PARTS INVENTORY MANAGEMENT BEST PRACTICES

he parts department affects every

other department in the dealership.

By adhering to industry “best prac-

tices” regarding the management of

parts inventory, you can greatly improve your

inventory performance and increase your return

on investment. Below are a

few best practices we have

observed in profitable, well-run

parts departments:

✔ Accuracy of parts inven-

tory: While it may seem obvi-

ous, it is worth pointing out

that inventory accuracy is cru-

cial for proper management. Physical inventories

and reconciliations must be performed regularly

to maintain accuracy.

Annual physical inventory: Use an outside

parts inventory company, one that knows your

dealership management system (DMS). The

physical inventory can be per-

formed any time during the year,

but a reconciliation to the general

ledger must be performed imme-

diately after the completion of the

physical inventory. The parts manager and office

manager must work together to determine the

cause of any significant variances.

Monthly inventory reconciliations: While a

physical inventory only needs to be performed

annually, the reconciliation of the inventory

value per the parts pad to the

inventory value per the gen-

eral ledger should be performed

monthly. If performed properly,

the reconciliation identifies

causes for variances on a timely

basis and results in curtailing

losses due to procedural errors

and/or mismanagement of the inventory.

Daily or weekly bin counts: The bin counts

should be performed by the parts department

staff. The parts manager should assign rotating

A PUBLICATION WWW.AUTOCPA.COM

OF THE AutoCPAGroup 1-800-4AUTOCPA

PARTS INVENTORY MANAGEMENT

BEST PRACTICES

Tasha Sinclair,

CPA, ABV

Tetrick &

Bartlett, PLLC

SPRING/SUMMER 2023

NEW CLEAN VEHICLE CREDITS—

INFLATION REDUCTION ACT

KNOW THE FACTS ON REPORTING

CASH PAYMENTS OVER $10,000

please turn the page ☞

CAMP HILL • CARLISLE • CHAMBERSBURG • STATE COLLEGE

211 House Avenue, Camp Hill, PA 17011

TEL (717) 761-7210 • FAX (717) 761-7134

www.cpabr.com • E-mail: [email protected]

HEADLIGHTS 2 SPRING/SUMMER 2023

he Inflation Reduction Act of 2022 brought us

the New Clean Vehicle Credit, which shows

some significant changes from prior electric vehi-

cle (EV)-related legislation. The IRS published

guidance on this credit on April 17, 2023.

How much is the credit?

The combined maximum total credit is $7500,

consisting of two parts:

1. Critical min-

erals: A $3750

credit applies

to a qualified

vehicle that sat-

isfies a domestic

test for critical

minerals in the

battery. A set percentage of the minerals must be

sourced from the United States, and that percent-

age increases every year.

2. Battery components: If the vehicle satisfies

a domestic content test for battery components, a

$3750 credit applies.

In addition to these rules, some transition rules

apply for vehicles placed in service or taken pos-

session of before April 17, 2023. Under these tran-

sition rules, the credit amount is calculated as it

was for vehicles placed in service before 2023.

Who qualifies for a credit?

Taxpayers with a modified adjusted gross income

(MAGI) of less than

✔ $300,000 for married couples filing jointly

NEW CLEAN VEHICLE CREDITS—

INFLATION REDUCTION ACT

Jen Youngberg, CPA

Green & Miller, P.C.

responsibilities for different areas to each per-

son. Count sheets should be returned to the parts

manager who then investigates and verifies any

adjustments, including the cause of any signifi-

cant variances. Bin checks improve the accuracy

of the parts system inventory and are a critical

component to minimize stock-outs and loss.

✔ Equip the parts manager: Just as your tech-

nicians need consistent training and essential

tools, your parts manager needs proper training

and resources.

Training: Most dealers diligently provide training

to Finance and Insurance (F&I) and sales depart-

ments but lag in training their parts managers.

If your parts manager has not obtained a Parts

Management Certificate through NADA Academy,

consider requiring them to complete the course.

Make certain your parts manager knows the

manufacturer’s return policy and understands the

DMS reports so he/she can maximize returns and

minimize purchases of nonstock parts. Your parts

manager should understand key performance indi-

cators, such as true turnover and fill rate, and how

to review their phase-in and phase-out criteria and

adjust them as needed.

Resources: Technologies have opened new ave-

nues for both buying and selling parts. Consider

enrolling in a program that provides access to a

virtual network of manufacturer dealers if you

have not done so already. A virtual network gives

you a larger pool of buyers for selling parts and

another resource for buying a particular part.

You may also consider working with a parts bro-

ker to move obsolete parts rather than spending

valuable employee time listing them on eBay.

Of course, you must establish controls over the

parts listed with a broker just the same as if you

allowed your parts manager to sell parts on eBay.

Parts inventories are a cash investment for the

dealership. Discuss and implement these best

practices with your parts manager to maximize

your return on investment in the parts inventory.

Contact your AutoCPAGroup member to discuss these

best practices. ✍

HEADLIGHTS 3 SPRING/SUMMER 2023

KNOW THE FACTS ON

REPORTING CASH PAYMENTS

OVER $10,000

he IRS requires retailers of con-

sumer durables to report trans-

actions where $10,000 or more in

cash is received as payment, in

a single transaction or in related

transactions, on Form 8300, a

joint form issued by the IRS and

the Financial Crimes Enforcement

Network (FinCEN). The government

uses this form to track individuals who

evade taxes and those who profit from

criminal activities.

Penalties assessed for failure to file

Form 8300 can be substantial, espe-

cially if the failure is deemed to be an

intentional disregard of the require-

ment to file.

