5 Ways Auto Repair Shop Owners Can Prepare for Tax Season

The article "5 Ways Auto Repair Shop Owners Can Prepare for Tax Season" from Tekmetric offers concise guidance for shop owners to efficiently organize their financial records and strategies to streamline tax filing and maximize deductions.

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Thought Leadership

5 Things Shop Owners Can Do to Prepare for Tax Season

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January 16, 2023

Read time: 1 min

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1. Send Out Your 1099s and W-2s

The people you do business with, whether they’re full-time employees or subcontractors, need tax forms sent to them. Anyone under full or part-time non-contract employment with your business will need a W2.

However, 1099s need to go out to anyone who provides services to your business who is not an employee, such as:

Your landlord
Accountants
Subcontractors

Stay on top of deadlines

1099s and W-2s are due on January 31st of each tax year. Sending them to the relevant parties should be your first priority at the start of each year. Make sure you order your forms, if needed, in December so you can have them in time. They can take up to two weeks to arrive!

Your CPA can also handle this task. You’ll need to send them your payroll reports for each employee and subcontractor, so make sure that your records are up to date before you ring up your CPA.

All of your employees, including yourself if your business is an S corp, will need a W-2 form which contains total wages and reports the amount of federal, state, and other taxes withheld.

Make sure you have submitted the appropriate amounts to the correct tax agency. If you are behind, have your CPA help you get caught up and in compliance immediately.

Being behind on payroll tax and sales tax obligations can put your shop out of business.

2. Get Your Books In Order

Day-to-day life as a business owner is hectic. Sometimes, you are so focused on the nuts and bolts that you don’t have time for detailed paperwork and your books end up in a mess. You’ve got a box of receipts and spreadsheets filled with outdated information. What now?

You still have time to make a plan, talk to your CPA, and get those books in order.

Your CPA will need all of your records such as loans, payroll, profits, and major purchases in order to help you do your tax filing. You’ll need to make sure your books are up to date and accurate. With a system like Tekmetric, you can view real-time reports on business performance and download and send these to your CPA to save precious time if you’re running behind. Some reports you can find in Tekmetric include:

Sales Tax Reports
Profits Reports
Accounts Payable Reports
Accounts Receivable Reports

You can use these reports to streamline your record-gathering process and make sure no details fall through the cracks. Little mistakes can mean lost deductions, so make sure you share as much information as you can with your CPA.

You’ll thank yourself later for investing your time in updating your books.

As you get your books in order, here are some questions to consider.

Do You Need to File for an Extension?

Talk to your CPA about the deadlines and obligations for your particular business, as it can vary depending on how your business is set up. That way, you can get on the right track toward compliance.

Remember: if you file a request for an extension, that is only for the paperwork, not the taxes due. Taxes must be paid by Tax Day to avoid penalties and fees, though you might still have to pay certain fees if you skipped quarterly taxes in 2021.

Add these dates to your calendar:

March 15, 2022 is the deadline for extending tax filings to September 15, 2022 for partnership and S corporations
April 18, 2022 is the deadline to apply for a tax extension to October 17, 2022 for sole proprietorships, C corporations, and single-owner LLCs.

Are You an S Corp?

Under IRS rules, an S corporation must pay a reasonable amount of money to its officers in exchange for provided services. This money is treated as employee wages for tax purposes and not as distributions. If you’re an S corporation owner, make sure you compensate yourself correctly to stay in compliance.

Have You Considered Retirement and Profit-Sharing Plans?

Do you have a retirement plan set up for yourself or your employees?

If you have a profitable shop, it might be worth looking into a profit-sharing or cash balance plan. These contributions need to be made by March 15 (or September 15 if you have applied for an extension).

Are You Complying With Reporting Rules for Cash-Based or Accrual-Based Tax Payers?

Under federal law, cash-based and accrual-based tax payers follow very different rules for reporting.

If this is news to you, you should check out the IRS’s guide, Accounting Periods and Methods.

Are Your Day-to-Day Transactions Current?

Make sure that your day-to-day transactions are all up to date and have been entered and categorized.

This includes:

Payroll
Sales
Received payments
Bill payments
Credit card purchases
Any other transactions

Tekmetric simplifies this process by giving shop owners a wealth of downloadable reports they can quickly save as CSV files.

What About Assets and Depreciation?

Don’t forget your assets! For example, if you finance a lift, it should be categorized as an asset so that you can claim the tax advantage. Other tangible assets you previously purchased will also need to be inventoried in order for them to be depreciated properly.

Your CPA will be able to calculate the depreciation on your shop equipment, which is an important tax deduction that you could miss out on. So, plan accordingly!

