GNYADA 2019 Membership Directory & Services Guide

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 comply with 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. For forms required to be filed on and after January 1, 2019, merely failing to file on time subjects a dealer to a penalty of $270 per instance (i.e., a negligent violation), up to an annual aggregate limit of $1,091,500 for businesses with gross receipts not exceeding $5 million and $3,275,500 for businesses with gross receipts exceeding $5 million. Intentional disregard raises the maximum penalty to $27,290 per instance or the cash received by the dealer in the transaction, up to a maximum of $109,000. 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 can also file a Form 8300 to report a suspicious transaction, even if the transaction does not meet the $10,000 threshold, if it suspects a customer is structuring cash payments in a manner intended to avoid reporting requirements. The criminal penalties for money laundering, the signs of money laundering, and the dealer’s written policy on reporting such 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 use the starter interrupt and GPS technology for payment assurance purposes may risk violation of federal and state law. At the very least, the disclosure must explain that the technology is installed on the vehicle as a condition of the extension of credit, describe how the technology will be used, and obtain the consent of the buyer to the use of the technology. While using starter interrupt or GPS technology is legal inmost jurisdictions, most retail installment sales contracts do not allow a creditor to impose a charge for the installation and use of the technology when such installation and use is a condition of the credit extension. In addition, regulators frown on such charges and therefore, dealers that assess charges for installation and use of the technology in these instances face potential litigation risk and regulatory scrutiny.

hot topics / 2019 membership directory & services guide

PG 216