Pub. 2 2012 Issue 4

16 AUTOMOBILE DEALER NEWS ILLINOIS www.illinoisdealers.com and simplified full inclusion methods. Ask your CPA which method is appropriate for your dealership. How many AJEs can you avoid? Adjusting journal entries (AJEs) muddy the waters when your CPA does his or her fieldwork. A long list of CPA-imposed changes could suggest that your CFO isn’t doing his or her job – and cause owners, franchisors and lenders to wonder what else might have fallen through the cracks. Plus, the fewer discrepan- cies between your controller’s year end statement and the CPA’s audited (or reviewed) financial statements, the fewer questions your franchisors and lenders will ask. Review last year’s list of AJEs and see which year end adjust- ments you can handle in-house. Consider making adjustments for bad debt write-offs; prepaid expenses; benefit plan contributions; and accruals for wages, commissions, interest and taxes. Gener- ally, accruals should tie to the payments paid in the following month (January) or shortly thereafter. Ask your CPA what was recorded for last year’s book-to-tax adjustments. This will help you anticipate document requests and estimate probable tax adjustments. Book and tax income usually differ, sometimes quite markedly. So, don’t make tax estimates based on pretax income shown on your income statement. Are you really ready? Year end is often the most stressful time for a dealer’s account- ing department. But by planning and adjusting your balance sheet and income statement accounts before December 31st, you’ll save time and frustration when it’s time to prepare your annual financial statements and income tax returns. Map out owner transactions Decide on the payments you want to make to owners before December 31st, such as salaries, bonuses, benefits and perks. Payments to owners, including interest on loans to S-corporation shareholders or to C-corporation shareholders (those owning more than 50% of the dealership’s stock), will be deductible only if they’re paid before year end. This includes expenses owed to related parties. Also determine the appropriate tax treatment for retirement and insurance benefits paid to owners. S-corporation, LLC and partnership owners may have to report these as taxable fringe benefits, rather than deduct them as an expense.  For more information please contact John Comunale, CPA at Councilor, Buchanan andMitchell, P.C. certified public accountants at (301)986-0600 or jcomunale@cbmcpa.com.  getting the jump — continued