2018 GNYADA Membership Directory

Even where doc fees are charged on both cash and credit sales, state law may limit the doc fee to a specific dollar amount or to a reasonable amount in relation to the actual costs of preparing and filing documentation. A great deal of litigation has occurred relating to the propriety of doc fees charged by dealers in states where no specific amount is provided by law. Know your state law on permissible doc fees and consult your local attorney if no specific amount is permitted, or the doc fees are limited to being “reasonable.” Cash Sales If a customer purchases a vehicle with cash or cash equivalents in excess of $10,000, you must file IRS/FinCEN Form 8300 within 15 days after receiving the cash payment. This form can now be filed electronically. For this purpose, “cash” is not only currency but currency equivalents such as traveler’s checks, cashier’s checks, bank drafts, and money orders, if they have face amounts of $10,000 or less (note that monetary instruments with a face value of more than $10,000 are not considered cash because the financial institution issuing the instrument is required to report the transaction). A personal check and a bank check representing the proceeds of an auto loan made to the customer by the bank are not considered cash or cash equivalents because they are part of an ongoing relationship between the customer and the bank. If the customer conducts a“related transaction”(another transaction within 24 hours such as buying another vehicle for cash, or transactions more than 24 hours apart if you know, or have reason to know, that each is one of a series of connected transactions), then you must total all the cash and cash equivalent payments from both transactions for purposes of calculating whether you collectively meet the greater than $10,000 threshold for filing IRS/FinCEN Form 8300. By January 31 of the following calendar year, you must send a notice to the customer informing him or her that you filed an IRS/FinCEN Form 8300 during the prior calendar year. The penalties for failure to complywith IRS cash reporting laws can be devastating if the IRS deems it to be intentional or in reckless disregard of the dealer’s obligations. Intentional disregard is the knowing or willful failure to file. Merely failing to file on time subjects a dealer to a penalty of $260 per instance (i.e., a negligent violation), up to amaximum of $3.193 million over a calendar year. Intentional disregard raises the maximum penalty to $26,600 per instance or the cash received by the dealer in the transaction, up to a maximum of $106,000. Note that the IRS adjusts the penalty amounts for inflation annually. A dealer should adopt a written policy to educate employees on cash reporting (including the definition of cash and cash equivalents), the dealer’s obligations, and how to avoid illegally structuring transactions with the person providing the cash. A dealer should also file a SARS form with the U.S. Treasury Department if it suspects a customer is laundering money from an illegal activity. The criminal penalties for money laundering, the signs of money laundering, and the dealer’s written policy to report suspicious transactions should also be a part of your compliance plans. Consider training, monitoring, and using the DMS system in the background to flag transactions based on types of funds received. Disclosure of Starter-Interrupt and/or GPS Technology A dealer who fails to fully disclose and obtain the consumer’s consent to install and use the starter interrupt and GPS technology for payment assurance purposes may risk violation of federal and state law. While using starter interrupt or GPS technology is perfectly legal in most jurisdictions, regulators frown on dealers that charge a consumer for the installation and use of the devices when such installation and use is a condition of the

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