This e-mail just came over the e-transom from one of TTAC’s Best and Brightest:
This just in. Some dealers are getting their first CARS [a.k.a. Cash for Clunker] reimbursement checks from the government. And they’re short. The checks. Not the bureaucrats. See, if the dealer who submitted a request OWES ANY FEDERAL BACK TAXES, THAT IS DEDUCTED FROM THE DEALER REIMBURSEMENT AMOUNT. Yep. If BillyBob Motors owes the government fifteen-hundred, the dealer gets a check from Obama Money Bags for, um, carry the five, three thousand. If BillyBob owes more than forty-five hundred in federal taxes, he gets back . . . nada.
UPDATE: DOT Spokesman Ray Tyson says the IRS “may” withhold money from Cash for Clunkers dealers’ payments should the dealer owe the federal government back taxes. I’ve heard from a dealer to whom this has happened. I have amended the text of the e-mail above and removed the “Wild Ass Rumor” designation.
Considering the (well-deserved) reputation of dealerships scamming customers, this is some serious payback. Not fair to the good dealers, but its hard to get sympathy from most people.
Karma’s a bitch, ain’t it?
If you owe taxes to the Govt, they have many ways to get it from you.
I’m actually glad the Government is on top of this. I can see the headline now ” ScammerMegaDealer got hundreds of thousands in C4C money but owes a million in back taxes”
Dealer owes taxes, gets payment garnished, so what ? No one “did” anything here.
Following no longer accurately reflects main article after RF updated above.
(The reported problem is that the dealer is being shorted the amount that the CUSTOMER owed the federales, NOT any back taxes that the dealer owed the government.)
Are we going to see contracts from the dealer stating that if this occurs, the customer will need to pay the dealer? Does something like this already exist?
“Seriously, you can’t make this shit up.”
Don’t have to. The federal and state governments have been doing “offsets” for years. For example, a deadbeat dad who refuses to pay his judicially-ordered child support obligation may discover his tax refund has been nicked by the state to reduce the guy’s child support debt.
It’s akin to a wage garnishment.
Moral: pay your bills and taxes.
That move will backfire, dealers will start holding back the CARS credit from the customer until they get paid. If they can’t do that, they’ll start requiring a separate deposit from the customer that’s equal to the CARS amount they’ll refund when the money comes in. Since this will probably be sprung on people in the finance office, and no one trusts those guys to keep their word to return the deposit, either of these measures will effectively bring the program to a halt. I think the govt is going to have to back down and stop withholding customer back taxes from these rebates.
Do we have a source for this? Because sometimes it is easy to “make this shit up”.
@50merc
The problem is that the person who’s getting their money docked, the dealer, isn’t the person who owes the back taxes. I’m sure dealers will relish the possibility of being turned into de facto collectors for the IRS. Good luck with that.
Methinks you need to update the headline so it’s clear whose back taxes are being deducted from the dealers’ checks.
This smells of FUD. You can’t penalize the dealer for the individual’s back tax liability. Sounds like pure, unadulterated BS.
The Comedian: “The reported problem is that the dealer is being shorted the amount that the CUSTOMER owed the federales, NOT any back taxes that the dealer owed the government.”
Ooops, thanks for clarifying that point. I missed it.
Can anyone supply more information, such as the IRS’ explanation or statutory citation? The only basis I can see for doing this is that the C4C money is viewed as the customer’s money being sent directly (though after-the-fact) to the dealer as a convenience for the buyer. Then, if the buyer wasn’t really “entitled” to part or all of a C4C subsidy, the government figures it shouldn’t be expected to send the cash to the dealer. In effect, the dealer bears the risk. Maybe dealers will start putting liens on C4C sales until the clunker subsidy arrives.
No wonder lawyers make a good living.
You can’t penalize the dealer for the individual’s back tax liability.
The question is whether dealers assumed that risk. If it’s somewhere in the CARS fine print that this could happen, then the dealers are screwed.
The question is whether dealers assumed that risk. If it’s somewhere in the CARS fine print that this could happen, then the dealers are screwed.
I downloaded the law from the cars.gov website, and the only mention of tax in there is that there is no taxation on the rebate for the buyer.
Relevant section:
(2) FOR PURPOSES OF TAXATION- A voucher issued under the
program or any payment made for such a voucher pursuant to
subsection (a)(3) shall not be considered as gross income of the
purchaser of a vehicle for purposes of the Internal Revenue
Code of 1986.
I like this plan. Uncle Sam gets his money. The dealer gets to stay in business. Customer gets a great (?) new car.
The Chrysler and GM bankruptcies proved that the Obama administration has little use for due process when it comes to business law.
In short, laws are for the little people. The federal bureaucracy is puffing out it’s chest since it knows it now has a major allie in the White House.
IMHO, this should be classified as Wild Ass Rumor of the Day until confirmed.
@ptr2void In that case if nothing else there will be legislative intervention. It’s bad enough that some folks are getting $4000+ windfalls. They shouldn’t have their back taxes reduced by $4500 on top of it.
