“GOTCHA!” of the Day
Clunker rebates count as taxable gross income, IRS bulletin says
(Automotive News) July 31, 2009 It turns out dealers will have to pay taxes on the thousands of dollars in rebates they receive under the federal cash-for-clunkers program, according to an IRS advisory bulletin issued today.
…Asked why dealers might have been confused about their tax obligations, Heider said they may have thought that because consumers didn’t have to pay taxes on the rebate, they also would be exempt.
What was Bingley just saying about tax receipts…?
Biz, Nanny State, Politics | tree hugging sister | 
August 4, 2009 8:46 am
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Wait a minute. Aren’t the dealers giving the rebates to customers, then getting reimbursed by the government? And they have to pay taxes on the reimbursement?
WTF am I missing here?
The money is being given to the consumer, not the dealer. The dealer files for that rebate on behalf of the consumer and applies it to the sale.
The theory seems to be that the dealer receives cash from the buyer (or from a bank via the buyer financing his purchase)of, say, $10k, and cash from the CFC program of $4500, so the dealer must report income of $14,500 on the deal rather than just $10k from the buyer.
The cleverness here is that the tax burden is on the dealers rather than the manufacturers. Look at it as another way to payoff GM and Chrysler and create tax revenue from the dealers.
The bulliten is not up on the IRS site as of yet er, as far as I could determine.
Obviously they deemed the amount income-rebates usually are- and that constructive receipt is with the auto dealers.
Really not good public relations at all.
The tax burden hasn’t changed on the dealers, Retread, and I’d bet one of ths’s Dunkin’ Donuts that the dealers are asking more for their units with this money out there.
The goal here was to stimulate the economy, get old inefficient clunkers off the road, and get newer fuel efficient cars on the road. I think it might have been a little too ambitious. I think they could have done it with a $3000 max rebate instead of $4500 and could have upped the differential to 6-10mpg instead of 4mpg. Despite its initial glitches, it’s working. The dealers are swamped with new business and are extremely grateful for it, crocodile tears nothwithstanding.
Why do I get the feeling that the price of a new Toyota just went up by $4500?
My guess is this aint your first time round the block, mojo. 🙂