Pub. 2 2012 Issue 4

14 AUTOMOBILE DEALER NEWS ILLINOIS www.illinoisdealers.com P roactive auto dealers meet with their CPAs in late summer or early fall to plan for the next year’s financial reporting and tax filing. This helps themanticipate requests for audit or review workpapers, streamline financial statement and tax return preparation, andminimize taxes. Here is some food for thought as your tax year winds down. Have you bought fixed assets? Sizable tax incentives to buy fixed assets still exist in 2012, but the potential savings are lower than in 2010 and 2011. Under Section 179, you can immediately deduct up to $139,000 of new and used capital equipment purchases placed in service on or before December 31, 2012. If you purchase more than $560,000 of equipment, Section 179 deductions begin to phase out. There are no threshold limits for bonus depreciation in 2012. This year, bonus depreciation allows dealers to depreciate half of the purchase price of qualifying new assets placed in service before year end, plus regular depreciation on the remaining half. If you’re thinking about replacing, say, a service lift or refreshing your signage, do it before December 31st. Section 179 is slated to return to normal levels in 2013, and bonus depreciation is scheduled to end. Is your fixed asset ledger in order? One of the most time-consuming parts of an audit or review is fixed assets. So, get your records together before your CPA arrives. Prepare a detailed listing of fixed asset purchases, new equipment loans, and retired or sold fixed assets. If old property will be replaced, consider a Section 1031 “like-kind” exchange to defer capital gains. Look through the ledger for smaller items that were capitalized but should actually be expensed. For exam- ple, if you recorded a large order of tools as one combined fixed asset, consider reclassifying each individual item as a supply expense, not a fixed asset. Screwdrivers and wrenches aren’t worth capitalizing. Establish a formal policy for capitalizing fixed assets that considers the asset’s value and useful life. Youmight, for instance, write off items that cost less than $100 or are likely to wear out within one year. Getting the Jump on Financial Statement and Tax Filing Preparation BY JOHN COMUNALE , CPA