Have You Been Doing Bank Reconciliations Monthly?

Take time to catch up on your bank reconciliations. Each month, you should be comparing your books to your bank statements to make sure that every transaction is accounted for. If you don’t, you could miss out on important deductions for business expenses.

3. Gather All Tax Documents

Now that you’ve gotten all your books updated and organized, it’s time to compile everything together to send to your CPA. Tax season is an incredibly busy time for every accounting firm, so you will need to stay in contact with your CPA.

If you still haven’t talked to your CPA this year, make sure to call your CPA to start getting everything in order. Make sure you include digital copies or scans of all of your documents, especially receipts that will be used for deductions.

Shop management software like Tekmetric can radically simplify and speed up the process of getting the documentation you need.

With real-time reports that show you how your business is performing, you can see your income, inventory, profit and loss statements, and other necessary information—without spending hours upon hours calculating everything by yourself (or putting your CPA in that unlucky position)!

Though you will have to pay any taxes owed on time, you may be able to file for an extension if you are still waiting on certain transactions or documents.

Your CPA will need all of your:

Income and expense records/asset reports
Inventory total and financial business reports from the year
Previous year’s tax returns
Payroll data
Stock or bond information
EIN or SSN number

4.Run a Tax Projection

No one wants to be caught by surprise when it’s tax time. You can forecast your tax situation right now by running a tax projection. Tools like TurboTax can help you run a tax projection, but it’s also helpful to sit down and run a tax projection with your CPA.

If you are in a spot where your books aren’t in order, the main thing your CPA will focus on is to mitigate losses.

Don’t be surprised if your projection includes a number of charges for failing to meet various IRS and state requirements. In the future, however, working with these partners earlier in the year can help you stay ahead of the game and better prepare for business growth.

When running a tax projection, you should include income taxes, sales taxes, payroll taxes, and capital gains taxes in your calculations.

Information You Need for Your Tax Projection

To run a complete tax projection, provide your CPA with:

Your business income for this tax year: If you’re not sure, you can start with what you reported last year and make an estimate. If your books are up to date, you may just need to run a report.
Your business expenses for the year: You can use the same method as before to determine expenses, but also consider any big purchases you made this year.
Your personal taxes (depending on how your business is organized): If so, you will need to include personal income, deductions, credits, exemptions, and any withholding of federal income taxes from your personal income. In the same way as you estimated your business income and expenses, you can use information from prior tax returns.
If you sold any real property: This is defined as land and anything attached to it. For example, if you closed a location and sold the shop, you will need to include this information as well, as it could be taxed differently than your other income.

There are numerous tax calculators online that you may be able to use. But if you have Tekmetric at your shop, you can pull reports that have automatically calculated a lot of figures for you, like your annual Gross Profit and purchases.

Even if you don’t have a system like Tekmetric, now is the perfect time for you and your team to consider implementing one to help you out moving forward.

Remember, even if you file for an extension, you will need to pay this estimated tax amount, so don’t put off making your projection. And again, we need to stress how important it is to talk to a CPA.

5. Foundations for Next Year

Now that you know what to do and can get everything in your accountant’s hands, you probably feel relieved.

Bookkeeping and tax preparation can be complicated and confusing. Set yourself up for a less stressful tax time by making a follow-up appointment with your CPA to review everything and prepare for next year.

Having a plan and structure in place can alleviate a lot of stress and allow you to focus on what’s important: the success of your auto repair shop.

You and your CPA can discuss various events that may need future planning, such as:

Setting up additional locations
Selling your shop
Renovating your current shop
Buying large equipment like lifts
Investing in training programs for your technicians and service advisors

On your journey toward growth and better bookkeeping practices, you should consider implementing shop management software as well. Having a tool that can track your numbers in real time will keep you on top of your books all year and help you track where you are making progress or need to make adjustments in your course.

Eric Joern (CPA and CM&AA) is a Partner at Kaizen CPAs + Advisors . He specializes in helping business owners in the auto repair industry file their taxes so they can stay in compliance with the law. Joern comes from a family of small business owners and is passionate about helping small businesses grow their profits.

For tax questions, email him at [email protected].

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FAQ

Were you looking for a vendor to reorder carbon copy auto repair receipt templates when you found this blog? Maybe you’ve already spent a few hours at your computer, searching for the right auto repair receipt template. But none of the templates you’ve seen looks right for your shop. It’s hard to find a perfect fit. You need a template that is fast to fill, inexpensive, flexible enough to work for any sale, and easy for you and your customers to understand. That’s a tall order.

