eventually receive for the repair of a vehicle will be determined before the job is actually started.

Insurance companies allow retail lists price for paint, parts, supplies and other items. Vendors will normally provide discounts to auto body shops ranging from 15 to 40 percent of the retail price. If a taxpayer can purchase so called "after market" parts (which are usually encouraged by insurance companies) the discounts will range even higher resulting in greater profits for the body shops. Parts purchased locally can usually be delivered in a matter of days or even hours. However, in some cases, parts need to be ordered directly from overseas factories which can result in delays of several weeks or even months. If a part is no longer manufactured, the auto body shop may have to search the various dismantling businesses to find one. Some fabricate parts for high end or classic vehicles.

Records to Request/Examine

The examiner should request the following if possible:

1. General Ledger

2. Disbursements and/or payables journals

3. Journal entries or accruals

4. Original Estimates: These documents may be prepared by the taxpayer or by the insurance companies. The estimate is their authorization and agreement to pay. They also provide the "expected" parts, supplies, and labor costs needed to complete the job based on the Mitchell Collision Guides or the insurance companies own in-house pricing systems. The actual prices paid by the taxpayer may differ depending upon whether original factory parts, "after market parts," or used parts are installed. Once the estimate has been approved, the total costs should agree with the total costs shown on the order.

5. Repair Orders: This document should have the customer's authorization to begin the job. It can also provide other important information such as the customer's name and phone number, date a job was started, itemized listing of parts, supplies, labor, sublet expenses incurred at retail or wholesale, make, year, model of the vehicle, and the date of payment. It provides a useful summary of costs for each job.

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