Susan Harwood, CPA

Hulsey, Harwood & Sheridan, LLC

✔ $225,000 for heads of household

✔ $150,000 for other taxpayers

This MAGI limitation applies to individuals as well

as owners of flow-through entities claiming the

credit, such as partnerships and S corporations.

Which vehicles qualify for a credit?

Final assembly must be in North America, and

the vehicle must be powered by an electric motor

with a battery capacity of 7 kilowatt hours or

more. A complete list of qualified vehicles is avail-

able on https://www.irs.gov/credits-deductions/

credits-for-new-clean-vehicles-purchased-in-

2023-or-after.

Price limitation: The MSRP must be less than

✔ $80,000 for a van, SUV or truck

✔ $55,000 all other vehicles

These IRS classifications of car or SUVs related

to EV credits may not align with the marketing of

vehicles. For instance, the Ford Mustang Mach-E

falls under the van, SUV or truck category, and

has an MSRP limit of $80,000. Go to https://

fueleconomy.gov/feg/tax2023.shtml for a complete

list of qualifying vehicles and the MSRP limits.

Dealer reporting requirements: A report must

be given to the buyer at the time of sale and the

IRS by January 15th of the following year with

the following information:

✔ Seller/dealer name and taxpayer ID number

✔ Buyer’s name and taxpayer ID number

✔ Maximum credit allowable under IRC 30D for

new vehicles or IRC 25E for previously owned

vehicles

✔ Vehicle identification number (VIN), unless the

vehicle is not assigned one

✔ Battery capacity

✔ Date of sale

✔ Sale price

✔ For new vehicles, verification that the buyer is

the original user

Each report must include a declaration of accu-

racy signed by a representative of your business

with binding authority. The declaration must

read: “Under penalties of perjury, I declare that I

have examined this report submitted to the IRS

pursuant to Revenue Procedure 2022-42 by [insert

name of Seller], and to the best of my knowledge

and belief, I certify that this report is true, cor-

rect, and complete.”

With the increased EV availability, dealers need

to be aware of the myriad requirements in sell-

ing EVs to customers. To better understand these

requirements, as well as proper reporting, contact

your AutoCPAGroup member. ✍

please turn the page ☞

HEADLIGHTS 4 SPRING/SUMMER 2023

More than just currency can trigger a reportable

transaction, and often employees do not realize a

reportable transaction has occurred. Commonly

overlooked transactions are those involving

cashier’s checks or money orders of less than

$10,000 which, when combined with cash paid,

exceed the reporting threshold.

What qualifies as a reportable transaction?

Any transaction or series of related transactions

of $10,000 or more in any combinations of the fol-

lowing forms:

✔ Currency or coin

✔ Cashier’s check

✔ Money order

✔ Traveler’s check

✔ Bank draft

Checks drawn on the buyer’s personal or busi-

ness account are not included in this requirement.

Cashier’s checks, money orders and bank drafts

are not included if they are conveying proceeds of

a bank loan.

When more than one cash payment is received for

a single transaction or for related transactions, the

multiple payments must be reported any time a

total amount exceeding $10,000 is received within

any 12-month period.

Cash reporting audits are common and increase

every year. It is of utmost importance that deal-

erships continuously review their cash reporting

process to ensure adequacy and adherence on an

ongoing basis. Documenting form of payment as a

required part of your routine paperwork is a great

way to be sure you don’t risk fines and penalties

for violation of reporting requirements.

Each year, it is important to give your employees

a refresher on the requirements. Also, be sure

throughout the year that new employees are

informed of these rules. All employees handling

cash in your dealership should be thoroughly

trained and sign an acknowledgement of such

training. They must understand the reporting

requirements and be able to identify reportable

transactions. No employee should instruct buyers

or potential buyers how to avoid cash reporting

requirements. Such coaching can subject both the

dealership and the employee to substantial fines.

Make sure your employees know the cash report-

ing requirements and can identify reportable

transactions in your dealership. Contact your

AutoCPAGroup member for further assistance

and guidance with this important issue. ✍

Managing Editor

Anna M. Cooley, WPI e-Newsletters, Springfield, NJ

Associate Editor

Ken Gordon, Weisberg, Molé, Krantz & Goldfarb, LLP

Woodbury, NY

Advisory Board of CPAs

Justin Burchill

Brady Martz and Assoc., P.C.

Grand Forks, ND

Megan Condon

BDO USA, LLP

Seattle, WA

Gerry Green

Green & Miller, P.C.

Denton, TX

Barton Haag

Albin, Randall & Bennett, CPAs

Portland, ME

Susan Harwood

Hulsey, Harwood & Sheridan, LLC

Monroe, LA

Carl Jensen

Larson & Company

Salt Lake City, UT

Donald Kretschmar

Donald Kretschmar, CPA, PLLC

Tempe, AZ

Dawn Moore

Spoor Bunch Franz

Tampa and St. Petersburg, FL

Jim Meade

Lattimore Black Morgan & Cain, PC

Brentwood, TN

Greg Porter

Porter & Company, P.C.

Greensboro, NC

Tasha R. Sinclair

Tetrick & Bartlett, PLLC

Clarksburg, WV

Jay Goldman

Boyer & Ritter, LLC

Harrisburg, PA

Scott Woodward

Woodward & Associates, Inc.

Bloomington, IL

Wayne Zimmerman

Pomares & Co., LLP

Sacramento, CA

For assistance, please call 1-800-4AUTOCPA or visit our website at

www.autocpa.com. Headlights is prepared by the AutoCPAGroup for the

clients of its members. We are required by IRS Circular 230 to inform

you that the advice contained herein (including all attachments) is not

intended or written to be used for the purpose of avoiding any

penalties that may be imposed under federal tax law and cannot be

used by you or any other taxpayer for the purpose of avoiding such