Leased a car in NJ in 2006 with $2500 Factory Lease Cash.
Not so fast. NJ collected 7% Sales Tax on the $2500.
Wonder how broke states are going to treat the Goverment CHee$e this time around.
Whiskey Tango Foxtrot?
At which point became responsibility of the stealership if the customer paid it taxes completely?… or not.
Yeah, the stealership is far from being baby Jesus, but give me a f@#$%& break.
Maybe they’ll find a way to check… so, if you have your IRS in order, credit in order, clunker applicable, etc…, then you’re eligible.
Mentioned this to my co-worker and his experience was that he had to sign a waiver saying that if the full amount didn’t come through, then the dealer would take back the car or negotiate what’s due.
But holy crap, if this is true it’s pretty underhanded by the IRS.
slateslate : IMHO, this should be classified as Wild Ass Rumor of the Day until confirmed.
Agreed… has this policy been confirmed?
xyzzy: That move will backfire, dealers will start holding back the CARS credit from the customer until they get paid.
Doubly agree… dealers will cut your heart out over the last $50 on a deal. So my guess is they’re not too likely to just take your word that you’ve been playing nice with the IRS if it could leave them potentially liable for thousands.
If this is a real policy, Adam Smith is howling with laughter in his grave.
Soon they will deduct for:
child support
parking tickets
photo radar tickets
mortgage payments
credit card interest
medical bills
etc., etc……
Twotone
It would be a pleasure to see some of the freeloaders whacked. LOL.
Since it is revenue to the dealers, it would make sense if the DEALER owes back taxes that it be withheld out of the CARS money, but it makes no sense at all to withhold it if the consumer owes the taxes.
I hate this clunkers program. First off it simply goes after low MPG vehicles – not necessarily the gross polluters. It rewards people who bought low MPG vehicles with gov’t bailout bucks. It rewards the auto industry which has gotten yet another gov’t handout to stimulate consumer spending.
How about a gov’t voucher for maintenance on all vehicles – low mpg or not? Maybe just $1,000. Applies to all vehicle systems mechanical and electrical. Does not apply to stereos or paint jobs or interior work. Let folks spend it on exhaust, engine repairs, fuel system repairs, etc. OEM parts – not exhaust upgrades, not engine upgrades – i.e. hot rodding cars with gov’t money.
Wait, so people who don’t pay their taxes are lining up to get free tax money handouts?
I’m looking at you, Secretary Geithner. Seriously, you would think the Obama Administration would be a little nervous about stepped up tax enforcement…
(By the way, the Obama Administration doesn’t limit itself to not paying their Federal taxes, they screw the Commonwealth of Virginia, too. Right now, northern Virginia is swamped in Illinois license plates for politicos who are NOT PAYING THEIR VIRGINIA PERSONAL PROPERTY TAXES by keeping their cars licensed in Illinois. )
On my clunker deal the $4,500 came off the very bottom line, AFTER the State and County get their sales tax. That sucked, was hoping it would count as part of the trade (traded an ’03 Matrix also) which is deducted before the tax is calculated. That little detail cost me an extra $281.
UPDATE: DOT Spokesman Ray Tyson says the IRS “may” be withholding money from Cash for Clunkers dealers’ payments should the dealers owe the federal government back taxes. Still checking on the customer side of the equation.
That would make at least a *little* bit of sense.
70 Chevelle ss454
Can’t you rat out the property tax deadbeats? As someone who didn’t vote for the Won, I’d be all over that even if I had to PAY a fee to complain.
Happens here in RI – dropping the dime that is. Personal property tax on cars is stupid. I see FL plates every day and the abuse of dealer plates was epic until they finally cracked down. Our mil rate is typically quite high and until they started excluding some of the car’s base value, it was a real ding. Until I moved to a relatively low mil rate location, I never had a really nice car…
Sure it’s fine for the IRS to collect from deadbeats, but that assumes the IRS’ records are correct. That’s not something I would count on.
I sent a similar tip to RF over the weekend, but it was about dealers not yet receiving their C4C funds from the government, their lots being filled with “sold” cars they couldn’t deliver. We were out to dinner with a couple C4C’d their Exploder for a RAV-4, and while the paperwork was done the car sat on the lot because the gov’t payment hadn’t arrived.
You would be shocked how many businesses owe employee withholding taxes to the state and federal governments. You might think that when your paystub says so many dollars were withheld in payment of your income taxes that this would mean the money has been sent in. Not necessarily. The actual payment of those monies from the employer to the government happens on a different schedule, and many employers who are having cash flow problems let themselves get behind.
The real kicker is that if the employer never turns over the money they withheld to the government, the employee can still be held liable for the missing taxes. I wonder how many of the recently deceased dealers left that nightmare behind for their ex-employees.
Anyway, I have no problem with the feds not handing over C4C payments if a dealer has equivalent legitimate back taxes due. In fact, we would be reading horror stories about it if the feds were giving cash to dealers who actually owed the feds money.