Doh! Dealers learn Cash for Clunkers rebates count as taxable income
As you're aware by now, yesterday's big news was H.R. 3435, the emergency legislation passed by the House of Representatives authorizing an additional $2B for the CARS scrappage scheme. As had been widely reported on Thursday, the clunkers program appeared to have run out of money a lot sooner than anyone had expected, sending legislators in favor of it into a panic. After a period of impassioned floor debate (the Michigan delegation appeared on the verge of a collective nervous breakdown, treating the possible suspension of C4C as the apocalypse), the resolution passed and will head on to the Senate next week for additional debate and a final vote. In the meantime, Cash for Clunkers stays online. For dealers, however, the action in the House wasn't the only important news to come out yesterday.
According to Automotive News, NHTSA -- the government bureaucracy responsible for administering the CARS program -- conducted a webinar for automobile dealers last Monday. During that session, retailers were reportedly told that the federal rebate cash they'd be receiving would be non-taxable. Now, for the buyers trading in so-called clunkers, this is indeed the case. Unfortunately for car dealers, however, it appears that NHTSA got the explanation wrong. In fact, AN reports that the IRS issued an advisory bulletin yesterday confirming that yes, the federal rebates dealerships receive for CARS trades count as taxable gross income.
Apparently, some retailers believed that since their customers weren't getting taxed, neither were they. And if the Automotive News account of events is accurate, it's fairly obvious that NHTSA didn't fully understand the tax implications either when they conducted their webinar. As a result, some dealer smiles around the country are likely turning into frowns this weekend. The money line in the AN piece comes from Dick Heider, a dealer accountant who points out that the CARS cash simply counts as a normal payment to the retailer, and thus is taxable. "What you are dealing with are people who don't understand accounting," he says. Apparently, on all sides of the equation.
[Source: Automotive News | Photo: Steve Lyon (CC by SA 2.0)]
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Reader Comments (Page 1 of 7)
laser 12:16PM (8/01/2009)
And we want to entrust healthcare coverage to the same Government who can't run this program where no life or death decisions have to be made? You want to trust government bureaucrats to determine your surgery efficacy when they can't determine taxable status right the first time? Be very scared. The only thing Government does better than the private sector is spending money and finding ways to get more from those who achieve.
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Jon 12:32PM (8/01/2009)
My grandma, who is on Medicare, sure would have a few qualms with your statement.
She's 95.
James 1:03PM (8/01/2009)
Tax on an American tax-payer funded program...
US Gov't never fails to screw somebody.
audi_arena 1:14PM (8/01/2009)
I really wish AB would stay out of politics and just report the news. Leave the complicated stuff to NY Times, and lets stick with cars, ok??
The dealer will pay the exact same taxes as they would if the customer traded in a car worth $4500. NOTHING CHANGES.
refugee7 2:39PM (8/01/2009)
As much as I hate dealers, it was kind of important for the dealer to know if it was going to be taxed as it would affect their bottom line.
Noidor 4:38PM (8/01/2009)
Audi_Arena - AB obtained this information from Automotive News which is a relevant publication to automotive industry and all factors that influence its operations. Do you see how silly your comment is?
Saying that AB should stick to cars is like saying that Tennis magazine should stick to writing about tennis players and totally ignore new development in making of tennis rackets.
Anyways, I'm sure dealers are aware that they have to pay tax on $4500 rebates - they are already benefiting from customers coming in and buying cars.
But this is a horrible waste of billions
1) They are punishing good people who drive older (
Nozferat 5:16PM (8/01/2009)
Wow you guys whine alot.
I've never seen a bigger group of whiners who want the government to take care of them but don't want to spend a dime doing it.
When the going gets tough, everyone wants a bailout and handout...but no one wants to be part of their social structure to participate...YET they want the government to be there for them. Hypocrisy at its best.
Perhaps if people didn't sit around on their a$$es so much and actual take on some personal responsibility, the government wouldn't to step in to save ya'll a$$es.
Olivier Parent 5:17PM (8/01/2009)
This is the oldest trick in the book. As a politician you claim to give back/invest/lower taxes etc. by $2. Everyone happy, but it doesn't nearly cost you as much.
Sexing up or covering up figures is what they do, and always will do. No news here.
polo 8:21PM (8/01/2009)
If the government ran healthcare like they ran the Cash4Clunks program everyone would want it, the hospitals and doctors would be dancing on their desks, and families would save untold thousands while getting quality care they otherwise wouldn't be able to get.
tankd0g 10:32PM (8/01/2009)
I wasn't aware that automobile dealers had put a big in to run the health care program.
Ray 11:14PM (8/01/2009)
Jon, MY now deceased grandmother (God bless her soul) would have a difference of opinion with you. Her cancer treatments were deemed too costly, and it killed her. Medicare didn't help her one bit.
Mr.Oak 5:06AM (8/02/2009)
Tragically typical GREEDY American. Everyone wants everything, no one wants to pay for anything. It's all supposed to fall out of the sky and into our laps.
Sing along now:
If all the raindrops were gum drops and lemon drops
Oh what a rain that would be.....
Standing out side with my mouth opened wide,
Ah... Ah... Ah..., Eh... Eh... Eh...
Oh what a rain that would be.....
You all behave line a 2 year old whose first learned word is "MINE".
A couple of things, the cash for clunkers program though not well run, was an OVERWHELMING success. It met both of its stated objectives, and in less than 2 weeks.
It got people to buy THOUSANDS of cars in a down economy.
It got THOUSANDS of gas-guzzlers off the street.
Hopefully there will be a second round of the CfC program. The industry and economy could use it.
adam1drift 12:23PM (8/01/2009)
LOL God Bless our Government! they really know how to F stuff up!
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Randy 4:32AM (8/02/2009)
Well I don't think it was a F up... Think about it... If one of us gets unemployment wages, we get taxed. Why wouldn't the dealer? It's income towards the purchase of something... Right? Or am I missing something?
John 9:23AM (8/02/2009)
@Randy dude you sound sooooo stupid right now.
hector000 12:26PM (8/01/2009)
incoming pissed off Republicans blaming obama for everything. BTW autoblog is about cars not about politics just FYI for all the morons here.
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Herkimer 12:39PM (8/01/2009)
CFC = both.
BigWill 12:35PM (8/01/2009)
Cash For Clunkers *is* politics, genius.
hector000 12:55PM (8/01/2009)
then how come you guys NEVER go to a politics blog or news site o yeah because if you when there you guys would get ripped apart.
why is it that ppl like Brian will NEVER post on anything but blaming obama for whatever he can think of. you guys don't come here for car news. you guys come here to cry and start crap. please leave and dont come back to autoblog.
you know your too far right when foxnews doesn't even agree with you.
Joe K. 1:15PM (8/01/2009)
Welcome to Autoblog Hector000 (As you are up to 6 posts now)
It's a bit early in your comments to already have your bollocks in a twist about politics to the point where you are telling other posters to leave.
Cut back on the caffeine a bit, take a few deep breaths, understand that much like you everyone else has a right to their political opinion even if it flies blatantly in the face of yours.
To cite Conan, 'Keep calm my babies'