Car Dealers get IRS Surprise

Leave it up to the Government to roll out a program and not adequately communicate the details. It was made clear that anyone who received the $4,500 cash for clunkers hand-out was going to get that tax-free. Of course, they didn’t mention that car dealers would be taxed on the $4,500.

Now there are two sides to this story. In a perfect world, car dealers would ask the questions and make sure that they knew the potential tax effects of the transaction. However, we are not in a perfect world and rely way too much on what is told to us. Thus, if it was important to point out in the program that the $4,500 was not taxable to the consumer, why then not go ahead and mention that the dealer would pay tax on that money?

Well, one could only wonder. I doubt that it would have removed the incentive for dealers to participate. At the same time, why take that chance? The Government wanted this program to be a huge success. They needed to move cars. After all, we are all in the automotive business. What is good for GM is good for those unions (see campaign supporters). If any of these auto dealers didn’t allot for taxes, this could end up being a real problem.

For those of you who might think that I am being too harsh, I know your argument. The Government really provided an opportunity that the car dealers would not have otherwise had. At the same time, there was no reason why the Government couldn’t have spelled out ALL of the details. As a car dealer, would you be extra incentivized if you thought you were getting a tax free bonus on that $4,500? Did the Government make something appear a certain way when it was not? You can be the judge. This did catch a lot of car dealers by surprise.

If the politicians cannot keep Medicare, Medicaid, Social Security, effectively run the cash for clunkers program, etc.; how in the world are they going to run a healthcare program? Oops, I better not write that – Big Brother is watching.

Tags: Bob Brooks, car dealers, cash for clunkers, Deceptive Money, GM, Government, IRS, Prudent Money, tax effects