Related finance companies have been around for a long time…and so have the IRS guidelines for valid RFCs that auto dealerships must follow for tax compliance. Like third-party lenders, RFCs can offer to acquire receivables at a 25-40 percent, up-front discount of fair market value (FMV). Problems arise, however, when the discount is not … Continue reading Fair Market Value Test Can Render Related Finance Companies Invalid
Related finance companies (RFCs) were not designed to be a tax-planning vehicle to reduce or defer auto dealership income. If the IRS validity test discovers noncompliance that cannot be explained in the RFC’s or dealership’s documentation, additional taxes and penalties can be severe. We find that many RFCs and dealers do not regularly review their … Continue reading Does Your RFC Pass the IRS Validity Test?
A Related finance company can provide a useful service to the public when operated to help auto dealerships sell cars to people who need an alternative financing method. This does not mean that every dealer should operate an RFC. Rather than a benefit to the dealer, it can actually be a financial drain due to … Continue reading Related Finance Company Pros and Cons
No one likes to be audited by the IRS. It costs time and, thus, money — even if no additional tax, interest or penalties are assessed — and it’s stressful. So, what can your dealership do to avoid an IRS audit in the first place? It’s simple: Don’t attract unfavorable IRS attention. Reviewers can’t audit … Continue reading A Strong Offense Can Ward Off an IRS Audit
Your dealership likely prepares and sends operating reports to your manufacturer every month. How you use the reports beyond sending them to the factory can have a big impact on your dealership’s profitability. Here are three ideas for using your monthly operating report as a tool to stay on track as the year progresses. 1. … Continue reading Manufacturer’s Operating Report Knowledge Can Be Golden