By - April 1, 2025
Categories: Accounting, Bookkeeping, Taxes
It’s no secret that time is limited as an auto repair shop owner.
Between diagnosing complex engine issues to managing your mechanics and creating a five-star customer experience, there’s often little time left to focus on your financials.
But what happens when tax season rolls around, and you’re forced to buckle down on organizing your records and preparing your returns?
At Three Rivers Bookkeeping, we know the needs of your auto repair business from the inside out. You’re dealing with parts inventory, labor costs, shop equipment, and fluctuating busyness. Navigating the intricacies of tax filing on top of all that can be a real headache.
That’s why we’ve put together these practical tax tips to help you simplify the filing process! Follow these steps to get your financial house in order before the tax deadline on April 15th!
Tax Tip #1: Organized Record-Keeping (From Day One!)
This might sound obvious, but organized records are the foundation of stress-free tax filing.
Don’t wait until January to start sifting through a shoebox full of receipts. And if you’re reading this in April, remember to start getting organized now for next year!
Implement a consistent system for tracking all your income and expenses throughout the year.
Here’s a framework to follow to keep your records organized in your auto repair shop.
Separate Business and Personal Finances: This is crucial. Keep your business bank accounts and credit cards strictly for business transactions. This makes it significantly easier to track income and deductible expenses.
Categorize Everything: Establish clear categories for your income (e.g., labor, parts sales, diagnostics) and expenses (e.g., parts purchases, payroll, rent, utilities, insurance, marketing, shop supplies). Use accounting software or even well-organized spreadsheets to do this consistently.
Document Everything: Your records should be kept to the same standards as your shop schedule and organized and clear! Track your invoices, parts receipts, bank statements, credit card statements, and payroll records — no matter how small the cost! Every bit matters.
Track Mileage: If you or your employees use personal vehicles for business purposes (e.g., picking up parts, making service calls), keep a detailed mileage log. This should include the date, purpose of the trip, starting and ending mileage.
Organized records make it easier to identify deductible expenses, accurately calculate your income, and prepare your tax forms. This will save you tons of time and effort during filing season.
Tax Tip #2: Don’t Be Afraid to Leverage Technology
Technology is your best friend when it comes to efficiently managing the finances in your auto repair business. If you’re still relying on manual spreadsheets and a spare notebook, it’s time to swap them out for accounting software that is designed specifically for small businesses.
We recommend QuickBooks Online because it streamlines all of the important areas in business, including:
- Your financial tracking process
- Automated reports
- Invoicing
- Payments
- Payroll
You can even connect it to your bank accounts and credit cards to make importing transactions and categorization a hands-free task.
If you have questions about QuickBooks Online, contact us here for a free consultation!
Tax Tip #3: Know Your Deductions
Your deductions can make or break you during tax season, which is why it’s critical for you to understand them! As an auto repair shop, your needs are very different from other service-based businesses.
Knowing what you can deduct is key to minimizing your tax liability.
Here is a checklist of common deductions specifically for the auto repair industry:
- Cost of Goods Sold (COGS)
- Labor Costs
- Rent and Utilities
- Insurance
- Vehicle and Equipment Expenses
- Shop and Office Supplies
- Marketing and Advertising
- Professional Fees
Don’t forget! Tax laws can be complex and are always evolving. It’s helpful to consult with a tax professional to confirm you’re claiming all of the deductions for which you are eligible.
Tax Tip #4: Plan Ahead and Don’t Wait Until the Last Minute
If you find yourself frantically scrambling at tax season, planning ahead WILL help! Make tax season simple by staying organized, having financial systems in place, and relying on automated software.
Navigating your bookkeeping and tax filing on your own can be time-consuming and lead to costly errors.
If you want to leave your tax filing to the professionals, we’d love to help!
Three Rivers Bookkeeping specializes in working with auto repair shops, so you can rest assured during tax season.