But all too often, standalone templates fail to meet the complex business needs of modern auto repair shops.

You have already made positive changes toward getting organized by searching for and maybe even trying out a variety of new templates. But what if you could save time and improve accuracy with a system that did all the work of writing and tracking receipts for you?

Think about how you currently find the information you need for your receipts and fill them out. Maybe you use carbon copies. Maybe you type the receipts out. But you’re probably getting the information from your invoices, which themselves reflect estimates. That’s three documents to write per customer, which can quickly add up to a lot of time spent on paperwork.

Auto repair shop management systems are capable of populating receipts with payment information and prices from estimates and invoices in seconds to create consistent receipts and a more positive customer experience.

We know that change can be hard, but it’s worth it.

Let’s analyze some of the ways your current auto repair receipt templates might be holding you back and how an auto repair shop management system can improve your customer experience, simplify work at the shop, and lead to more business growth for you and your team.

Thought Leadership

Go Beyond an Auto Repair Receipt Template with Tekmetric

July 18, 2023

Read time: 2 min

HOUSTON – October 31, 2023 – Tekmetric, industry leading automotive repair shop management system, has released Smart Jobs, the industry’s first smart job building feature that quickly builds jobs in just one click to help streamline the creation of repair orders. In just one click, shops can quickly build an estimate with parts and labor, check on-hand inventory levels and shop at preferred vendors right in Tekmetric. This revolutionary feature enables service advisors to focus on customer service while simultaneously reducing workload.

"When it comes to running an independent auto repair business, efficiency is paramount," said Sunil Patel, CEO of Tekmetric. "With Smart Jobs, shops have the opportunity to respond to customer needs quickly and accurately, saving time and hassle for everyone. This is a game-changer for our industry, and we are confident that it will revolutionize the way shops operate and deliver customer service."

With one click in Tekmetric, service advisors can now build a job based on the vehicle selected, and Tekmetric will automatically:

● Create a job title

● Add the relevant labor line and apply a labor matrix

● Add the necessary parts, filters and fluids and apply a parts matrix

● Check inventory for all parts, then fetch them from your favorite vendors if not in stock

● Apply a locked package price to the entire job

● Apply any necessary fees

In addition to building repair orders more efficiently, Smart Jobs also accelerates the parts ordering process. Not only can the feature automatically apply the correct quantity of parts, filters and fluids to the repair, but it also shops for out-of-stock items and prepares an order within Tekmetric. For quick jobs, like cabin air filters, Smart Jobs has been able to save approximately one minute per job, adding up quickly throughout the day. Smart Jobs can also help new employees to begin building jobs faster. This can lead to improved productivity and reduced errors, helping employees to produce high-quality work earlier in their training.

Smart Jobs will be available to Tekmetric customers in 2024. To request pricing or schedule a demo visit https://www.tekmetric.com/feature/smart-jobs.

About Tekmetric

Tekmetric, a Houston-based auto repair technology company, offers a cloud-based platform that enables auto repair shop owners to enhance productivity and increase profitability through its streamlined workflow management processes. Designed by a former shop owner, Tekmetric’s platform drives shop efficiency through real-time data, a customizable user interface and customer-centric communication tools. Since its launch in 2016, Tekmetric has disrupted the industry with its robust fully-integrated system, developed with an emphasis on customer transparency and user collaboration. For more information, visit www.tekmetric.com.

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Tekmetric Launches Smart Jobs, Industry’s First One-Click Job Building Feature

Read time: 3 min

The Auto Repair Industry is experiencing a number of changes. From larger economic shifts to a growing technician shortage, its now more crucial than ever to set your shop up for growth.

Often in moments of chaos there are windows of opportunity.

After every economic decline, no matter how steep—the housing crisis, the dot-com bust, even the Great Depression—the world has managed to come back.

Times of economic downturn are difficult, but there is light at the end of the tunnel. As far as the virus is concerned, economists are even speaking of a “V” curve. Meaning just as fast as our economy slowed down, it may pick up that quickly too.

In other words, have hope. There are opportunities during slow periods to adjust how you operate and how you service your guests.

These opportunities can help you navigate a tricky economy and prepare your shop for when business picks up again. This may be an unprecedented time in human history, but it’s also an open window for innovation.

‍ What you do now will have a big impact on the future of your business.

If less cars than usual are rolling into your shop for repairs, you now have some time to work on streamlining your process, being more efficient, eliminating waste (of both time and materials), and improving your marketing and guest experience.

How should shop owners approach this situation? In a way, the same way you might approach business at any other time: finding ways to innovate and improve.