes. Once closed, these schedules are accessible only in PDF format through archives. DealerTrack does not have this restriction.

3. Reconcile inventory

Unfortunately, reconciling inventory is time-consuming. But matching what you have on paper to what you have on the shelves is crucial. In my practice, I’ve seen dealerships where half of what they had on the shelves was older than nine months— the accepted amount is around 9 percent.

Consider the potential – Bumpers ordered for a car that were never used, parts ordered for a customer — all are sitting on the shelf instead of being returned for a credit.

Verify your inventory throughout the year. If you operate on a Last In, First Out (LIFO) basis, ensure manufacturer invoices are available for every vehicle in stock at fiscal year-end.

Calculate the used vehicle write-down using auction values. Ensure consistency in valuation by using the same source (e.g., Kelley or NADA) across the board. Additionally, reconcile any work-in-progress with the service work-in-process report.

4. Reconcile key accounts

Reconciliations are necessary for specific accounts, including cash accounts, floor plan payables, and manufacturer payables. Alongside these reconciliations, provide statements for verification.

5. Review fixed asset details

Your dealership should have a clear capitalization policy. Also, keep in mind that the IRS allows you to immediately expense purchases of $2,500 or less.

That means even if you purchase many items at once, if the individual price of each item is under $2,500, you can immediately expense it. For example, suppose your dealership purchases 20 computers costing $1,000 each. Even though the total cost is $20,000, you can still expense each computer individually.

In preparing your taxes, provide detailed records of all fixed assets for the review period. Submit the DMS detail for each account and make sure to include invoices for all asset purchases.

6. Review prepaids and accruals

Accurately review and expense any prepaid accounts. For example, some dealerships may prepay rent or security systems. Descriptions for prepaids should be documented in detail. Also, ensure you accrue all salary, bonus, and other expenses by year-end.

7. Provide year-end details for expense and revenue accounts

It’s crucial to send year-end details for expense and revenue accounts such as floor plan interest, travel and entertainment, rent, and other income and expenses. This step ensures a comprehensive view of your dealership’s financial activities for the year.

If you have ongoing construction, you’ll want to keep all the invoices separate and everything associated with the project listed on one spreadsheet. Again, entering the information as it occurs saves time and headaches, so you’re not left scrambling to find invoices and account for costs.

8. Finalize and submit the trial balance

An issue that comes up all too often are dealerships that have additional costs and expenses to calculate after they provide their year-end trial balance -- and unfortunately end up being a surprise.

Be sure to call attention to any additional entries, even if you have added them to DMS. Extra entries will change your return, so this information is essential.

Bottom line

By focusing on these eight areas, your dealership can confidently navigate the tax season, avoid potential pitfalls, and ensure a thorough and accurate filing.

Boyer & Ritter is here to support clients every step of the way, providing templates and guidance to streamline the process. With proper preparation, every tax season can be a smooth and successful experience for your dealership.

Chris Merkey is a manager in Boyer & Ritter’s Dealership Group. Prior to joining the firm, Chris oversaw the financial operations for four area automotive dealerships. Chris uses his experience of working in-house as an advantage to help dealer clients realize their strategic goals. Contact Chris at cmerkey@cpabr.com / 717.761.7210.